NICOSIA, May 30 (Xinhua) -- Cyprus' Fiscal Council has warned that despite brisk growth over the past few years, the economy of the eastern Mediterranean island is still vulnerable to unpredictable economic turbulence.
The Council in its 2018 Spring Report released on Wednesday cited as a reason for concern the market crisis which was generated by the Italian political turmoil.
It also pointed out that the fiscal progress has not been accompanied by necessary reforms which could enable the economy to face contingencies caused by external factors.
The Fiscal Council is a body set up under the direction of Cyprus' international lenders to keep watch over the government's economic planning and to make sure that it can repay its lenders.
It said in its report that the most important challenges the economy is faced with include a weak competition ability and its dependency on only a few sectors, such as tourism and construction, and on external factors.
The Fiscal Council also criticized the way in which the legislation regulating the issue of Cypriot passports to investors is being applied.
It said selling Cypriot passports to investors, enabling them to travel or live all over the European Union, may lead to the so-called Dutch disease -- the funneling of capital to low productivity and low profit investment and away from productive investment.
The Fiscal Council also said that be better than projected macroeconomic environment, the strong growth of the past few years which is projected at more than 3 percent for both 2017 and 2018, and the over-covering of fiscal targets must not be considered as factors favoring backtracking on corrective measures and ending reforms.
The Cypriot government has made big steps towards reforming the administration, but strong opposition by highly partisan lawmakers has foiled planned reforms, such as further streamlining the public administration and the privatization of government-owned assets, such as telecommunication company.
It further noted that developments in the selling of the government-owned Cyprus Cooperative Bank issue have increased the public debt by about 12.2 percent of the Gross Domestic Product (GDP), as a result of the purchase of the non-performing loans portfolio by the government for 2.5 billion euros. (2.91 billion U.S. dollars)
