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ECONOMIC NEWS JULY 2024

18/07/24

Agricultural Minister Maria Panayiotou announced a number of measures aimed at tackling the extended period of drought with a total estimated cost of 6 million euros.

Measures range from increasing fines to increases in water treatment systems and offering subsidies for investments in smart irrigation systems to save water, reduce losses & to install small seawater treatment plants for irrigation purposes.

Tourist arrivals in Cyprus displayed a slight yet steady increase in June 2024, recording a 5.5 per cent rise compared to the previous year. This upward trend is also reflected in the first half of the year, with arrivals from January to June 2024 showing a 2.4 per cent increase, compared to the same period in 2023.

The United Kingdom continues to be the primary source of tourists, contributing 35.6 per cent of the total arrivals in June 2024. Other significant contributors include Israel, accounting for 10.7 per cent (51,814 tourists), Poland with 7.5 per cent (36,202 tourists), Sweden with 4.9 per cent (23,639 tourists), and Germany at 4.5 per cent (21,552 tourists).

On the domestic front, there has been a slight decline in the number of Cyprus residents travelling abroad with Greece remaining the most popular destination, accounting for 37.5 per cent of trips.

16/07/24

Left-wing opposition Dialogos reported that the position of Larnaca, as conveyed to the Minister of Transport and Works at the meeting of June 10,  is that the implementation of some infrastructure projects by the state for the Larnaca port/marina project can proceed immediately, since there are already plans and some permits, while the finances of such an undertaking are not prohibitive. The plan, as submitted to the Minister of Transport and Works, is even accompanied by costing based on Kition’s master plan and briefly provides for the following:

  • Construction of the Yacht Club (12 million euros)
  • Upgrade of the marina by modernizing the berthing infrastructure without increasing the capacity (10 million euros)
  • Landscaping (2 million euros)

These are the three main pillars of the Larnaca Development Committee’s proposal to the government, while a fourth project is the new road connecting to the main gate of the port.

The estimate of the Committee is that the amount needed for the first projects so as to show that the development has started is between 30 and 40 million euros.

The final decision belongs to the President. As regards the port, there have been voices from important players for the port to remain under the operation of the public sector and to be separated from the marina and this position seems to be gaining ground.

A scenario prevailing in the discussions is that the upgrading of the port focuses towards facilitating passengers with some commercial uses (‘clean cargo’ such as cars, iron, etc.). And polluting cargo, such as plaster, to be transferred to the port of Vasilikos.

Kathimerini reported that following the public admission by Energy Minister George Papanastasiou, a consensual separation between Cyprus’ Natural Gas Infrastructure Company (ETYFA) and China’s CPP-Metron Consortium Ltd is imminent. Official announcements are expected this week, as the minister will be briefed on Tuesday. The coordinated exit of the Chinese consortium from the unfinished Vasilikos energy terminal has damaged the Republic of Cyprus’ image and will likely deter international companies from future projects. This issue adds to growing concerns following the failed Larnaca port redevelopment and highlights the shortcomings in the tender and award processes for large public works. The agreed exit will lead to financial losses for Cyprus due to ongoing negotiations with the Chinese.

10/07/24

Philenews reported “Israeli… invasion of Paphos after the war in Gaza” that the Israeli market has now opened up for good to Paphos and the province’s airport already has daily flights from three airlines, EL-AL, TUS and Israir while new airlines of Israeli interests have appeared in Paphos in recent days.

Left-wing opposition Dialogos reported that there is no planning for what the future holds for Larnaca port, two months after the collapse of the agreement with Kition. The Cyprus Ports Authority has been given the temporary management of the port without specialized staff and equipment.

The contract regarding the construction of the Liquefied Natural Gas (LNG) Receiving and Regasification Terminal in Vasilikos is moving towards termination the Minister of Energy announced in Parliament.

The Natural Gas Infrastructure Company (ETYFA) studying other ways to complete the project. As the Minister of Energy explained, the many extensions taken by the consortium demonstrate that there was no destination for the completion of the project. The Minister of Energy also informed that the negotiations with the construction company for the shipment of the floating unit are in the final stage. He explained that there are three parts to the terminal, with the most important being the floating unit. The other two are the jetty and the part of the terminal on land.

