The mission was coordinated with an International Monetary Fund Article IV mission, while staff from the European Stability Mechanism participated in the mission on aspects related to the ESM's Early Warning System. While remaining strong, economic growth is gradually decelerating. After real GDP growth of 3.9% in 2018, the pace of economic expansion moderated in the first half of 2019, largely reflecting external headwinds. Downside risks include the sizable current account deficit and the declining, but still elevated private sector indebtedness. Fiscal performance is expected to remain strong. The general government balance in 2019 is projected to show a sizable surplus of above 3.5% of GDP on account of buoyant tax revenues and some one-off factors. Good progress was made in consolidating the banking sector and reducing non-performing loans, but the Cypriot banking sector still has the second highest non-performing loan ratios in the euro area. Therefore, efforts to further reduce NPLs remain a priority, including plans for further loan sales and securitisations. The structural reform momentum needs to be renewed to support growth and economic resilience going forward.