Economy Archives - LoveCyprus | We Love Cyprus and you will Love it too.

Economic recovery to begin in Q4, growth to peak in 2021, FinMin says

LoveCyprus — Thu, 30 Apr 2020 13:49:29 +0000

The gradual relaxation of containment measures aims to kickstart economic recovery in the fourth quarter of 2020 followed by a peak in GDP growth in 2021, Finance Minister Constantinos Petrides said on Friday, noting the second phase is considered more dangerous and people should be alert to avoid backward steps.

Finance Minister, along with Ministers of Health and Labour analysed the road map for the gradual lifting of lockdown measures taken by the authorities to curb the spread of coronavirus outbreak.

“Our aim is to proceed with recovery because without the economy (recovering) there will be no public Health system, there will be no income,” Petrides said during a press conference and added “if there is compliance in this second, more dangerous phase that needs increased discipline we perhaps need to be more alert, then the economy will may to recover in the fourth quarter and will peak in 2021.”

He said the road map containing four stages, is based on a comprehensive strategy made after consultations with the social partners and increased evaluation of the epidemiological data and various economic indicators, while the gradual lifting of containment measures in various sectors was made after evaluating certain indicators such as GDP contribution, employment, contribution to state revenue, infection risks as well as capacity to work from home.

Petrides also referred the sectors among the first to reopen in the first phase of relaxation of containment measures.

According to Petrides, the sector of retail trade is very important with a contribution in added value terms of over €1 billion, employment of 38,000 persons or 9.4% of jobs in Cyprus with a contribution of 12% in state revenue.

Noting that the sector will have a gradual operation, Petrides added that this retail trade is very important to the economy.

On constructions, Petrides said the sector’s contribution in value added terms is 5% with employment of 30,000 persons corresponding to 7.5% of total employment in Cyprus and a contribution of over 16% in state revenue.

However, the FinMin called for prudence and adherence on the personal hygiene and safety measures to avoid taking steps backwards, as Cyprus would enter in “uncharted waters” in case of a second phase of containment measures.

Noting that since the coronavirus outbreak the Ministry backed strict measures under the condition of a two-month lockdown, Petrides added “If we do no succeed in the second stage (the gradual relaxation of measures) then we enter again to uncharted waters for which no forecasts can be made.”

Responding to a question whether the Ministry is considering wage cuts in the public sector, Petrides said the government efforts aim to boost and not to reduce income, noting that “we should not be financially myopic but we should see the next day as well”

“We should not spend our firepower at once and run out of fuel precisely to avoid memorandum terms, either our own memorandum or memorandums from abroad and to be force to slash spending, to reduce income and increase taxes and that is why my call is for prudent financial management on the basis of a comprehensive financial planning,” he said.

On a question regarding the government guarantee scheme, Petrides said he will table a revised bill to the Council of Ministers, reflecting the consultation with political parties, as the bill requires parliamentary approval.

“And I hope next week (the bill) will secure a parliamentary majority,” he said, noting that government guarantees are a tool included in the coronavirus response package, including fiscal measures, monetary measures and financial measures that complement each other.

“I hope next week when I submit the new proposal to achieve the necessary consensus so we will be able to use all our combined fire power in this financial war. We do not have the luxury not to use all our weapons,” he concluded.

Source: CNA

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Invest Cyprus: There’s a high decree of satisfaction among foreign Investors for COVID-19 response

LoveCyprus — Wed, 29 Apr 2020 06:07:10 +0000

There`s a high degree of satisfaction among foreign investors in Cyprus with the measures taken by the government to tackle coronavirus pandemic. This was the result of a survey among foreign investors, in the context of an online discussion organized by the Cyprus Investment Promotion Organization (Invest Cyprus), entitled “Cyprus – Covid-19 Response Plan: What lies ahead ».

According to a press release from Invest Cyprus, speaking in the online discussion, Cyprus Minister of Finance Constantinos Petrides thanked the investors for the trust they showed in Cyprus and sent a message of optimism that the country will fully recover, as it did in the recent past.

“We are optimistic that with the measures we have taken, we will be able to get out of the crisis,” said Petrides. According to the Minister of Finance, the news is good, as the number of cases has decreased and the gradual easing of measures is imminent.

Explaining the government’s response to COVID-19 crisis, he said that the government respond in time to support businesses and the economy, by taking economic measures, reaching 5.5% of GDP.

Referring to the €2 billion State Guarantee Plan to boost liquidity in businesses, he said he was confident that it would be forwarded for approval in Parliament in the coming days.

