Cyprus's economy being slowed by NPL's

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European Commission’s 4th review
At the beginning of this month international lenders remarked that the bailout adjustment program in Cyprus remained on track, however there were strong warnings regarding non-performing loans (NPL’s) and that the issue needs to be addressed. The European Commission reviewed the islands program for the fourth time, and confirmed that the financial sectors has improved, however with the NPL’s it is still high and on the increase, the banks are in jeopardy and are seriously restricted when it comes to giving credit which in turn can cause the whole economy to stagnate.
NPL’s in the first quarter
NPL’s were at 50% but by the end of the first quarter in 2014 have increased to 55% which equates to approximately €14.5 billion, of which nearly 70% of NPL’s on the banks’ balance sheet stem from corporate loans.
A look into the future
Projections for the future suggest that Cyprus’s recovery will more restrained with an expected 0.4% growth in 2015 and minute progress moving forward until the issue of NPL’s has been resolved. The IMF International Monetary Fund said in a report ‘Conditions in the banking sector are normalizing, although non-performing loans remain very high, constraining the ability of banks to provide credit to the economy,’ although the European Commission says that considerable efforts were being made to improve arrears management, and that new frame work is being established which should provide incentives for both borrowers and lenders alike to come to some mutual solutions.
Eltoma Corporate Services
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