Commission staff, in liaison with staff from the European Central Bank, visited Cyprus from 18 to 22 March to conduct the sixth post-programme surveillance mission. The Cypriot economy continued to grow strongly in 2018, reaching 3.9%. Growth was driven by domestic demand and exports of services, particularly tourism, while inflation remained subdued. However, external headwinds are increasing, and important vulnerabilities remain, most notably very high levels of non-performing loans; private, public and external debt in a context of low productivity growth; and a high level of dependency on foreign capital flows. Nonetheless, the underlying fiscal performance continued to be very strong in 2018 on account of buoyant revenues, even though the general government surplus turned into a deficit due to the one-off banking support measures related to the sale of the Cyprus Cooperative Bank (CCB). Moreover, last year Cyprus made significant progress in consolidating its banking sector and reducing non-performing loans held by banks. The still favourable economic conditions provide a window of opportunity to step up the pace of structural reforms to boost potential growth.