The Minister of Finance also spoke about measure to support tourism, emphasizing that Cyprus will emerge as a safe tourist destination for tourists, as soon as conditions allow.

Despite the uncertainty prevailing internationally, he stressed that the forecasts for Cyprus are much better than for other EU countries and referred to the forecast of Fitch rating agency that there will be a loss of 5-7% of GDP in Cyprus. He also said it was possible the initial forecasts to be revised as Cyprus will leave the lockdown earlier than originally estimated due to early measures.

During the discussion, foreign investors participated in a poll on the consequences of the pandemic and the response by the government.

According to the survey, 56.9% of investors said they were very satisfied with the measures taken by the government to deal with the pandemic, 35.3% said they were satisfied, 5.9% said they were dissatisfied, and 2% very dissatisfied.

When asked about the degree of satisfaction by service providers (lawyers, accountants, bankers) and their response in order to ensure the continuity of the operations of each company, 29.8% said they were very satisfied, 59.6% satisfied, 8.5% said they were dissatisfied, while 2.1% were very dissatisfied.

When asked about the degree of satisfaction with the information provided about the measures and instructions given to deal with the pandemic, 53.7% said they were very satisfied, 37% satisfied, while 9.3% said they were dissatisfied.

In a question of when they expect their business activities to fully recover from the crisis caused by the pandemic 29.4% estimated that this will happen within 2020, 35.3% estimated that this will happen in the first half of 2021, 27.5% estimated that this will happen in the second half of 2021, while 7%, 8% estimated that this would happen later.

Source: CNA

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Fitch changes Cyprus’ outlook to stable due to economic impact from coronavirus

LoveCyprus — Mon, 06 Apr 2020 11:01:07 +0000

Fitch rating agency has changed the outlook for Cyprus to stable from positive, citing the impact of the coronavirus pandemic on the Cypriot economy and on Cyprus’s fiscal position.

In a rating action issued on Friday, Fitch affirmed Cyprus’ Long term rating at ‘BBB-‘.

“The outlook revision reflects the significant impact of the global COVID-19 pandemic on Cyprus` economy and on the sovereign`s fiscal position,” Fitch said.

The agency forecasts a GDP contraction of more than 2% in 2020 “reflecting the material negative impact of the health crisis on the global economy.”

Fitch noted however, that “risks to this baseline forecast are tilted firmly to the downside, as it assumes that the coronavirus can be contained in 2H20, leading to a relatively strong economic recovery in 2021.”

“In the event of a second wave of infections and the widespread resumption of lockdown measures, economic outturns would be significantly weaker for 2020 and 2021,” Fitch said.

According to Fitch, “the recession and the economic policy response to the COVID-19 pandemic will result in a sizeable deterioration of the budget balance this year.”

With regard to the support measures announced by the government, Fitch said that while details had not been finalised by 1 April, “fiscal easing, including extra healthcare expenditure, lower social security contributions and subsidies for job protection to lead to a budget deficit around 1% of GDP in 2020 compared with the 2.8% of GDP budget surplus in 2019.”

Furthermore, the agency added that despite favourable trends in the gross general government debt (GGGD) to GDP ratio which amounted to 95.5% in 2019, the GGGD to GDP ratio to increase somewhat in 2020 due to the combination of the economic recession and budget deficit.

“Moreover, the risk of materialisation of contingent liabilities into the sovereign balance sheet remains a risk, given the financial system`s still fragile position and downside risks to the economic outlook,” Fitch added.

According to Fitch, the Cypriot economy`s demonstrated flexibility, illustrated for example by the fall in unemployment to close to pre-crisis level to drive the recovery after the severe short-term shock.

But it pointed out that “the GDP growth forecast is highly uncertain in 2021, but afterwards it is expected that the GDP growth will gradually converge to 2% medium term growth potential, unchanged since the last rating review.”

On Cyprus’ market access, Fitch noted that the government has built a track record of capital markets access with increasingly favourable yields, pointing out however that “financing needs in 2020 could increase further depending on the extent of the fiscal impact of the health crisis.”

According to Fitch, the banking sector “remains a weakness relative to `BBB` peers due to the exceptionally weak asset quality and high NPE ratios that still weigh on capital, in particular capital at risk from unreserved problem assets, and profitability.”

Source:CNA

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Cyprus government unveils two schemes to protect economy during COVID-19 crisis (2)

LoveCyprus — Fri, 27 Mar 2020 07:44:52 +0000

The government has unveiled two schemes to help workers keep their jobs and businesses to avoid bankruptcy amid the coronavirus pandemic.