“We believe the two last ones are easy to complete. Their construction is already at 60 per cent and the remaining 40 per cent we believe we can complete with our own means,” Papanastasiou said.

The President of CERA, before of the Parliamentary Energy Committee, said that next Monday ADMIE has been summoned to CERA in relation to the new data on the basis of which it has requested a review of the regulator’s decision not to allow the charging of Cypriot consumers before the implementation of the Great Sea Interconnector project. The Minister of Energy said during the session that the Government has also requested the Nexans contract but also that the cost-benefit study which is expected to be delivered by ADMIE to be evaluated by experts so that the final investment decision can be made. The study has also been requested by the Electricity Authority of Cyprus. The Minister explained that Israel has recently strongly stated in the context of a teleconference and another meeting with a physical presence here in Cyprus, that it would like to connect with Cyprus as soon as possible. We understand why, he said, it is a matter of security of electricity supply under the conditions it is in and possibly these conditions require a more immediate settlement of the interconnection issue with Cyprus. The President of the Parliamentary Energy Committee, said that the passing on of such a large cost to consumers is not acceptable without knowing the final cost, if it will work & when.  The President of the Cyprus Wind Energy Association questioned whether it would be good for the energy security and supply of Cyprus to depend on a private company and warned that in the case of the implementation of the project and the channeling of Greece’s electricity surplus to Cyprus, “all the RES projects could go into default, all the companies will go bankrupt, the banks will go bankrupt”. The President of the Electricity Market Association said they are in favor, in principle, of an interconnection as well as in favor of importing cheap electricity but maintain  their reservations.  The President of the Cyprus Consumers Association Marios stated that it is unthinkable for the consumer to start paying before the completion of the project.

Philenews reported that due to the absence of available funds from ADMIE for the payment of Nexans (that manufactures the cable for the electrical interconnection of Cyprus with Crete), the Greek side, assisted by the General Directorate of Energy of the European Commission, insisted during a teleconference, on the request that the Energy Regulatory Authority vary the decision it took otherwise the project will be stopped. According to info., a representative of Nexans also attended the teleconference (has signed a contract with the implementing body for 1.4 billion euros) who said that if CERA does not approve in the next few days the start of the recovery of the costs by ADMIE, the construction of cable will stop. The participation of Nexans caused discomfort to Cypriot authorities, who consider it an attempt to extract with threats and blackmail the consent of CERA.

The Electricity Authority of Cyprus must “change” to become a competitive organisation by the time the electricity market opens up, the energy minister said, noting the importance of driving down electricity costs. EAC chairman outlined the key short-term challenges ahead. These include the anticipated liberalisation of the electricity market and consequent competition, electrical interconnectors, the arrival and use of natural gas for power generation, upgrades to the Dhekelia power station, and the installation of a new turbine at the Vasiliko power plant.

At the same time, said Petrou, the transition to green energy and the reduction in greenhouse gas emissions is a “top objective”.

Cyprus and the FBI are to work together on clearing Cyprus’ name regarding the naturalisation through the citizenship by investment programme, it was announced after President Nikos Christodoulides met FBI assistant director Michael Nordwall.

Passenger numbers at the occupied north’s Ercan (Tymbou) airport increased by almost a third for the first six months of 2024 over the same period last year.

In total, 2,181,947 passengers passed through the airport during the first six months of the year.

Civil service trade unions rejected the recommendations of the International Monetary Fund (IMF), which had called for the rationalisation of salary scales and expenditures related to the state payroll.

09/07/24

President Nikos Christodoulides suggested there would be news even next week over the Larnaca port and marina project.

At the end of August, it is expected that the proposals for the future investment of the port and the marina of Larnaca will be submitted. This was mentioned during the discussion of the supplementary budget of 8.4 million euros for the Ports Authority.

MPs appeared skeptical with the request of the Cyprus Ports Authority for an extra €8.4 million.

