On the face of it, Cyprus has much to celebrate. In March, the country completed the three-year economic adjustment programme that followed 2013’s €10bn bailout package agreed with the European Commission, European Central Bank and the International Monetary Fund. That the country has finally wrested back control of its finances was coupled with the Commission’s prediction of a 1.4% rise in GDP for Cyprus in 2015 – the first year of economic growth since 2011.
This good news provides a psychological boost following years of financial turmoil, but even the most ardent optimist would concede that Cyprus has a long way to go. The island is mired in debt and faces a lengthy period of post-programme surveillance (PPS) by the Commission, which will continue until it has paid at least 75% of the €7.25bn in loans it received from the bailout. The Commission estimates that, ‘barring any early repayments’, the PPS will continue till at least 2029. Alongside this are the €26.7bn of non-performing loans (NPLs) that the country’s banks must deal with. According to the World Bank, in 2015 these NPLs accounted for 44.8% of the country’s total gross loans, a figure much higher than Greece’s 34.4%. These factors will define Cyprus’s economic future for many years to come, both on a macro and micro level. Fundamental to this is how Cyprus positions itself in the global economy, particularly now that one of its key investment partners, Russia, can no longer be relied upon to generate previous levels of work.