Nicosia unworried about sanctions impact on economy

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The government sees no need to step in to support any sector of the economy from the fallout of the war in Ukraine and sanctions on Russia.

At the House Commerce Committee, the head of the economic policy unit of the Finance Ministry, Dionysis Dionysiou, told MPs that all sectors of the economy would be in growth mode in 2023, making it difficult for the government to justify state aid.

The House Committee on Energy, Trade, Industry and Tourism convened on Tuesday to discuss the impact of the sanctions imposed on Russia due to the war in Ukraine on Cypriot businesses.

Dionysiou told MPs the Ukraine war and sanctions on Russia were the main reason behind the expected economic slowdown from a 5.6% GDP growth last year to 2.8% in 2023.

He said there is no evidence to support that unemployment may increase, despite market rumours supporting that business turnover would be reduced by 10% in 2024, leading to a steep rise in unemployment.

“We believe the reduction in the turnover of companies will lead to a short-term increase in unemployment in specific sectors, which will, however, be corrected immediately due to market needs”.

On the loss of the contribution of Russian companies to the economy, Dionysiou said that Cyprus could attract investment with its geographical location, tax system, qualified personnel, high level of services provided and standard of living.

He said the state and various sectors of the economy should get used to operating under the new rules of the game imposed by sanctions.

Dionysiou added that the government feels confident that with the work done by the Registrar of Companies, no Cypriot businesses will suffer collateral damage without being directly involved on sanctions lists.

Central Bank official Maria Papageorgiou said that since the beginning of the war and sanctions, the authority has been monitoring the effects on various sectors of the Cypriot economy, including tourism.

Papageorgiou said they do not expect serious losses regarding the recent sanctions from the USA and the UK and the possible effect on the services sector.

She stated that although some accounting and legal businesses may close, other companies will cover their loss.

Nicosia has been in damage-control mode since sanctions were imposed by the US and UK last month on Cypriot’ fixers’ for allegedly helping Russian oligarchs hide their assets following sanctions imposed on Moscow.

Ten Cypriots and 13 foreign-born Cyprus nationals, “oligarch enablers,” have been sanctioned by the US and the UK, with authorities fearing that more Cypriot entities will find themselves on the list due to exposure to Russia.