Cyprus Business Now: weekly wrap-up
Here are the top business stories in Cyprus from the week starting August 19:
A total of 6.6 million passengers traveled through Cyprus’ airports between January and July this year, according to airport operator Hermes Airports. Looking ahead, the company said that it expects the figures for August to exceed 1.5 million passengers, similar to the levels recorded in 2023. This prediction comes after Hermes Airport’s latest report revealed that in June alone, the passenger count soared to 1.3 million, a rise of 105 per cent compared to the same month last year.
Notably, Larnaca airport handled the majority of this number, welcoming over 895,000 travelers, while Paphos airport saw more than 404,000 passengers. In fact, July continued this upward trajectory with around 1.5 million people moving through the two airports, slightly up by 1 per cent since July last year.
This announcement followed the bank’s financial results for the first half of 2024, which were released on August 8. At that time, Bank of Cyprus CEO Panicos Nicolaou said, “in the coming weeks, we will outline why we are recommending the above, with a proposal to be put to shareholders at a forthcoming EGM.” Moreover, Nicolaou stated that this move “will yield a number of long-term strategic and capital market benefits.”
Simultaneously, the final discussion on the 2025 state budget is expected to take place in mid-September during a Cabinet meeting, according to Finance Minister Makis Keravnos. Commenting on this, Keravnos mentioned that the Finance Ministry has completed the preliminary work, including the allocation of expenses for each ministry.
Additionally, he said that the final touches will be added to the state budget document upon his return next week. Regarding future economic plans, Keravnos confirmed that the government’s investment plan, aimed at strengthening Cyprus’ economic model, will continue, focusing on collaborations between Cypriot businesses and foreign companies.
Turning to economic indicators, Cyprus experienced a 2.4 per cent year-on-year increase in the Harmonised Index of Consumer Prices (HICP) in July 2024 compared to the same month of the previous year. Interestingly, the HICP, a key measure of inflation, also recorded a 0.7 per cent rise between June and July 2024, according to a report released by the Cyprus Statistical Service (Cystat). For context, the index increased by 2.3 per cent in the first seven months of 2024, driven primarily by year-on-year increases in recreation, culture, and hospitality sectors.
Meanwhile, the latest State Aid Scoreboard from the European Commission, published by the Centre of International and European Economic Law (CIEEL), highlights a significant reduction in state aid expenditures reported by EU Member States for the year 2022.
Specifically, the Office of the Commissioner for State Aid Control reported a decrease of 34.8 per cent from the previous year, with spending dropping to €228 billion from €349.7 billion in 2021. This drop is largely attributed to the phased reduction pandemic-related measures as the health situation improved.
On the tourism front, Larnaca’s hotels are enjoying robust occupancy rates this summer, ranging from 80 to 85 per cent, according to Marios Polyviou, president of the Larnaca Hoteliers Association (Pasyxe).
According to him, most visitors are coming from Britain and Israel, contributing to strong performance in both July and August. He also noted that despite a muted start to the year due to instability in the Middle East, Larnaca’s tourism is now flourishing.
In financial markets, there will be a new issue of Cypriot government bills on Monday, August 26, with a three-month duration set to mature on November 29, 2024.
Notably, Sophic, an online platform allowing clients to invest in government bills, announced that it intends to secure a portion of this new issue, continuing its practice from previous issues. This move, the company stated, provides non-professional investors and businesses with a safe and attractive investment opportunity.
Shifting to research and innovation, spending in Cyprus as a percentage of domestic GDP remains low compared to the European average, despite an increase in absolute terms. In fact, the Cyprus Statistical Service (Cystat) estimated total research expenditure for 2022 at €207 million, representing 0.75 per cent of GDP. Although this figure shows a slight increase, Cyprus still lags behind the EU average, where research expenditure stands at 2.24 per cent of GDP.
In the consumer market, the Cyprus consumer protection service reported that the price of 27 out of 45 products monitored increased in July. This rise was most evident in fresh and frozen fish and sugar, though greens and vegetables saw a decrease.
At the same time, the inflation rate dropped to 2.1 per cent in July, down from 2.9 per cent in June, reflecting a moderation in price increases across several product categories.
On the telecom front, PwC Cyprus partner and telecoms lead Nicos Theodoulou emphasised key strategies for industry leaders to remain competitive amid rapid changes, especially with the rollout of 5G networks.
According to Theodoulou, 5G presents numerous opportunities, particularly in enabling smart cities, autonomous cars, and IoT devices, which will significantly benefit telecom companies.
In the hotel sector, Famagusta’s hoteliers are optimistic that occupancy levels will be similar to those in 2023, with rates for July and August ranging from 85 to 95 per cent. Panayiotis Constantinou, President of the Famagusta Hoteliers Association (Pasyxe), noted that promising reservations are extending into early autumn, with hopes to sustain this momentum through October and November.
Further regulatory developments include CySEC’s decision to withdraw the registration of the ‘Investment Compartment – Real Estate (RAIF76_1),’ under RAIF Prime Property Services P.P. RAIF V.C.I.C. Ltd. This move was prompted by the fund’s failure to raise the required minimum assets within the specified timeframe, in accordance with the Alternative Investment Funds Law of 2018.
According to a report from the Cyprus Statistical Service (Cystat), the general government debt was recorded at €22.81 billion at the end of June, down from €23.04 billion at the end of March. This improvement was driven by the expiration of a €850 million Euro medium-term note (EMTN) and the issuance of a €1 billion seven-year bond.