Debt at € 19.3 bln in May, says PDMO

Cyprus’ debt was at EUR 19.3 bln in May, unchanged from the beginning of the year, the Public Debt Management Office (PDMO) said on Tuesday. It said that the general government budget balance was in surplus of EUR 114 mln in the first five months of the year, with the primary surplus reaching EUR 289 mln, the Cyprus News Agency reported.

The PMDO said that in the first quarter of the year, GDP (in seasonally adjusted terms) recorded a positive rate of growth of 3.3% compared with 2.9% in the fourth quarter of 2016 on an annual basis. The increased activity was broad based and is mainly attributed to sectors: hotels and restaurants, professional, scientific and technical activities, retail and wholesale trade, manufacturing and construction. Negative growth rate was recorded in the financial services sector.

It noted that developments are currently driven by increases in private consumption and gross fixed capital formation.

The economic sentiment indicator deteriorated slightly by 0.8 points in June, compared to the preceding month, as a result of a relatively weaker confidence in the prospects of the construction sector and among consumers.

Imports of goods increased by 8.1% in January-May, compared to January-May 2016. Exports of goods decreased by 14.4% in January-May, compared to January-May 2016.

In January-June tourist arrivals increased at a rate of 16.6% compared to the corresponding period of 2016.

The current account balance in the first quarter of 2017 recorded a deficit of EUR 721 mln (-3.9% of GDP) compared with a surplus of EUR 73 mln (0.4% of GDP) in the first quarter of 2016.

This deterioration is mainly due to the trade balance of goods attributed to imports of transport equipment (airplanes and vessels). The remaining categories of the CA (services, primary income and secondary income) recorded small improvements which mitigated, to a small extent, the deterioration recorded in goods.

Inflation (HICP) in June stood at 0.9% while for January-June it averaged at 1.2%. Core HICP inflation between January-June was 0%.

Labour Force Survey (LFS) unemployment, in monthly seasonally adjusted terms, decreased to 11.0% in May compared to 12.8% in May 2016. The most affected segment of the population is youth, although it has been on a downward trend since the third quarter of 2013 falling to 24.8% in the first quarter of 2017 from the peak of 39.9% in the second quarter of 2013. Particularly challenging is also the relatively high long-term unemployed.

The capital position of the banking sector has been strengthened. CET1 capital ratio of the Cypriot banking sector reached 16.0% on March 31.

Non-performing exposures (NPEs) continued their downward trend in absolute terms reaching EUR 23.7 bln on the 31st of March, down from EUR 24.3 bln in December 2016 and EUR 27.3 bln in December 2015.

Restructurings were EUR 13.05 bln on March 31 (EUR 13.45 bln in December 2016 and EUR 14.15 bln in December 2015). Data show that over 72% of undertaken fixed-term loan restructurings abide by the new repayment schedule agreed as part of the restructuring.

Deposits in the banking system have been on a rising trend since the second half of 2015 with deposits increasing from EUR 44.5 bln in June 2015 to EUR 49.1 bln in May 2017.

Total loans continued their decreasing trend, being EUR 54.1 bln in May 2017, down from EUR 62.7 bln in December 2015, mainly due to write offs in the context of debt restructurings.

Despite the overall decline of loans and strict criteria in supplying new credit, new lending is on an upward trend. New loans towards Non-Financial Corporations during the first five months of 2017 reached EUR 1036 mln (total 2016: EUR 2334 mln), while towards Households reached EUR 472 mln (total 2016: EUR 1281 mln).

During the first five months of 2017, the general government budget balance was in surplus of the order of EUR 114 mln (0.6% of GDP) compared to a surplus of EUR 25 mln (0.1% of GDP) during the same period of the year before. General government primary balance was surplus during the January-May of the

in order of EUR 289 mln (1.5% of GDP) compared to a surplus of 194 mln (1.1% of GDP) during the same period of the year before.

Total revenue exhibited a positive rate of growth of about 6% reaching EUR 2,746 mln during the first five months of 2017 compared to EUR 2,592 mln during the same period of 2016.

Total expenditure exhibited an increase of about 2.5% reaching EUR 2,632 mln during the first five months of 2017 compared to EUR 2,567 mln during the same period of the year before.

The General Government Debt reached EUR 19.3 bln in May 2017 exhibiting no change since the beginning of the year, the PMDO said, noting that available cash covers the financing needs up to end 2018.

In June Cyprus issued a new 7-year 2.75% benchmark bond of EUR 0.85 bln with a simultaneous offer for switch or sale of outstanding international bonds due in 2019 and 2020. A nominal amount of EUR 515 mln or 37% of the outstanding bonds was switched.

In July, Cyprus proceeded with partial early repayment of the loan by the IMF which had been granted in the period of the economic adjustment programme (20132016). The prepayment of the order of EUR 0.3 bln reduced the outstanding balance of the loan to EUR 0.7 bln. The prepayment related to tranches carrying a higher interest rate than the current market rates.

The yield at the monthly 13-week Treasury Bill auctions continue to be negative. In the latest auction in July the average yield was -0.05% and the bid-tocover ratio was 2.0.

The next sovereign rating reviews are scheduled for 28 July by Moody’s and 15 September by Standard & Poor’s.