NICOSIA (Reuters) – Cyprus has a “nimble and dynamic economy” that should grow about 2.5% this year, the International Monetary Fund said on Friday, while it added that the island should resist any temptation to loosen fiscal policy.
The east Mediterranean island required a bailout from the IMF in 2013 after fiscal slippage and heavy exposure to Greece, which experienced a full-blown debt crisis.
“Cyprus has demonstrated impressive resilience to successive shocks,” said Alex Pienkowski, IMF mission chief to Cyprus after a week-long assessment.
At 3.4%, Cyprus’s growth was among the highest in the euro area in 2024, supported by foreign investment and strong tourism arrivals. Growth is expected to moderate to around 2.5% this year and 3% in the medium term, the IMF said.
It said the island’s authorities should continue to reduce public debt and avoid unbudgeted pay sector hikes given that inflationary pressures remain high above 2%.
Near-term risks are tilted to the downside and include potential trade conflicts impacting Cyprus’s main trade partners, an intensification of regional tensions or new energy price shocks, the IMF said.
(Writing by Michele Kambas; Editing by Hugh Lawson)
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