Sapienta Cyprus Round-up Sep 2022
Shorter Executive Summary 30 Sep 2022
Welcome to Sapienta Cyprus Snippets in the turtle-hatching month of September. 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 lifting of the US arms embargo is a decisive step “westwards” for Cyprus but raises the risk of conflict and will affect natural gas exploitation.
SECTORAL POLICIES, REFORMS AND ENERGY. The end of the year should see some clarity about gas export options. Electricity liberalization remains far off. The ECJ may have to decide on consumer petrol purchases in northern Cyprus.
FISCAL PERFORMANCE AND FORECAST. A budget surplus is reducing the impact of rising borrowing costs. VAT on energy and property remains an issue. We continue to expect a sharp drop in the debt/GDP ratio in 2022.
BANKING SECTOR. Lone Star withdrew its bid for BOC after parliament tried to rush a bill to block the takeover. The banking system is moving towards a single-digit NPE ratio.
MACROECONOMIC TRENDS AND FORECAST. The economy has so far withstood external shocks but data point to a coming slowdown. We are maintaining our real GDP growth forecast of 4.7% for 2022.
ECONOMY OF NORTHERN CYPRUS*. Direct flights from Russia to northern Cyprus might be tricky to implement in practice. The coalition is running into opposition on a range of policy issues.
*Areas not under the effective control of the government of the Republic of Cyprus.
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