It is the third such revision this year, after better than expected quarterly output figures showed the recession tapering off. But the business climate remained constrained, the agency, a division of Cyprus’ finance ministry, said.

“We maintain our view that growth in 2014 will remain negative, not exceeding 3.0%, and we assume a rebound in 2015 with a gradual restoration of lending at affordable rates,” it said.

Cyprus required a €10 billion international bailout from the European Union and the International Monetary Fund in 2013, contingent on it shutting down one troubled bank and forcing depositors in a second to pay to recapitalise it.

In its latest review in July, international lenders said the island nation would experience a 4.2% drop in output this year.

Although Cyprus has received good reviews on meeting its bailout commitments, lenders are now withholding a new tranche of aid worth about €435 million until authorities produce an effective foreclosures law which would allow banks to manage rising non-performing debts.

Source: Cyprus Mail