NICOSIA, May 21 (Xinhua) -- Cyprus' Ministry of Finance on Monday revised up its economic growth forecast for the bailed-out eastern Mediterranean island for 2018 to 3.8 percent from earlier prediction of 2.5 percent.
After a growth of 3.9 percent last year, expansion is predicted to reach 3.8 percent in 2018, 3.6 percent in 2019, 3.2 percent in 2020 and 3.0 percent in 2021.
The projections were made in the 2019-2021 Strategic Framework for Fiscal Policy, which was discussed and approved by the Council of Ministers at its weekly meeting on Monday.
The document started the process for the drafting of the 2019 state budget, defining the ceiling for the state total expenditure and the proposed distribution of the state spending in line with the policy aimed at keeping the economy within the boundaries established after Cyprus ended its 3-year probation under a 10-billion-euro bailout by the Eurogroup and the International Monetary Fund in 2013.
"The improved macro-economic environment is expected to lead to more foreign investments, which are considered to be the key to the growth of the Cypriot economy," the document said.
The Ministry of Finance aims at a high rate of growth as a means of managing the high proportion of non-performing loans following the 2013 economic crisis and the resulting resolution of the Cypriot banking system
"With the re-restructuring of the banking system and the expected improvement in the management of non-performing loans, growth is expected to be maintained at high levels," the Fiscal Police document said.
It also predicted that unemployment, which topped 16 percent at the height of the crisis and dropped to 11 percent last year, will drop further to the psychologically important single-digit level of 9.5 percent this year.
The Finance Ministry has said that the only means of reducing delinquent loans is a high growth which will create more jobs and enable debt owners to start servicing their loans again.
In a related development, Moody's Investor Services said that the non-performing loans issue is expected to be tackled in a decisive way by the licensing by the Central Bank of Cyprus of companies specializing in the purchase of red loans from the banks.
Non-performing loans totaled 22 billion euros in January 2018, representing 45.7 percent of the total loan portfolios of all banks.
Despite having been reduced by about 8 billion euros relative to 2013, the high rate of non-performing loans reflects a contraction of bank operations relative to the period before the crisis.
Operations by Cypriot bank operations topped 72 billion euros, more than four times the annual gross domestic product of the island.
