Following a three - year reform period and an extensive banking consolidation, Cyprus has exited the EU-IMF economic adjustment programme in March 2013 and has entered a period of recovery and growth. In this post crisis period, where Cyprus is currently outperforming its budgetary targets and the economic trends are showing positive signs, the challenge is to increase the island's role as a regional hub in the Eastern Mediterranean.
A conference was held last week on the 7th of December, at the London Stock Exchange, with the eye-catching title: "Cyprus: The Eurozone's Comeback Kid – Setting new targets for growth and competitiveness", under the auspices of the world-known financial publication The Economist. What has caught our attention regarding this forum was the plethora of the significant speakers and presenters in addition to their actual remarks on the development of the Cyprus economy.
The conference's agenda included The Economist's most recent forecast on Europe, a general outlook on the Cyprus economy and the road towards growth, with a special reference on the performance of the capital markets in continental Europe, the financial services sector in Cyprus after the bail-out in 2013 and the "financial landscape" regarding southeast Europe, following the Brexit. The conference brought together significant stakeholders of the Cypriot economy, such as representatives of the creditor institutions, politicians and investors.
This article attempts to examine what was underlined by each of the speakers and what was the core message delivered through this conference.
THE CYPRUS ECONOMY: BACK ON TRACK FOR GROWTH
The institutions' perspective
Source: The Economist
To begin with, the Minister of Finance of the Republic of Cyprus, Mr. Harris Georgiades, reaffirmed in his speech the government's commitment to accomplish all the necessary reforms. He highlighted the determination to maintain the "reform momentum" and the "fiscal discipline", two major factors for the consolidation of the country's economic recovery. The Finance Minister characteristically said that Cyprus has undergone a "remarkable recovery", following the 2013 crisis, attributing this to the Cypriot economy's "resilience and adaptability".
On the other hand, Mr. Georgiades, did not fail to comment that there are still challenges that need to be dealt, for example, the unemployment rate, the public debt, the level of non-performing loans (NPLs), and the occasional "problematic bureaucracy" noting however that "despite the remaining challenges it is clear that macroeconomic stability has recovered and that confidence has been restored".
Mr Georgiades added that Cyprus has the potential to have one of the highest growth rates in Europe for the next ten years, indicating that the economy growth rate for this year has been nearly 3%. He also said that Cyprus is expected to maintain this pace next year, not because of any "artificial boost" through "deficit spending" but because of "real economic activity".
He even revealed that Cyprus is planning to be "out and about" in bond markets next year, after a successful first debt sale in July since the 2013 banking collapse and bailout.
Georgiades also told the Cyprus News Agency that there is no room for abandoning reforms by saying that "there can be no justification for any reform fatigue. The government argues with much more intensity that the reform effort needs to be continued; the fiscal discipline needs to be continued and maintained as well. We have covered significant distance precisely through the reform actions and the consolidation of our economy and we have set the economy anew on a track of strong recovery".
He concluded by commenting that "Cyprus can be a strategic partner, an island of stability and safety in a troubled region, offering businesses investment and cooperation opportunities."
Subsequently, it was Mr. Daniel Daco's turn to comment on the implementation of the Cyprus economy programme. The head of the European Commission mission for Cyprus, said that now this implementation is starting to deliver tangible results however, he underlined that in order to ensure sustainable growth "the top policy priority for Cyprus must be to address the legacy issues from the crisis".
He also mentioned the requirement for strong financial sector fundamentals, the reduction of private debt, and the need for sound public finances. On the same line with the Minister of Finance, Mr. Daco highlighted as the main problematic areas the considerable amount of non-performing loans and the over-indebtedness of corporations and households. Moreover, he referred to the utilization need of the recently adopted state of the art insolvency and foreclosure frameworks by the Republic of Cyprus.
The European Central Bank mission chief for Cyprus, Mr. Andreas Westphal, who also presented under this specific subject matter, said that Cyprus has indeed achieved remarkable progress through a difficult and painful process, without omitting to praise the government and a large part of the population who, according to his words, "took ownership" of the reforms.
On his part, he advised against complacency, stating that in order to maintain the growth potential in the medium term there must be a significant effort to renew the reform potential that has weakened during 2016.
THE FINANCIAL SERVICES SECTOR IN CYPRUS FOLLOWING THE CRISIS
Source: The Economist
During the discussion in regards to the financial sector in Cyprus, the CEO of the Bank of Cyprus, Mr. John Hourican, emphasized on the bank's plans to be listed in the London Stock Exchange as they believe that there are "real growth opportunities in the UK." He also noted that the "last scar" from the crisis that needs to be treated are the non-performing loans (NPLs), for which, as he said, there is "no magic bullet".
Mr Hourican also referred to a "broad based recovery" in Cyprus since it extends well beyond the traditionally strong sector of tourism, with actual focused drives across the economy and with the markets confidence being restored.
STRATEGY FOR CYPRUS AS A REGIONAL HUB IN THE MEDITERRANEAN
The investors' viewpoint:
The Deputy Minister to the President of the Republic of Cyprus, Mr. ConstantinosPetrides commended the government's tactics by remarking that the government has been pursuing real and not "bubble" growth, within a carefully strategic plan of establishing Cyprus as a regional hub. He underlined that Cyprus has "rejected the false dilemma of austerity or growth and followed a reasoned economic policy which has restored confidence".
Source: The Economist
During his presentation, Mr. Constantinos Herodotou, the Commissioner of Privatisations, noted that the economy has been growing in a sustainable manner and that Cyprus has an investment friendly environment. He presented the current privatisations portfolio, which includes CYTA and CYTA Hellas, the National Lottery, real estate assets in the Troodos mountain range and the Cyprus Stock Exchange.
The Chief Executive Officer of PwC Cyprus, Mr. Evgenios Evgeniou, who is a strong supporter of the building of a strong start-up ecosystem and who promotes the establishment of headquarters in Cyprus of big international brands, has highlighted in his presentation, the growing status of Cyprus as a stable investor base in a hazardous region, such as the Eastern Mediterranean.
On a final note, the event was sponsored by the Bank of Cyprus and PwC Cyprus.