April 2015

Cyprus Economy Review

Cyprus returns to the international markets

Cyprus has successfully sold one billion euros in seven-year bonds on April 28, 2015. This is the country’s second bond issue in less than a year and it will allow the country to pay off older, costlier and short-term domestic borrowing, which means less expenditure in interest, as well as a flow of cash in the Cypriot market. Cyprus` return to the international markets confirms the restoration of confidence of the international investment community in the Cypriot economy, Minister of Finance Harris Georgiades said following the successful issue. The interest rate was 3.875% and the performance 4%. (Source: www.stockwatch.com.cy)
Contact us

Costas Christoforou CPA, TEP
General Manager costas.christoforou@cpm.com.cy

Rodoula Demetriades MS, CPA
Senior Manager
Business Development rodoula.demetriades@cpm.com.cy

Cyproman Services Ltd

All Capital Restrictions Lifted

Monday 6 April 2015 marked a new day for Cyprus and its banking sector: All capital restrictions introduced two years earlier as a result of the Economic Adjustment Program for Cyprus, agreed with the European Central Bank (ECB), the International Monetary Fund (IMF) and the European Commission (EC) were finally lifted.
Fiscal overview of the Cyprus economy in 2014

GDP for the year 2014 is provisionally estimated at €17,5 billion at current prices compared to €18,1 billion in 2013 and €15,0 billion at constant 2005 prices (chain linking method) compared to €15,4 billion in 2013.

According to the forecast, Cyprus GDP will demonstrate slight growth in 2015 and 2016 of 0,4% and 1,6%, respectively.

The economy experienced a negative growth rate estimated in real terms at -2,3%, compared to -5,4% in 2013. The rate of contraction is less than what was expected by creditors (International Monetary Fund, European Commission and European Central Bank), who estimated that total recession for the year would reach 4,5%. (Source: CYSTAT)
Cyprus’ adjustment programme

The adoption of the insolvency framework by the House of Representatives and the implementation of the law on foreclosures on the 17th April has put Cyprus back on track with its adjustment programme. The implementation of these laws was a Troika prerequisite, which is expected to return to Cyprus this week to proceed with the completion of the fifth review of the country’s economic adjustment programme.

Following the completion of the review of the country’s economic adjustment programme, Cyprus will be eligible for the ECB’s quantitative easing programme. This, together with the reduction in the yields of Cyprus Government bonds will give the opportunity to the country to issue public debt in the international markets at lower cost. (Source: www.stockwatch.com.cy)
Fitch affirmed Cyprus's Ratings

Fitch Ratings affirmed Cyprus`s long-term foreign and local currency Issuer Default Ratings (IDRs) at `B-` with a positive outlook just few hours after the Eurogroup gave the green light for the restart of the review of the economic adjustment program. The issue ratings on Cyprus`s senior unsecured foreign and local currency bonds have also been affirmed at `B-` due to expectations that Cyprus will end up not using the entire EUR10bn of the EU-IMF programme and because of the country’s strong budget performance which implies that the buffers in the programme have grown close to EUR3bn (17% of GDP). The Country Ceiling has been raised by three notches to `BB-` from `B` and the short-term foreign currency IDR has been affirmed at `B` mainly as a result of the removal of the remaining capital controls in April to `BB-`. (Source: www.cna.org.cy)
World Economic Outlook Report for Cyprus

The IMF, in its 2015 World Economic Outlook report released beginning April, forecasts a GDP increase of 0.2% for the Cyprus economy in 2015 and a 1.4% increase in 2016. The report also forecasts deflation of 1% in 2015, followed by inflation of 0.9% in 2016. In its forecasts the IMF also expects a deficit of 1.9% in 2015, a much lower projection than the 3.0% deficit forecasted by the Winter Forecast, last February, and a deficit of 1.4% in 2016, in line with the Winter Forecast. Unemployment is expected to drop to 15.9% in 2015 and 14.9% in 2016. The report notes characteristically that uncertainty and pessimism in relation to the decisiveness of the Eurozone in dealing with economic challenges may hurt trust. Finally, the report forecasts growth of 1.5% for the Eurozone in 2015, and inflation of 0.1%. (Source: ec.europa.eu/economy_finance/eu/forecasts/2015_winter_forecast_en.htm)

