European Commission staff, in liaison with staff from the European Central Bank, visited Cyprus from 25 to 29 September to conduct the third post-programme surveillance mission and undertake specific monitoring of macroeconomic imbalances under the Macroeconomic Imbalances Procedure. Cyprus’ economic recovery has gathered further strength, but sustaining growth over the medium term will require renewed reform momentum, continued fiscal discipline and acceleration in the resolution of non-performing loans (NPLs). The very high level of NPLs remains the key vulnerability of the Cypriot economy. Growth has been increasingly driven by domestic demand, while tourism remains buoyant and labour market conditions have continued to improve. Despite these positive developments, high private sector debt continues to weigh on growth prospects. Fiscal performance benefited from the favourable macroeconomic environment and from prudent expenditure policies, but uncertainties and risks remain for the medium term.