Cyprus Business Now

The Central Bank of Cyprus (CBC) released its latest data this week, revealing a minor increase in deposit interest rates in Cyprus in August 2023 compared to July.

While the interest rates on consumer loans showed an increase, there was a slight decrease in other categories of interest rates.

Specifically, the interest rate for household time deposits of up to one year experienced a slight increase to 0.88 per cent, compared to 0.87 per cent in the previous month.

The corresponding interest rate for deposits by non-financial corporations also saw a rise to 1.78 per cent, up from 1.68 per cent in the previous month.

The interest rate applicable to consumer loans registered an increase to 6.06 per cent, compared to 5.51 per cent in the previous month.

However, the interest rate for housing loans decreased to 4.20 per cent, down from 4.50 per cent in the previous month.

Moreover, the interest rate for loans to non-financial corporations for amounts up to €1 million decreased to 5.56 per cent, compared to 5.65 per cent in the previous month.

Similarly, the interest rate for loans to non-financial corporations for amounts exceeding €1 million recorded a decrease to 6.10 per cent, down from 6.33 per cent in the previous month.

The level of implementation of state budget expenditures in Cyprus has experienced a minor increase, reaching 59 per cent as of August, according to a report released this week from the state treasury. This increase is primarily attributed to higher expenditures on interest payments.

In more detail, by the end of August, total revenues amounted to €6.68 billion, equivalent to 57 per cent of the state budget (compared to €5.91 billion or 59 per cent in 2022).

Meanwhile, actual expenditures reached €6.68 billion, corresponding to a 59 per cent implementation rate (compared to €6.02 billion or 54 per cent in 2022).

In comparison to the previous year, there is a notable increase in the implementation of the state budget concerning expenses (59 per cent in 2023, up from 54 per cent in 2022), while revenues have slightly decreased (57 per cent in 2023, down from 59 per cent in 2022).

The increased implementation of expenses is primarily due to higher outflows for interest payments, which amounted to €0.41 billion in 2023, compared to €0.29 billion in 2022, as highlighted by the treasury.

Regarding revenues, indirect taxes have increased by €0.41 billion (19 per cent) compared to 2022, mainly due to the rise in VAT revenues by €0.37 billion (2023: €1.88 billion, 2022: €1.51 billion).

Direct taxes have also increased by €0.2 billion (10 per cent) compared to 2022, primarily due to income tax for legal and natural persons (2023: €1.88 billion, 2022: €1.67 billion).

Inflows resulting from increased borrowing reached €1.12 billion by the end of August (compared to €1.12 billion in 2022).

This included €0.12 billion from borrowing from the European Investment Bank, €0.01 billion from the issuance of bonds by natural persons, and €0.99 billion from the issuance of European Medium-Term Notes with a nominal value of €1 billion.

Regarding wages, pensions, and allowances, the implementation rate indicates a 10 per cent increase (€0.17 billion) from €1.78 billion in 2022 to €1.95 billion in 2023, as reported by the treasury.

Expenses for social benefits reached €1.09 billion by the end of August 2023, compared to €1.04 billion in the same period last year. This increase of €0.05 billion is mainly attributed to higher spending on social security benefits (€0.46 billion in 2023, up from €0.43 billion in 2022) and increased spending on health benefits (€0.45 billion in 2023, up from €0.43 billion in 2022).

Regarding transfers and subsidies, the implementation rate shows a 13 per cent increase (€0.11 billion) from €0.85 billion in 2022 to €0.96 billion in 2023.

This increase is primarily due to the Government Contribution to the Social Insurance Fund by €0.4 billion (15 per cent) and subsidies for the cost of electricity consumption to address inflationary pressures by €0.67 billion.

At the same time, loan repayments amounted to €1.75 billion (compared to €1.52 billion in 2022), including €0.28 billion for internal loan repayment, €1.05 billion for external loan repayment, and €0.42 billion for loan interest and charges.

The increased outflows for interest payments, as explained by the treasury, are mainly due to the payment of interest on social security investments (€0.16 billion), based on the tripartite settlement between the Central Bank, the Ministry of Finance, and the Social Insurance Services,

Finally, based on data from the treasury, over the past decade, the average implementation rate of the state budget for expenses until August has been 57 per cent in Cyprus.

The Cyprus Stock Exchange (CSE) ended Thursday, October 5 with losses.

The general Cyprus Stock Market Index was at 129.27 points at 13:32 during the day, reflecting a decrease of 0.59 per cent over the previous day of trading.

The FTSE / CySE 20 Index was at 78.38 points, representing a drop of 0.60 per cent.

The total value of transactions came up to €87,891.

In terms of the sub-indexes, the main, alternative and hotel indexes fell by 0.8 per cent, 0.13 per cent and 2.16 per cent respectively. The investment firm index remained stable.

The biggest investment interest was attracted by Salamis Tours (no change), Logicom (-1.41 per cent), Demetra (no change), and KEO (+1.28 per cent).