World Economic Outlook Report April 2015

Forecasts for Cyprus





GDP growth (%, yoy)





Inflation (%, yoy)





Unemployment (%)





Public Budget Balance (% of GDP)





Cyprus bonds reach a five year low

Following the adoption of the insolvency framework by the House of Representatives and the implementation of the law on foreclosures, the yields on the Cypriot bonds have reached a five year low.

According to latest available data, the yield on the Cypriot 10-year bond (maturing in 2020) in the secondary markets fell below 3,60% mainly as a result of the expectation that, following a positive assessment of the Troika, the Cypriot bonds can participate in the European Central Bank's quantitative easing programme. (Source: www.stockwatch.com.cy)
Tourist arrivals

For the first quarter of 2015 the arrivals of tourists totaled 189.988 compared to 163.446 in the corresponding period of 2014, recording an increase of 16,2%. The increase is attributed to increases in tourist arrivals recorded from the United Kingdom, Greece and Germany. (Source: CYSTAT)
Russian Incoming Tourism – better than expected

Incoming tourism from Russia shows positive signs of improvement despite initial negative outlook.
Total property sales

According to the data published by the Cyprus Department of Lands and Surveys property sales in Cyprus increased by 16% during the first three months of 2015 compared to the corresponding period in 2014. Almost 23% of total buyers were non-Cypriots. (Source: Cyprus Department of Lands and Surveys)
Cyprus and Egypt agree to cooperate in the field of oil and gas

In February 2015, an important agreement was reached between Cyprus and Egypt for the development and exploitation of the Cypriot ‘Aphrodite’ gas field in block 12 of Cyprus’ Exclusive Economic Zone, utilizing existing gas infrastructure in Egypt for the mutual benefit of the two countries.
Commercialization of natural gas resources

Four years after the initial exploration well in block 12 in Cyprus’ EEZ, US Noble Energy is expected to shortly submit a development plan for the commercialization of the 4,50 trillion cubic feet reserve of natural gas found in the Aphrodite well, declaring it commercially viable. A pipeline is the likeliest development option. Noble has expressed its intention to commercialize the Aphrodite gas both through exports as well as supplies to Cyprus for domestic electricity generation. (Source: www.cyprus-mail.com)
Cyprus as an investment funds jurisdiction

The Cyprus Investment Funds Association will cooperate with the renowned law firm King & Wood Mallesons (KWM) for the purpose of the preparation and implementation of an action plan for the promotion of Cyprus as financial services and investment funds centre. KWM is one of the top 10 global firms by lawyer numbers, headquartered in Asia, with international presence in Australia, Europe, the Middle East and North America. (Source: www.cifacyprus.org)
Casino in Cyprus

A bill governing the operation of casinos is expected to be put to vote during May and the license will be issued about nine months later according to Energy and Commerce Minister Mr. Giorgos Lakkotrypis. The operator will choose the district in which the resort would be located in. (Source: www.cyprus-mail.com)
Cyprus amongst the top countries leading social progress

Cyprus has ranked 30th amongst 133 countries in the global 2015 Social Progress Index.

The study is based on the view that in order to achieve economic growth that is both inclusive and sustainable we need to look beyond GDP and consider social progress. The Social Progress Index (SPI) 2015 is providing tangible insights that are helping drive action and inform policy and investment choice. The Index measures the extent to which countries provide for the social and environmental needs of their citizens by observing social and environmental outcomes directly rather than the economic factors. The social and environmental factors include personal safety, ecosystem sustainability, health and wellness, shelter, sanitation, equity and inclusion and personal freedom and choice. Fifty-two separate indicators in the areas of basic human needs, foundations of wellbeing, and opportunity to progress show the relative performance of nations.

