NICOSIA, June 4 (Xinhua) -- The International Monetary Fund urged Cyprus on Tuesday to pursue long-delayed structural reforms and maintain strict fiscal discipline, as the economic recovery after the 2013 crisis is gradually decelerating.
Cyprus was bailed out by the Eurogroup and the IMF in a 10-billion-euro economic package program and achieved an economic growth of 4 percent in 2018.
But a report issued after the third post-program monitoring visit by the IMF said that Cyprus' rapid recovery was expected to slow gradually, even as the outlook remained favorable.
It added that real Gross Domestic product is projected to grow at a still robust 3 to 3.5 percent in 2019 and 2020, supported by foreign-financed investment and private consumption.
"Over the medium term, growth is expected to ease to potential, as the investment boom dissipates and households step up debt servicing," the report said.
The IMF said a window of opportunity for structural reforms was opening "and should be vigorously pursued".
With the co-operative bank now resolved and the next parliamentary elections scheduled only in 2021, the authorities are pursuing some long-delayed structural reforms, including judiciary and local government reforms, and the introduction of a national health insurance system, the IMF said.
"However, there has been little progress on some important reforms, such as the state-owned enterprises, law, privatizations, and broader civil service reforms," it added.
It also said reforms of civil procedures and the process to issue title deeds, and introduction of the e-justice system would help resolve crisis legacies and improve access to financing and investment.
The IMF said risks remained, however, namely the banks' still weak asset quality, direct fiscal guarantees, and fiscal spending, including the reversal of crisis-era measures.
"The growth outlook could be adversely affected in the event of a disorderly hard Brexit and tightening of foreign financing for investment," the report said.
IMF advised that a strict fiscal discipline should be maintained and a neutral medium-term fiscal stance should be ensured.
It added that it was also important to keep the growth of the wage bill, including increases arising from the reversal of crisis-era public wage and pension cuts, below nominal GDP.
Cyprus is not obliged to heed reports by the IMF, and also by the Eurogroup, after the end of the bailout program in March, 2016. But though advisory in nature, Cypriot authorities have made a point of following the advice of the international lenders.
