Bright prospects for Cyprus economy

December 18, 2017

An overall very positive picture of the Cypriot economy, notwithstanding specific challenges, was drawn by the speakers of an Economist event held in London’s Stock Exchange on Thursday.

The ‘Cyprus: Regaining Momentum – Targeting Investment and Growth’ conference looked into the current situation and the prospects of the Cypriot economy.

As the consultant editor of the Economist John Andrews stated at the start of the conference, “things look rather healthy for Cyprus, but there remains the problem of the high percentage of non-performing loans.”

The rest of the speakers’ presentations sent the same message, with Peter Bofinger, an economics professor and member of the German council of economic experts noting that Cyprus’s recovery was faster in comparison to other economies in SE Europe because the island’s economy is more open.

Anthony De Lannoy, IMF executive director for Cyprus presented the stand-out factors of the country’s recovery: the GDP growth, the achieved fiscal balance, the regained capital markets access, the credit rating improvement and the restructuring of the banking sector.

As far as the main challenges are concerned, he pointed to the high private debt and the non-performing loans.

Servaas Deroose, of the European Commission, spoke of a “remarkable turnaround” and a “vibrant momentum”, but he added in the mix of challenges the need for enhanced productivity.

The Bank of Cyprus UK CEO Nick Fahy presented the work that his bank has done following the crisis and said that there is more time needed to deal with the high NPLs. He also stressed the high compliance standards of the Cypriot banking sector.

Speaking on behalf of Moody’s, Colin Ellis, the rating agency’s chief credit officer for EMEA, said that we have a seen a very strong turnaround in Cyprus and he expressed the view that the country faces no risk of default.

The last part of the conference examined the competitive advantages of Cyprus as an investment destination. Among the speakers were Natasa Pilides, director general of CIPA and Evgenios Evgeniou, CEO of PwC Cyprus.

The EBRD deputy director Bojan Markovic said that the bank has already invested €270m in Cyprus over the last two years. He also mentioned that there are initiatives being prepared in order to assist European countries in dealing with NPLs.

At the beginning of the conference, James Ker-Lindsay, senior visiting fellow at the LSE, and a close observer of the Cyprus issue spoke about the latest developments in the pursuit of a viable settlement.

He commented that the sense that the talks could resume quickly after the presidential election is not justified in his view. He also expressed concern at the fact that the Cyprus issue dynamics cannot be understood anymore under the calculation that Turkey is following a European path. As he said, that country is now going towards a very dangerous direction.

He also described President Erdogan’s recent visit to Athens as “an unmitigated disaster”.