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CYPRUS is an ideal choice for a business base. That was the message delivered last week by George Campanellas, director general of Invest Cyprus, when he addressed the fourth International Investors Summit in Limassol.
Finance Minister Harris Georgiades was even more upbeat. He told the 150 foreign entrepreneurs and investors at the conference that the difficulties Cyprus experienced between 2009 and 2014 were “a story of the past”.
The Republic has added almost 19 per cent to its GDP since then and is one of the fastest growing economies in the EU, he said.
Both men had expert opinion to back their claims. By happy coincidence – if, indeed, it was a coincidence – Hellenic Bank’s Economic Research Department published an economic review last week as the investors were gathering for their conference.
It said that, for Cyprus, the ‘recovery phase’ has passed and the economy is settling into its ‘growth phase’.
The Bank’s Economic Research Department, predicted that growth would be 3.4 per cent in 2019 and 3.2 per cent in 2020.
It expected that the pick-up in domestic demand would be reflected in improved labour market conditions with unemployment decreasing to 6.6 per this year. Inflation is expected to remain at relatively low levels, around 1 per cent.
But every silver lining has a cloud and this one was provided by the Central Bank of Cyprus (CBC) which also published an economic forecast.
It agreed, broadly speaking, with Hellenic Bank’s report but the tone was a good deal more cautious. The CBC forecast further recovery over the next few years, but at a slightly slower space, revising down a previous 3.3 per cent growth rate for 2021 to 3.2 per cent.
It predicted that that private consumption would ease off a bit, despite an increase in wages. The extra money earned was more likely to be saved than spent, it forecast,
It was a busy week for reports and forecasts and the cautious tone of the CBC may be explained by another one. A survey from the Ifo Institute for Economic Research concluded that the German economy had contracted in the second quarter.
After nine successive years of growth, “the German economy is heading for the doldrums,” Ifo President Clemens Fuest said, adding that the business climate in both the manufacturing and services sectors had worsened.
The Bundesbank has said it expects the German economy to contract slightly in the second quarter after an expansion of 0.4 per cent between January and March. The Berlin government has halved its 2019 growth forecast to 0.5 per cent after an expansion of 1.5 per cent in 2018, the weakest rate in five years.
Trade disputes and a cooling world economy have hurt Germany’s export-dependent manufacturers and Britain’s delayed exit from the European Union has created uncertainties in Berlin and everywhere else.
These indicators are not as conflicting as they might seem. Cyprus’ recovery has a momentum of its own and there is no reason to downplay the optimism of the Hellenic Bank. But if Germany slumps, the EU will slump and Cyprus will fall with it.
For the private investor the moral is ‘move with care’ and, as I constantly urge, take expert advice.
My company, the Woodbrook Group, is an international firm of financial advisers with its headquarters in Cyprus.
We are not owned by any financial institution or life insurance company and can offer you unbiased and impartial advice to help you understand your options and how to address your income needs .
In times of uncertainty, it is important to make the most of your assets.
Woodbrook’s expert financial advisers can help you understand your options, how to address your income needs, and how much wealth you will need to support the lifestyle you want.
We can’t make the uncertainty vanish, but we can help you navigate your way through it.
