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Cyprus Country Risk Report Q2 2018

Executive Summary
Core Views
Major Forecast Changes
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Reforms Provide Solid Basis For Continued Growth
Cypriot real GDP growth will remain above 3.0% in 2018, as investment and consumption will continue to expand at a robust pace.
growth GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Outlook On External Position
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
TABLE: TOP 5 GOODS IMPORTS IN 2016
TABLE: TOP 5 GOODS EXPORTS IN 2016
Structural Fiscal Position
TABLE: GENERAL GOVERNMENT EXPENDITURE AND REVENUE BREAKDOWN
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Monetary Policy
Implications Of ECB's Dovish Taper
The European Central Bank's tapering announcement in October points the way to a gradual exit from extraordinary accommodation,
but we continue to believe that policy will remain very easy for years. Our core view is that the ECB will continue expanding its balance
sheet until the end of 2018 and keep its benchmark interest rates on hold until 2020, a policy mix that will keep the euro on the back foot
against the US dollar Currency Forecast
EUR: Rally Running Out Of Steam
We maintain a bearish outlook for the euro, predicated on our hawkish policy rate forecasts for the US Federal Reserve and our belief
that expectations for the pace of European Central Bank tightening are beginning to overshoot TABLE: BMI EUROZONE CURRENCY FORECAST
Chapter 2: 10-Year Forecast
The Cyprus Economy To 2027
Enjoying The Fruits Of Structural Reform
Cyprus has gone through the worst of its painful structural adjustment process and sustained economic expansion will continue through
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
2018 Elections Unlikely To Change Status Quo
Republic of Cyprus President Nicos Anastasiades is likely to win re-election in 2018, ushering in the possible renewal of the Cypriot
Long-Term Political Outlook
Cyprus Problem, Economy The Dominant Issues
Cyprus has remained divided along ethnic Greek and ethnic Turkish lines for more than 40 years. Settlement talks between the
leaders of the ethnic-Greek South and ethnic-Turkish North have been going for several years with little in the way of progress, but
there is cause for cautious optimism on a permanent accord being reached in the future. Economic policy will also be at the forefront
depression. Nonetheless, the downside risks to long-term stability are limited by strong democratic institutions operating within the EU
framework Chapter 4: Operational Risk
Operational Risk
TABLE: LABOUR MARKET RISK INDEX
TABLE: LOGISTICS RISK INDEX
TABLE: CRIME AND SECURITY RISK INDEX
TABLE: TRADE AND INVESTMENT RISK INDEX
Chapter 5: BMI Global Macro Outlook
EM Growth To Accelerate In 2018 While DMs Plateau
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES ’ REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS ’ REAL GDP GROWTH, % y-o-y

Cyprus Country Risk Report Q2 2018

Executive Summary

Core Views

Cypriot economic activity will peak in 2017 and 2018, at a well-above- trend pace. Household demand will remain subdued while the external sector – led by tourism – will continue to help prop up growth, in part by helping to encourage stronger business investment.


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