The two schemes were approved by the Cabinet on Thursday and were presented by Finance Minister Constantinos Petrides.

He said the first provides for a suspension of loan payments for a period of nine months, or end of December 2020. The second provides government guarantees of up to two billion euros to banks to offer low-interest loans and to subsidize part of the interest rate.

Petrides described the schemes as bold, noting that they subsidize the market through the banking system and not the banking system itself.

Central Bank Governor, Constantinos Herodotou said that the two schemes protect the banks and urged them to proceed with measures that will be presented to the Central Bank which he added, is planning further measures.

The Minister of Finance said that in front of huge economic challenges there’s need of bold financial measures that will have a huge impact on public finances, will prevent a deep and prolonged crisis and will allow a faster recovery.

After the Government’s consultation with the political parties, the two schemes are expected to be approved Friday by the parliament.

The Minister also said that the Ministry of Finance, had been working in full coordination and cooperation with the Central Bank of Cyprus (CBC) to combine, in the best possible way, both monetary and fiscal tools.

Regarding the suspension of loan payments for a period of nine months, he said that the suspension covers businesses, natural persons and self-employed who were consistent with their obligations to both the banks and other credit institutions. For the implementation of the measure, a written request should be made to the financial institution.

On the other hand, the Minister said that Banks, while they will have costs due to the suspension of payments, they are not expected to face sustainability problems due to the flexibility provided by decisions of the Central Bank of Cyprus (CBC) and the competent European monetary authorities.

Regarding the second scheme that provides government guarantees of up to two billion euros to banks, he said that €1,750,000,000 will be granted as new low-interest loans to Businesses and self – employed and € 250,000,000 will be for subsidizing part of the interest rate to individuals, self-employed and businesses.

He explained that government guarantees would cover 70% of the losses that could result from the above loans and banks the remaining 30%, regardless of whether the loan was secured or not.
Loans will last from 3 months to 6 years excluding current accounts with a maximum guarantee of 1 year.

The process of granting government guarantees to credit institutions will begin in early April and it is expected that the first loans will be granted in early May 2020.

There are also conditions for granting government guarantees to credit institutions as well as for the granting of loans, such as the maximum amount of loans that may be granted and the reasons of the loan.

The Minister particularly noted the condition that eligible businesses and self-employed will not proceed with any layoffs from the date of the decree and until December 31, 2020 through the redundancy fund.

On his part the Central Bank Governor said that the suspension of loan payments helps the real economy, households and businesses, while safeguarding banks, which will not be forced to recognize as non – performing loans the difficulties that people are experiencing. He also urged banks to fully plan measures and present them to CBC. He added that the CBC was considering further measures to be announced soon.

Source: CNA

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State considers granting €2 billion guarantees to unlock credit to the economy amid COVID19 epidemic

LoveCyprus — Tue, 24 Mar 2020 06:55:04 +0000

The Cyprus government is considering a plan to provide state guarantees to banks amounting to €2 billion, in a bid to unlock credit to self-employed, small and medium-sized enterprises and large corporations, hit by the coronavirus epidemic.

The plan, which will be put into consultation with the Cypriot banks provides for the granting of government guarantees to SMEs and self-employed persons amounting to €1.7 billion and €0.3 bl for large corporations.

The aim of the plan, a copy of which was obtained by CNA, “is to provide state government guarantees with a total amount of up to €2 billion to Cypriot licensed banking institutions, including subsidiaries of foreign credit institutions with the purpose to provide loans to companies and self-employed persons (to help them) to deal with the consequences of the measures to combat the coronavirus (epidemic).”

The plan aims to cover the credit risk encouraging the bank to provide cheap new loans from April 2 until the end of the year, as well to cover the credit risk current loans of Self-employed persons, SMEs and large corporates which have been hit by the coronavirus epidemic.

Furthermore, the plan also covers the issuance of current accounts and overdrafts that may not exceed 50% of amount offered to a self-employed person, 25% of the amount provided to an SME and 15% of large corporation.

“The provision of loans aims to cover the companies’ and self-employed persons’ liquidity needs, working capital and investments,” the draft reads.

However, the draft makes clear that self-employed or corporates that had non-performing exposures at the end of 2019 will not be eligible for the plan.

As far as the limit of loans is concerned, the draft notes that a loan cannot exceed an amount that is double of a company’s or a self-employed total annual wage bill in 2019 or the latest available year, or cannot exceed the annual wagebill for the first two years of operation in case of companies or self-employed persons that began operations in January 2019.

