Businesses struggling with COVID-19 impact

3 mins read

Cyprus businesses are trying to find ways of surviving the COVID19 crisis as the outbreak takes its toll on the workplace and commercial activity.

As the number of cases rises, and people refrain from their daily routine from fear of contracting the virus, sectors critical for the economy such as tourism, services and commerce are stuck in a dark tunnel.

Employers and industrialists appealed for the state to come to the aid of small and big business which have all been struck by the virus’ impact in one way or another.

The EU in the wake of the devastating effects of the deadly virus announced the establishment of an investment fund called the ‘corona fund’ which will invest €25 bln with the sole purpose of re-energising the euro economy.

Brussels seeks to allocate €7.5 bln of existing liquidity to the Structural Funds.

Apart from asking the government for an equivalent corona fund, businesses seek concrete measures which will relieve them from the burden that is the coronavirus crisis.

Cyprus Federation of Employers and Industrialists director-general Michalis Antoniou told the Financial Mirror: “We don’t have many options in front of us. The government must take drastic measures to relieve the economy which is being crushed by the effects of the virus”.

He believes the government needs to take targeted measures rather than general ones.

“Based on the necessary priorities that lie ahead and the most pressing problem facing us today is the challenges in the trade, transport and tourism sectors”.

Antoniou wants the state to take a set of fiscal and monetary measures.

He said the government must first extend the deadlines companies have to pay their taxes (including VAT) and contributions to the social insurance fund.

Secondly, it will have to encourage banks to provide loans and repayment facilities such as extending repayment deadlines.

Thirdly, the use of state aid to provide liquidity and working capital to businesses by providing credit guarantees for the short-term needs of the businesses affected.

Employers and hoteliers will ask the Finance Ministry to submit a proposal to the cabinet to temporarily reduce the cost of electricity rates for businesses.

“The government will have to consult on the matter with the EU as it will need to establish several support mechanisms which will not be construed as state aid,” said Antoniou.

The Finance Ministry is close to finalising a package of fiscal measures to boost the economy amid the disruption created by coronavirus.

Finance Minister Constantinos Petrides said the fiscal buffers created due to the government’s prudent fiscal policy allows the state to intervene.

“There is no doubt, this package will come at a significant fiscal cost, there is no doubt growth will be affected but I would like to reiterate that the prudent fiscal policy we abided by has allowed us to be able to intervene in the best possible way at a time of crisis.”

Petrides underlined that the coronavirus emergency is turning into a financial crisis.

“The Cypriot economy will not be left unscathed, but it is impossible to estimate the exact damage at the present stage.”

He said the financial package aims at safeguarding jobs, the level of wages and measures to boost liquidity and subsidies for companies affected by the crisis.

Banks are also called to do their bit for the economy to buffer effects of the crisis created by COVID-19.

Cyprus Banks Association source told the Financial Mirror that banks are ready to play their part and will be kindly reviewing requests from businesses in distress.

“Cyprus banks will be evaluating which businesses need liquidity or relaxation on loan payments and will act to keep the economy going,” the source said.

“Banks are enjoying all-time high liquidity levels as they now possess €15.1 bln more in deposits than loans, a long way from the dark days of 2013”.

According to the latest Central Bank data, as of December 2019 deposits in the country’s banks exceeded loans by €15.1 bln, remaining at the highest levels since at least 2008, when such information was recorded.

The source also said that Cyprus banking institutions are designing modules to calculate how the outbreak will affect their business.

There is a great deal of anxiety in the banking system, especially after the analysis published by international firms regarding the range of negative impacts that banks will have, especially those with low profitability levels.

“Despite the stabilisation of the banking system and the fact Cypriot banks have excess liquidity and sufficient capital, they fall into this category.”

The banking source felt the need to clarify, that while looking into ways of helping out businesses and staying afloat themselves, banks are protecting their employees and clients.

“Banks have taken all necessary measures at branches to protect their employees and people coming in to carry out their business at the tills.”