Sapienta Cyprus Teaser, 31 Aug 2022
Shorter Executive Summary 31 Aug 2022
Welcome to Sapienta Cyprus Snippets. I shall add more features to this free-for-now service going forward. Below is the shortened executive summary from my monthly Sapienta Country Analysis Cyprus: unrivalled independent analysis on all things Cyprus.
POLITICAL ANALYSIS AND OUTLOOK. The latest gas find brings closer the moment of reckoning among political players in Cyprus and Turkey. We continue to expect Nicos Christodoulides to win the presidential election in February 2023.
SECTORAL POLICIES, REFORMS AND ENERGY. Eni’s natural gas discovery of 2.5 tcf brings Cyprus’ estimated reserves to around one year of EU consumption. However, Turkey has indicated that it will prevent natural gas extraction without a broad deal on energy.
FISCAL PERFORMANCE AND FORECAST. VAT on energy bills have been referred to the Supreme Court. We expect a budget surplus for the full year. Inflation and higher than expected real GDP growth will depress debt/GDP ratios.
BANKING SECTOR. Various stakeholders are trying to prevent a takeover of Bank of Cyprus (BOC). Hellenic Bank management faces a tough autumn with employees. New loan growth has decelerated.
MACROECONOMIC TRENDS AND FORECAST. Real GDP growth accelerated to 6.1% in the second quarter. We have therefore revised up our forecast for 2022 to 4.7%. The trade deficit has widened sharply.
ECONOMY OF NORTHERN CYPRUS*. The inflation rate remained above 100% in July but is currently proving positive for public finances. Highly liquid banks continue to buy up central bank hard-currency debt issues. Tourism and higher education are rebounding.
*Areas not under the effective control of the government of the Republic of Cyprus.