Cyprus – Showing Signs of Growth? Implementing Reforms Vincenzo Guzzo Resident Representative in Cyprus
Growth momentum is significant Deviation from Pre-Crisis Level and Trend Cyprus: GDP (€ billion) (Percent) 18 0 0 16 -10 -20 14 -20 -40 12 -30 -60 10 -40 -80 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 Spain Cyprus Portugal Italy Greece Deviation from Level Deviation from Trend (rhs) Actual Estimate Source: CySTAT, IMF staff estimates Source: IMF staff estimates Note: data are percentage differences of IMF World Economic Outlook estimates for 2016 from pre-crisis levels and trends. Levels are 2007 data. Trends are linear regression trends fitted using data for 1996-2005.
Jobs are being created Unemployment Rate (Percent of Labor Force) Cyprus: Labor Force (thousands) and Unemployment Rate (Percent of Labor Force) 2 30 450 20 1 24 0 18 400 16 -1 12 350 12 -2 6 300 8 -3 0 Netherlands Luxembourg France Belgium Estonia 250 4 Cyprus Spain Slovak Rep. Greece Portugal Slovenia Ireland Finland Latvia Lithuania Malta Germany Italy Austria 200 0 2016Q2 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Change from a year earlier (lhs) Latest Peak (2008-2016) Employment Unemployment Unemployment Rate (rhs) Source: CySTAT Source : Eurostat, IMF staff estimates
Demographics are not favorable Population Growth (Percent) Cyprus 2.5 1.5 2.0 1.5 1.0 1.0 0.5 0.5 0.0 -0.5 0.0 -1.0 -1.5 Luxembourg Cyprus Ireland Spain Belgium Malta France Italy Austria Finland Netherlands Slovenia Germany Portugal Greece Estonia Latvia Lithuania Slovak Rep. Cyprus: Share of Workers Aged 55-64 (Percent of Labor Force) 14 1995-2004 2005-15 2016-21 13 Source: IMF staff estimates 12 11 10 2016Q2 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: CySTAT
Productivity is weak Employment and Labor Productivity Total Investment (Percent of GDP) (Percent Change) 32 4 28 2 24 20 0 16 -2 Cyprus Italy Portugal Spain Cyprus Italy Portugal Spain Cyprus Italy Portugal Spain Greece Greece Greece 12 8 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1996-2005 2005-2015 2016-2017 Employment Labor Productivity Cyprus Greece Italy Portugal Spain Source: IMF staff estimates Source: IMF staff estimates
Policy priorities for Cyprus i. Repair bank balance sheets addressing NPLs and strengthening operational efficiency to support new lending ii. Commit to credible medium-term fiscal consolidation to generate space for productive public investment iii. Eliminate product and labor market distortions to ensure efficient allocation of factors of production iv. Promote policies that encourage investment in R&D and foster innovation to sustain long-term potential growth
Cyprus – Showing Signs of Growth? Implementing Reforms Thank you
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