Cyprus forecasts 2027 growth as Morgan Stanley backs European bank shares

Nicosia, Cyprus. Cyprus expects economic growth next year despite pressures from conflicts abroad, Finance Minister Makis Keravnos said as he presented the 2027 state budget on Monday. The forecast was among the leading business developments for the week beginning October 12, alongside Morgan Stanley’s positive assessment of European bank shares.

Budget forecasts growth and a surplus

Keravnos put average GDP growth for 2027-2029 at approximately 3 per cent. Inflation is forecast to ease to 2.5 per cent next year, compared with an overall rate of 4.6 per cent in 2026.

The general government is expected to record another surplus in 2027, equivalent to roughly 3.9 per cent of GDP, while the public debt-to-GDP ratio is projected to fall further.

Addressing reporters after submitting the budget to parliament, Keravnos described international conditions as particularly difficult because of intensifying armed conflicts in Ukraine and the Persian Gulf. He said the wars had triggered a severe energy crisis, putting European economies under pressure and affecting both households and businesses.

Morgan Stanley sees opportunity in bank sell-off

Morgan Stanley considers the recent retreat in European banking shares an opportunity for investors to buy. Its assessment attributes the decline to worsening sentiment in sovereign bond markets and investors taking profits, rather than weaker fundamentals across the banking sector.

Greek business publication Newmoney shared findings from the investment bank’s latest report. Morgan Stanley retained a favourable view of Greek banks, citing their valuations, robust profitability and solid capital positions despite fresh volatility in Europe’s bond markets.

The report places Alpha Bank among Morgan Stanley’s favoured European mid-cap banks, assigning it an Overweight recommendation. Its €5.50 price target compares with a valuation of €4.65 in the report, indicating potential gains of approximately 18 per cent.