The Association of Owners of Docked Vessels, in a letter sent to the Minister of Transport, expresses its disappointment at the inability of the Ministry of Transport to respond to the basic requests for the return of docking fees, services and contract terms to the levels before the management by Kition Ocean Holdings. They demand suspension of the issuance of docking tariffs by the state, until the tariff policy for the Larnaca Marina is officially decided by Parliament.

Media reported that the 4th case of usurpation of Greek Cypriot properties in the occupied territories, within this year, is being investigated by the Republic. The Police recently arrested a 49-year-old German woman while the cases with Turkish lawyer Akan Kurciat, Simon Mistriel Aykut (remains in custody) and German Martin Josef Rikels (national and European arrest warrant pending against him) preceded this.

Turkish Cypriot representative at the Parliamentary Assembly of the Council of Europe (PACE) Oguzhan Hasipoglu called for an investigation to be launched after the Republic of Cyprus made a series of arrests over the sale of Greek Cypriot owned property in the north.

Philenews reported that the implementing body (ADMIE) of the Interconnector project and the General Directorate of Energy of the EU will try today in a teleconference with the Energy Regulatory Authority, the Ministry of Energy and the Greek regulatory authority to convince that the project is not sustainable if Cypriot consumers don’t pay about 25 million a year until 2030. ADMIE has already submitted a request to review the decision  not to allow the recovery of costs from 1/1/2025. It has so far failed to secure an agreement with any bank or investment organization to finance the project, but the Commission agrees that if the recovery of 100-125 million euros over a period of five years is approved, creditors and investors will ‘come running’. At the same time, ADMIE wants a review of the regulatory framework, so that it is fully covered financially, if the interconnection does not proceed due to a serious external factor (obviously Turkey).

The teleconference is not expected to lead to new decisions by CERA today. ADMIE is expected to submit on July 11 to the Minister of Energy the cost-benefit analysis carried out on its behalf and then the evaluation process of the study by an international firm, from the University of Cyprus and the Cyprus Institute. It remains doubtful whether CERA will revise its decision before the Government of Cyprus takes a position regarding the viability of the project and regarding its participation in the shareholding structure of the Great Sea Interconnector.

The only certain thing at this stage is that most private producers and suppliers of electricity in Cyprus wish for the ‘wreck’ of the interconnection. Because without it, the scope for real competition in the internal electricity market of Cyprus, in favor of consumers, is significantly reduced. And this ensures their super profits.

The 2025 state budget will be in surplus, President Nikos Christodoulides said.

After a Council of Ministers meeting, Christodoulides held an extraordinary session during which he outlined the government’s financial goals and stressed that the goal is for the budget to align with the administration’s strategic priorities.

The Ministry of Agriculture unveiled a revised ratio recipe for goat and sheep milk content in Halloumi cheese, aiming to comply with Protected Designation of Origin (PDO) regulations while supporting livestock farmers.

For the period from February 1, 2025, to August 31, 2025, the quota increases to 30% (an increase of +5%)

In the seven months till then, production remains the same, with sheep and goat milk at 25 per cent.

For the dry period (September to January), there were two regulations, one for 10 per cent and one for 19 per cent, which now become the average of the two quotas, set at 15 per cent.

Goat and sheep farmers’ incentives will target infrastructure upgrades, genetic improvement, and increased production units to address seasonality challenges and encourage year-round production.

Dairy farmers will benefit from the measures that aim to limit further expansion of cow’s milk for Halloumi and encourage environmental footprint reduction in line with EU commitments.

Approximately 7,000 people in Cyprus work in forex, although the actual number may potentially be much higher than that, according to recently published research from TradeInformer, a business-to-business news and research portal that covers the global retail trading industry.

This means that approximately 1.65 per cent of Cypriot private sector employees work in the forex industry.

In addition, these people also comprise close to 40 per cent of financial services workers in Cyprus, with similar numbers to those working in the Cypriot banking sector.

02/07/24

 All Larnaca port and marina workers (72 in total) have been hired by the Larnaca and Famagusta District Development Agency, the transport ministry announced.

The process is part of a deal between the ministry and workers, after the government terminated its concession agreement with Kition Ocean Holdings.

