NICOSIA, May 3 (Xinhua) -- The Cypriot economy is expected to continue to grow at a solid pace in 2018 and 2019, the Economic Research Center (ERC) of the state University of Cyprus said on Thursday.
In an emailed handout, ERC said real gross domestic product is forecast to increase by 3.8 percent in 2018 and to moderate slightly to 3.5 percent next year.
Projections by the Ministry of Finance and international rating agencies have projected Cypriot economy growth at close to 2.8 percent for each of the two years.
The less conservative estimates by ERC have consistently proved to be more accurate than projections by the Cypriot government, the European Commission and the International Monetary Fund.
The Cypriot economy is closely followed by both the Eurogroup and the European Commission, as well as the IMF, after the bailed-out the nearly bankrupt eastern Mediterranean island under a 10-billion-euro package assistance in 2013.
ERC said that key drivers behind the strong outlook in 2018 and 2019 are historically high levels of domestic economic sentiment, steady growth in both Cyprus and trading partner countries, favorable external financial conditions and supportive domestic lending conditions.
But ERC warned that the still high percentage of non-performing loans as a result of the crisis and the 2013 resolution of the banking system may create risks to financial stability and discourage future investors.
It also warned authorities on the dangers of fiscal slippage, most notably increasing expenses, which may render the economy vulnerable to shocks and to higher borrowing costs, as people are demanding less austerity following several years of tighter family incomes.
Outside factors which may affect the Cypriot economy either way included slower than expected growth in the UK, a weaker pound after Brexit, geopolitical dangers in the eastern Mediterranean region and a stronger growth in the EU, which may lead to even faster Cypriot growth than the current forecasts.
