‘Cyprus businesses focused on survival,’ Keve president says

Cyprus Chamber of Commerce and Industry (Keve) president Christodoulos Angastiniotis earlier this week said that the local businesses are now focused on enduring the current economic crisis.

“The business community’s priorities have now changed, with businesses now focusing on overcoming their liquidity issues and ensuring their survival,” the Keve president said.

Angastiniotis’ comments were made at an online conference held by the Nicosia Chamber of Commerce and Industry (Evel) in collaboration with the European Investment Bank (EIB).

Angastiniotis labelled the EIB’s findings on investments in Cyprus as disappointing, describing them as no longer relevant since they concern a time before the war in Ukraine and its adverse effects on the economy.

The Keve president also said that the chamber is pushing for the introduction of a business support scheme, which would include state-backed loans for Cypriot businesses.

“The funds made available through Cyprus’ recovery and resilience plan are of the highest importance, since they will facilitate the acceleration towards a more modern and more resilient economic model,” Angastiniotis concluded.

Nicosia Chamber of Commerce and Industry (Evel) president Michalis Mousioutas said that the war in Ukraine has come at a time when “efforts were being made to recover from the shock caused by the coronavirus pandemic”.

“The war in Ukraine has further worsened the situation, causing a number of problems in the business sector, which is having to deal with soaring energy costs, higher prices, and supply chain disruptions,” the Evel president added.

Central Bank Governor Constantinos Herodotou said that the rise in prices and the sanctions imposed on Russia will hinder economic activity in Cyprus.

It should be noted that the Central Bank recently revised its original forecast for Cyprus’ 2022 GDP, which was published in December 2021, from 3.6 per cent to 2.3 per cent.

Herodotou explained that the impact on Cypriot GDP is directly linked to rising oil and other commodity prices, as well as the disruption to exports of goods and services to Russia.

The governor said that Russia on average accounts for 16 per cent of Cyprus’ exports, which include tourism.

He also said that inflation for 2022 has risen significantly, reaching 6.7 per cent, with the initial forecast having stood at just 2.5 per cent.

However, Herodotou noted that the medium-term outlook for the Cypriot economy remains positive, supported by the disbursements of the EU recovery and resilience plan.

At the same time, the Central Bank governor explained that the Cypriot banking system is facing this crisis with a tangible improvement in its fundamental size.

At the end of 2021, non-performing loans showed a decrease of 89 per cent when compared to the end of 2014.

Meanwhile, Finance Minister Constantinos Petrides referenced his speech during the presentation of the state budget for 2021, where he mentioned the need to prepare for the next crisis.

“Indeed, the next crisis has arrived much sooner than we expected,” Petrides said, referencing the Russian invasion and the resulting sanctions.

The minister painted a more optimistic picture when it comes to tourism, saying that the loss of the Russian market will be mitigated by inflows from alternative markets.

Petrides highlighted the fact that tourist bookings have reached 75 per cent of those recorded during the corresponding period of 2019.

“What is more worrying is inflation,” Petrides said, noting that the rise in energy prices in many countries bear a resemblance to the situation caused by the 1973 oil crisis.

“We are close to seeing double-digit inflation rates due to rising energy prices in most European countries, and this will certainly affect the demand and supply of products and services,” he added.

Furthermore, Petrides said that investments in the green transition can have a beneficial effect on the Cypriot economy, while at the same time reducing Cyprus’ dependence on fossil fuels.

The minister said that In the medium-term fiscal framework, which covers the period between 2022 and 2024, expenditures of €717 million have been included that “will significantly contribute to the resilience of the Cypriot economy”.

In addition, he noted that the Cyprus recovery and resilience plan, which has a total budget of €1.2 billion, can function as a catalyst to leverage increased private investment.

“We must work together, public sector, private sector and banking institutions, to use these funds as quickly as possible,” Petrides said.

“We need political will and we must convince everyone, the parliament and the political parties to work together to adopt the necessary reforms,” ​​he concluded.

Finally, EIB vice president Lilyana Pavlova said the bank has planned a strong investment programme for Cyprus.

What is more, Pavlova noted that the implementation of the green transition will also hinge on private investments.