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Tight spending but strong growth expected for Cyprus (Xinhua)

Tight spending but strong growth expected for Cyprus (Xinhua)

The Chinese interest about the Cyprus economy is reflected by recent news analysis from Xinhua and the Shanghai Daily. According to these news sources, the Cyprus government, following the recent exit of the bailout program, "will start bringing down taxes, in a bid to promote even higher growth through demand". The extent of tax reduction will depend on the performance of the economy. In addition to that "the prospect of a gradual restoring of salaries and pensions to pre-bailout levels as of 2017 are expected to further help demand-oriented growth".

According to the same sources, "the best omen so far is an announcement by the hoteliers association that they have a sold out for the duration of the tourist season that ends at the end of October". It is a fact that the Cyprus's Tourism Organization (CTO) has already announced that it expects a marked increase in arrivals, most notably from Russia which is expected to send 50% more visitors this year. Russia is already, by far, the second largest source of tourist arrivals.

A sizeable increase of the tourist sector, which accounts for about 12% of Cyprus's annual economy of €18 billion could prove enough to produce a growth of close to 2.0% this year. The Economic Research Center of the University of Cyprus in its latest Economic Outlook bulletin projects a 2016 GDP growth of 2.7%, more than one percentage point over the official prediction. It listed as factors which will help the economy a strong growth in the third quarter of 2015, the lowering of lending rates in conditions of high unemployment, the stabilization of the banking sector and increased trust in the Cypriot economy by international agencies.

Foreign investment in a casino resort which will be licensed any time now and further licensing for natural gas exploration will add to the improvement of the economic climate. In addition to that, many analysts agree that the Cypriot economy will really take off in the event of a solution reunifying the eastern Mediterranean island. It has been estimated that investment in infrastructure needed for the reunification will add an additional 3.0% on the economy each year.

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