High growth rates exceeding 3% of the GDP and high primary surpluses are projected until the year 2021 in the Strategic Fiscal Policy Framework (SFPF) 2019-2021, which was approved by the cabinet.
According to the SFPF, for 2018 the improvement in the labour market with the consequent improvement of the available income, the sectors of tourism, professional services, and shipping, are expected to drive the expansion of the Cypriot economy over the next few years.
Based on the macroeconomic scenario drafted by the Ministry of Finance, the growth rate of the economy in 2018 is expected to be around 3.8%, while the improved macroeconomic environment should attract further foreign investments.
Developments in the banking sector will continue to be decisive for the economy, especially the effective management of the very high percentage of non-performing loans (NPLs).
However, growth is expected to remain high with the restructuring of the banking system and the improvement in the management of NPLs.
Furthermore, unemployment is expected to drop even lower to around 9.5% of the labour force from 11% in 2017.
According to the Ministry of Finance, the public debt is expected to reach 105.6% of the GDP by the end of 2018 after the issuing of a number of government bonds worth €2.35 billion to the Cyprus Cooperative Bank but should drop to 88% of GDP by the end of 2021.