Cyprus programme is on track, says troika

The troika of the European Commission, European Central Bank and International Monetary Fund have published their first quarterly review of Cyprus’s economic programme, and concluded that it is on track.

A statement on the European Central Bank website read:

All the fiscal targets have been met as a result of significant fiscal consolidation measures underway and prudent budget execution. The authorities have taken decisive steps to stabilize the financial sector and have already been gradually relaxing deposit restrictions and capital controls. While the authorities have started to implement the program with determination, risks remain substantial. Continued full and timely policy implementation is essential for the success of the program.

The short-run economic outlook remains difficult and subject to considerable uncertainty. Recent indicators support the program’s projections of a contraction in output of about 13 percent cumulatively during 2013-14. Encouragingly, confidence indicators have improved somewhat from the lows hit in April. But the labor market has weakened more than anticipated, and unemployment has continued to rise. Growth is expected to recover modestly starting in 2015, driven by non-financial services.

Approval of the conclusion of the review is expected to be considered by the Eurogroup and IMF executive board in December, which would pave the way to aid worth €1.5bn from the European Stability Mechanism and €86m from the IMF.