Cyprus is emerging from a prolonged recession. Regardless, the economy will continue to be challenged by a weak external environment, public sector austerity, competitive pressures on wages and disposable income, and high levels of non-performing loans in the banking sector.
Negotiations between Greek and Turkish Cypriots on the 40-year-old 'Cyprus problem' are reaching a crucial phase. The odds of a deal to reunify the island are higher now than they have been since the last major peace effort ended in 2004.
The Cypriot government's adherence to the terms of the 2013 bailout programme and a series of structural and fiscal reforms have put the country in a position to reduce its public debt overhang substantially over the next decade.
Major Forecast Change
We have revised up our forecast for real GDP growth in 2015 to 0.4% from 0.3% as a result of strong economic data in the first half of 2015. We continue to see a strong acceleration in 2016, to 1.4% growth.
Key Risks To Outlook
Cyprus' status as a small, open economy leaves it vulnerable to external risks, particularly from key trading partners Russia and Greece, which are each experiencing severe difficulties.
Given the sharp decline in major categories of expenditure, particularly fixed investment, there is the potential for a stronger rebound than we are currently pencilling in. We reiterate, however, that the economy and the components of expenditure are likely to remain well below their peaks in real terms for several years to come.
|Real GDP growth, % y-o-y||-5.1||-2.3||0.4||1.4|
|Nominal GDP, EURbn||18.1||17.5||17.7||18.2|
|Consumer price inflation, % y-o-y, eop||0.4||-0.3||-0.3||1.2|
|Exchange rate EUR/USD, eop||0.72||0.83||0.98||0.91|
|Budget balance, % of GDP||-4.9||-8.8||-1.4||0.2|
|Current account balance,...|
The Cyprus Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Cyprus. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.
An influential new analysis of Cyprus's economic, political and financial prospects through end-2019, just published by award-winning forecasters, BMI Research.
- Forecast the pace and stability of Cyprus's economic and industry growth through end-2019.
- Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
- Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
- Contextualise Cyprus's country risks against regional peers using BMI's country comparative Risk Index system.
- Evaluate external threats to doing business in Cyprus, including currency volatility, the commodity price boom and protectionist policies.
BMI provides our fully independent 5-year forecasts for Cyprus through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.
Economic Outlook Contents
The Cyprus Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.
Key Areas Covered:
- Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
- BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.
- Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
- Balance of Payments - trade and investment, current and capital account.
- Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
- Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
- Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
- Foreign Direct Investment - approvals, inflows and climate.
- External Debt - debt profile (short and long-term plus public and private sector obligations).
- Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.
- Rely upon BMI's 100% independent forecast scenarios for Cyprus and underlying assumptions - we take no advertising and are privately-owned.
- Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Cyprus, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
- Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.
What are the political risks to doing business in Cyprus over the next 5-years?
BMI's Cyprus country Risk Index evaluates the short- and medium-term threats to political stability.
Political Outlook Contents
- SWOT Analysis for the Cyprus Market - Political Strengths, Weaknesses, Opportunities and Threats facing Cyprus.
- Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for Cyprus's risk are compared with regional and global averages.
- Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
- Long-Term Political Outlook BMI examines the structural risks to the stability of Cyprus’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.
- Benchmark Cyprus's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
- Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
- Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.
What are the current operational risks and difficulties associated with doing business in Cyprus?
The Operational Risk section gives an evaluation of current risks and difficulties associated with operating in the market. It also provides a brief overview of the regional Operational Risk Index which benchmarks Cyprus against its neighbours.
Operational Risk Contents
The chapter provides a summary of the main threats in the country, within:
- Labour Market Risk (Education; Availability of Labour; and Labour Costs)
- Logistics Risk (Market Size and Utilities; Quality and Extent of the Transport Governance)
- Trade and Investment Risk (Economic Openness; Government Intervention; and Legal Risks)
- Crime and Security Risk (Crime; Terrorism; and Interstate Conflict risks).