Press Releases

Good morning ladies and gentlemen and let me say how delighted I am to address the 4^th International Funds Summit. I want to express my appreciation to CIFA for organising this major event and for inviting me to say a few words.  My thanks also to all the sponsors for their support and to each and every one of you for attending.

I am tasked to give a brief overview on the state of the Cyprus economy, so let me ask you to take note of this:

From 2009-2014, over a 6-year period, the Cyprus economy lost an aggregate 10.5% of its GDP. This was deep recession, which saw unemployment rising to 17%, which brought the banking sector to its knees, and raised doubts about the ability of Cyprus to remain a member of the Eurozone.

This was the story of a painful fall.

But over the next four years and by the end of 2018, the Cyprus economy will have grown by 16% of the GDP. We have more than covered the lost ground and, if all goes well, we expect growth to remain above 3% annually for the next three years. These rates make Cyprus one of the fastest growing economies in EU.

Unemployment is already down to 7%, registering the fastest drop in the EU, and conditions of full employment will be re-established by 2020.

Up until 2013 Cyprus was registering budget deficits in the range of 5-6% of the GDP. But since 2014 we are operating with a balanced budget, and in fact for the last three years we are operating with a surplus budget, currently estimated at 3% of the GDP. This is what we are also budgeting for 2019. Once again, this is a top fiscal performance among the Eurozone economies.

And we do need maintain this solid fiscal performance because the public debt is, admittedly, high, at 104% of the GDP and the plan is to bring it down to 90% by the end of 2020.

So, the painful fall was followed by a strong recovery.

And I should point out, that we did not spend our way out of the recession. This, I suppose, could have been an option, but not a sustainable one. And what we are working for, is stable, sustainable, long-term economic growth.

In fact, we are staying clear of policies of tax and spend. This allows us to maintain tax certainty, to continue promoting tax breaks and incentives, and in this way, to safeguard consumer and business confidence.

And this, ladies and gentlemen, is what governments should do. They should create conditions of stability and confidence, they should maintain a business-friendly environment, allowing the productive forces of the economy, allowing the private sector, to do the job. This is what makes economic growth sustainable.

Indeed, all the key sectors of the Cyprus economy are performing well, including tourism, shipping, real estate and business services. The productive base of the economy is gradually expanding into new sectors including higher education, innovation, offshore natural gas and renewable energy.

And I am delighted to note, that Fund Management, is part of this new beginning for the Cyprus economy. In fact, I have been referring to the rise of Cyprus as a new destination for Fund Management as an excellent example of Government, and industry, and regulators, working together to ensure that all the ingredients of success are in place.

I should thank everyone for their co-operation and support in this effort, and I know I speak on behalf of all stakeholders when I say that we should renew our commitment and we should continue working together in this very direction. Because there is always more which needs to be done.

Indeed, we know that there is a potential to lift the Cyprus economy even higher. We should do more in terms of reform, we should invest more in technology and we should continue to promote incentives for new business. And I can assure you, that this is exactly what we intend to do as a Government.    

For example, we shall be ambitiously reforming the judiciary, we shall be investing heavily in e-government, we are drafting a policy to further support private and public sector universities and centres of excellence for research and innovation. We have also embarked on an effort to draft a national strategy regarding blockchain technologies. We have even launched an initiative aiming to encourage the development of the Film Industry, with grants and tax breaks, complementing the natural advantages that Cyprus has to offer.

Ladies and gentlemen,

As of September 14th, Cyprus is back on investment grade territory. And just a few weeks ago, we tapped the markets, raising a 1.5bn ten year bond, with the lowest yield ever achieved by Cyprus, at 2.4%.

The Cyprus economy has already entered a new, promising phase.

But before I conclude, let me also refer briefly to the Cyprus banking sector. The unsustainable expansion of the sector was at the heart of the problems we faced in the not so distant past. Credit had expanded by more than 3.5 times, over a ten year period, leaving behind a sizeable stock of NPEs. But since then progress has been steady.

In fact, progress lately has been decisive and fast, as a result of a number of actions taken, including the strengthening of the legal framework on foreclosures and insolvency. And most notably, the carving out of almost half of the NPEs from the banking sector, primarily though the separation of the CO-OP Bank. None of these decisions were easy politically, but they all worked to the benefit of our economy and lead us into the investment grade zone.

The financial sector also operates under much tighter rules and regulations. AML and KYC procedures have been shored up and any reputational issues belong to the past.     

I should also note the positive significance of the presence of new investors particularly from the US in the banking sector of Cyprus.

Ladies and gentlemen, a full clean-up of the balance sheets of the Cyprus banks can only happen gradually. But it is encouraging that new credit is picking up, and this is of much-improved quality.   

In the meantime, the real economy is advancing with a strong, steady pace. Asset prices are rising. Investment and consumption are on the rise. And the Government remains committed to maintain fiscal discipline but also to continue promoting an ambitious reform agenda, in order to continuously enhance the competitiveness and the growth potential of our economy.

We shall also continue to work with our EU partners, in order to ensure that the EU remains relevant, and carefully considers any next steps in the direction of further integration.

And we shall do whatever is necessary to maintain Cyprus as an island of opportunities, an island of safety and stability during uncertain times.   

Ladies and gentlemen, thank you for your attention.

(AH)