According to the draft, in some justified cases and based on liquidity plans, loans can be increased to cover the liquidity needs for the next 18 months in case of a self-employed person or an SME and the next 12 months when it comes to a large corporation.

According to the draft, the plan will be put into force on April 2 until the end of the year.

Source: CNA

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GDP in Cyprus set to grow by 3.2% in 2019, 2.8% in 2020 and 2.5% in 2021 according to Commision Forecast

LoveCyprus — Fri, 14 Feb 2020 10:45:36 +0000

The economy in Cyprus will grow by 3.2% in 2019, 2.8% in 2020 and 2.5% in 2021, according the European Commission`s Winter Economic Forecast, published today in Brussels, and presented by Commissioner Paolo Gentiloni. Inflation will be 0.8% in 2020 and 1.2% in 2021 and “downside risks are primarily external notably a potential slowdown in foreign demand for residences and tourism services”.

More specifically, according to the European Commission “Cyprus’ real GDP grew strongly in the third quarter of 2019 (3.4% y-o-y), driven by buoyant domestic demand”. But “net exports, by contrast, were a drag on growth”. The EC states that “economic sentiment stabilised in 2019 and it even improved in early 2020” and “business sentiment remained strong in services and manufacturing, but deteriorated in construction”, while “consumer sentiment and business sentiment in retail trade stabilised suggesting that growth might moderate in the months to come”.

Furthermore, according to the Commission “private consumption is nevertheless expected to remain resilient, given positive labour market expectations and rising wages” and the unemployment rate fell rapidly to 7.2% in the third quarter of 2019, the lowest level since 2011″.

The EC report states that “public spending is also set to boost growth, driven by increasing public wages and government expenditure in relation to the newly established National Health System”. “Investment in residential buildings is a key driver of activity and is expected to continue in the medium term, as suggested by improved order books and increasing building permits”, the EC states.

Furthermore, “new bank lending to domestic non-financial companies and households is only slightly picking up. Net exports, however, contributed negatively in the first three quarters of 2019”.

“Amid the still subdued external environment and increasing competition over tourism from neighbouring countries, net exports are likely to continue decreasing over the coming months with a slight recovery in 2021”, the EC warns.

Overall, “real GDP is projected to grow by 3.2% in 2019, 2.8% in 2020 and 2.5% in 2021”.

Furthermore, “price pressures remain subdued. HICP inflation stood at 0.5% in 2019, even lower than in 2018” and “a major factor behind the low inflation was the dip in energy prices in the second half of the year, compared to high increases in the corresponding period in 2018”. In addition, “non-energy industrial goods inflation continued to decline. Inflation in services is picking up, mainly reflecting increasing prices for housing related services”.

Finally the EC explains that “rising disposable income is expected to fuel inflation but the rate should remain somewhat contained due to the bottoming-out of energy base effects”. Overall, “headline inflation is projected to reach 0.8% in 2020 and 1.2% in 2021”.

Source: CNA

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Cyprus’ building permits significantly up in January-November 2019

LoveCyprus — Thu, 13 Feb 2020 06:52:31 +0000

The number of building permits issued by municipal authorities and the district administration offices during the period January – November 2019, increased by approximately 11% over the corresponding period of 2018, with the value of these permits up by 74%.

According to data released by the Statistical Service of Cyprus, the total value of building permits issued in the first 11 months of 2019 stood at € 3.3 billion with 54% of this value recorded in Limassol.

During the period January – November 2019, 6,571 building permits were issued compared to 5,929 in the corresponding period of the previous year. The total value of these permits increased by 73.8% and the total area by 44.6%. Τhe number of dwelling units recorded an increase of 49.6%.

Most building permits were issued in Nicosia with 2,334 followed by Limassol with 1,961, Larnaca with 1,020, Pafos with 974 and Famagusta with 282. In terms of both total value and total area Limassol was at the top with € 1.8 billion and 1 million square meters, followed by Nicosia with a value of €623.1 million and 584 square meters, Larnaca with € 410.9 million and 298 square meters, Pafos with € 299.4 million and 236 square meters and Famagusta with € 166.9 million and 137 square meters.

During November 2019 the number of building permits authorized by the municipal authorities and the district administration offices stood at 707. The total value of these permits reached €332.4 million and the total area 222.4 thousand square metres. These building permits provide for the construction of 909 dwelling units.

Building permits constitute a leading indicator of future activity in the construction sector.

Source: CNA

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