Key global highlights include the evaluation of Norway as this year’s top performing country, Sweden as the best performing country in the European Union and Canada as the best performing G8 country. (Source: www.goldnews.com.cy)
Other Developments
  • The European Central Bank announced an expanded asset purchase programme, through which it will expand purchases to include bonds issued by euro area central governments, agencies and European institutions. The purchases are intended to be carried out until at least September 2016 and the combined monthly asset purchases to amount to €60 billion
  • The Central Bank of Cyprus decided to differentiate the maximum deposit rate by one per cent. The majority of commercial banks have announced reductions in interest rates on loans
  • Cyprus and the USA signed an inter-governmental agreement to enhance international taxation cooperation for the implementation of FATCA (Foreign Account Tax Compliance Act), to streamline compliance and reduce compliance costs
  • Cyprus Government is implementing the privatization plan for the Cyprus Telecommunications Authority, Electricity Authority of Cyprus, Cyprus Ports Authority and other organizations, a process that will attract foreign investors
  • In particular, in relation to the Cyprus Ports Authority, the amendments to the legal framework governing its operation were approved by the Council of Ministers and the privatization proposals procedure will start by May 2015
  • The government has decided to create a Science Technology Park (‘STP’) in the form of a Knowledge Park within the scope of promoting research, innovation and technology
  • Number of investment companies licensed by Cyprus Securities Commission is increasing
  • Specific incentives are provided to non-EU citizens for investing in Cyprus, including acquiring immovable property
  • Shipping industry has strong potential considering the tax beneficial regime which has been approved by the EU
  • Specific European funds have been approved for developments in farming and agriculture, while Cyprus has proposed projects in relation to European Union Investment Plan.
Latest Double Tax Treaties

On 9 March 2015, the Republic of Cyprus and the Kingdom of Bahrain signed a Double Tax Treaty. On April 1 a protocol amendment (update) on the Double Tax Treaty between Cyprus and South Africa was signed. The Double Tax Treaties are based on the OECD Model Convention for the Avoidance of Double Taxation on Income and Capital aiming to attract foreign direct investment to Cyprus. The total number of double tax treaties is 56. (Source: www.mof.gov.cy)
Russian Cultural Days in Cyprus

The ΤΡΑΚΑΣΟΛ Cultural Centre, located in Limassol, is honouring Russian culture with a series of events entitled "Russian Cultural Days" to be held under the auspices of the President of the Republic of Cyprus, Nicos Anastasiades. With the backdrop of Limassol Marina, the new thriving hub of town, the ΤΡΑΚΑΣΟΛ Cultural Centre is devoting May and June to Russian cultural events of a calibre aiming to appeal to all art lovers.

The festivities will begin on May 2 and will include top soloists from the Mariinsky Theatre Opera, two different performances by St. Petersburg's "Atelier" Plastic Theatre, one of the world's most famous pantomime theatres, a piano recital with various Russian masterpieces as well as The St. Petersburg's Stage CircusPeople catering to people of all ages. The "Russian Cultural Days" will end with a unique exhibition entitled "A Doll's Tale" featuring over 10,000 Russian dolls dating back some 2,000 years. (Source: www.goldnews.com.cy)
World First in Cyprus

A black flamingo was spotted among its pink-colored friends at a salt lake at the Akrotiri Environmental Centre in Cyprus. It may be the first of its kind ever seen, experts say.

Copyright 2015 © Cyproman Services Limited. All Rights Reserved.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of Cyproman Services Limited. The information provided in this publication does not constitute legal, tax or investment advice and no responsibility is accepted for any loss occasioned directly or indirectly as a result of persons acting, or refraining from acting, wholly or partially in reliance upon it.