December 2016

Cyprus Economy Update

This alert covers updates regarding the selection of applicants for Cyprus’ EEZ’s 3rd licensing round, tourist arrivals, the increase in property sales and sale contracts, company registrations, the deposits in the Cyprus banking system, the status of Non-performing loans as well as data regarding the industrial output.
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Costas Christoforou CPA, TEP
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Cyprus EEZ's 3rd licensing round

Energy giants Exxon Mobil and Qatar Petroleum as well as major European companies Eni and Total were selected by Cyprus` Government within the framework of the 3rd licensing round for offshore hydrocarbons exploration in Blocks 6,8, and 10 in the Exclusive Economic Zone (EEZ) of Cyprus.

Having considered the recommendation of the Minister of Energy Yiorgos Lakkotrypis as well as the preparatory report of the technical Advisory Committee on Hydrocarbons, the Cabinet decided at its Wednesday meeting the applicants for negotiations on the terms and provisions of the Explorations and Production sharing contracts.

The selected companies are the consortium Eni Cyprus Limited/Total E&P Cyprus B.V. for exploration block 6, Eni Cyprus Limited for exploration block 8 and Exxon Mobil Exploration and Production Cyprus (Offshore) Limited/Qatar Pertoleum International Umpstream O.P.C. for exploration block 10.

The Cabinet has appointed a team, led by Minsters of Energy, Finance and Labour, to negotiate contract terms and provisions with the selected applicants. In case negotiations are successful and provided that the agreed contract per individual block is approved by the Council of Minister, hydrocarbons explorations licenses shall be granted. Otherwise, the runner-up applicants will be invited for negotiations.

Arrivals of tourists reached 124.192 in November 2016 compared to 108.093 in November 2015, recording an increase of 14,9%.on the basis of the results of the Passengers Survey, announced by the Statistical Service of Cyprus.

Tourist arrivals for the period of January – November 2016 totaled 3.098.604 compared to 2.581.057 in the corresponding period of 2015, recording an increase of 20,1% and outnumbering the total arrivals ever recorded in Cyprus during the first eleven months of the year.

Tourist arrivals from the United Kingdom increased by 3,4% in November 2016 compared to November 2015 while an increase of 51,9% was recorded for tourists from Greece. Increases were also recorded from other important tourist markets, such as Germany (51,9%), Israel (112,7%) and Poland (13,0%). Contrary to that, a decrease of 0,6% in tourist arrivals from Russia was recorded. The United Kingdom and Russia constitute the main sources of tourism for Cyprus, with proportions of 34,9% and 14,2% respectively, while arrivals from Greece comprise 11,7% and from Germany 10,4% of total arrivals.

For a percentage of 68,2% of tourists, the purpose of their trip was holidays, for 15,2% visit to friends and relatives and for 16,4% business. Men comprise 53,8% of tourists and women 46,2%, whilst most of the tourists belonged to the age group of 20-44 years.
Increase in property sales

Property sales in Cyprus recorded a large increase of 46% in November 2016 compared with the same period last year, according to the latest official figures published by the Department of Lands and Surveys. Property sales during the period January – November 2016 recorded a significant increase of 34% compared with the same period last year. By district, the largest increase in sales in November 2016 was recorded in Limassol with 82% followed by Paphos with 74%. Property sales to foreign buyers have also recorded a significantly increase amounted to 36%.

Particularly, according to the figures released by the Lands and Surveys Department, the number of sales documents amounted in November 2016 to 651, compared with 446 in November 2015. During the period of January - November 2016, the number of sales documents recorded an increase of 34% amounting to 5.929, compared with 4.439 a year earlier (Source:
Company registrations

Applications for company registrations in Cyprus in November 2016 reached their highest point since January 2013, reflecting the improvement of the economic environment and the increasing confidence towards Cyprus as an investment destination.

According to data from the Department of the Registrar of Companies and Official Receiver, in November 2016 applications for registration of companies in Cyprus reached 1.398 compared to 1.079 in November 2015, recording an annual increase of 29,6%. In October, the increase reached 8,9%.

The number of applications is the largest since January 2013 when they were 1.448. In the first eleven months of 2016, applications for registration of companies reached 12.215 compared to 9.964 in the corresponding period last year, recording an increase of 22,6%. The total of registered companies in Cyprus is 209.758.

Total deposits in Cyprus, in October 2016, recorded a net increase of €446,5 million, compared with a net decrease of €131,3 million in September 2016, according to data released by the Statistical Service of Cyprus for the Monetary Financial Institutions.

The annual growth rate stood at 5,9%, compared with 5,5% in September 2016. The outstanding amount of deposits reached €48,3 billion in October 2016.

Total loans in October 2016 exhibited a net decrease of €138,2 million, compared with a net decrease of €316,1 million in September 2016.

The annual growth rate stood at -11,0%, remaining unchanged compared with September 2016. The outstanding amount of loans reached €53,8 billion in October 2016.
Decrease in Non-Performing Loans

The total amount of non-performing loans held by all Cypriot banks decreased by €430m in September 2016 according to data released by the Central Bank of Cyprus (CBC). Non-performing loans decreased by €600m in the third quarter falling to €24,12bn from €24,55bn the previous month.

Total loans shrank in the third quarter by approximately €400m reaching €49,59bn. From December 2014 until September 2016, the overall decrease in non-performing loans amounted to €3,2bn. or 11,7%. The NPLs have declined since the beginning of the current year at € 2,54 bn. representing 48,6% of total loans from 49,45% the previous month.

Total loans under restructuring scheme until the end of September 2016 amounted to € 13,59bn., of which €10,06bn are still included in non-performing loans due, to some degree, to the definition of non-performing loans.
Industrial output

The Industrial Turnover Index showed an increase of 0,2% from January to September 2016, compared to the corresponding period of the previous year, the Statistical Service said. In September 2016 the Index reached 83,6 units (base 2010=100), recording a decrease of 0,9% compared to September 2015. For Manufacturing, the index for September 2016 reached 81,3 units, recording an increase of 1,6% compared to September 2015.
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