At the same time, the ministry has begun talks with Larnaca’s ad hoc committee on the strategic plan to implement the development project for the Larnaca port and marina.

The aim is to announce the next steps by the end of July. The management of the port has been temporarily assigned to the ports authority and the marina to the transport ministry.

Talks are ongoing with Kition Ocean Holdings to hand over the equipment.

Cyprus’ Energy Regulatory Authority (Cera) has received the proposal of Greece’s Independent Power Transmission Operator (Admie) on what the revenue of the Israel-Cyprus-Greece (Great Sea Interconnector) electricity interconnection project should be from the implementing entity.

This is to offset the amounts that will be spent next year on advancing the project.

A similar request was submitted to the Regulatory Authority for Energy of Greece.

Philenews reported that a few days ago, a letter was sent to CERA  with additional requested information so as to examine the broader issue of recovering the implementation costs for the Great Sea Interconnector.

The regulatory authority in Greece has already agreed that ADMIE’s cost recovery will begin in 2025. However, CERA has not yet made such a decision, as it appears to favour starting the consumer charges at a later stage.

Energy Minister George Papanastasiou said last week that Cyprus will take any decision on the project after receiving and evaluating the cost-benefit study from the implementing agency, which he said he expects on July 11.

Banks as well as government officials are against the idea of taxing the windfall profits of commercial lenders, a proposal brought by opposition party Akel.

The bill envisages a 5 per cent ad hoc tax imposed on banks’ so-called windfall profits during 2024 and 2025. These profits are described as deriving from the high interest rates on loans charged by banks.

It also wants a ‘social solidarity fund for the support of borrowers’ – into which the proceeds from the windfall tax would go (estimated at €100 million for 2024 & 2025).

Akel said that last year banks altogether made €973 million in profits from interest. Total income from charging interest came to €2 billion. Overall profits (from all sources) amounted to €1.3 billion.

Finance Ministry officials believe that Akel’s bill might breach provisions of the constitution.

Cyprus saw a 20.1 per cent increase in tourist arrivals during 2023, reaching 3,845,652.

Over one-third of visitors staying in Paphos.

Tourism revenue rose by 22.6 per cent, totalling €2.99 billion.

The United Kingdom was the primary source of tourism for Cyprus in 2023, accounting for 33.9 per cent of total arrivals, followed by Israel (10.7 per cent).

survey from Hermes Airports shows that 2% of tourists visiting Cyprus during the winter months (October 2023 – March 2024) stayed in the occupied areas. Additionally, 3% visited the occupied areas while staying in the free areas. Most visitors to the occupied areas were British and Americans (4%), followed by Germans (3%), Austrians (3%), Israelis (2%) and Poles (2%).

2% equates to about 56,000 people out of 2.8 million visitors, or roughly 266 people per week.

Paphos was the top destination for winter tourists from Lithuania (73%), Poland (70%), and the UK (62%). Larnaca saw many visitors from Lebanon (57%), Israel (45%), and Romania (41%). In Limassol, tourists mainly came from Israel (39%), Italy (33%), and the USA (26%). Free Famagusta attracted visitors from Serbia (29%), Austria (25%), Latvia (13%), and Germany (13%).

The Cyprus government saw its surplus rise to 1.9 per cent of Gross Domestic Product (GDP) between January and May 2024, up from 1.1 per cent in the same period last year.

This increase translates to a surplus of €590.6 million, marking a significant rise from €322.7 million previously.

01/07/24

Philenews reported that the Minister of Energy is upset by information that about six employees of the Natural Gas Company (DEFA) were in Spain for a tour / briefing / training at a floating natural gas terminal, while the Ministry Energy is in tough negotiations with Chinese CPP for the Cypriot FSRU Prometheus and the resumption of work at Vasilikos. Meanwhile, the negotiations to hand over the FSRU without additional cost have not led so far to a positive development. The consortium is claiming an extra 32 million euros, on top of what it has already been given for the ship (about 190 million euros). But the focus now is for the floating unit to receive final certification from Lloyds that it can safely sail. 

Left-wing Dialogos reported that there are many important and critical questions regarding the electrical interconnection of Cyprus with Greece and Israel, AKEL MP and member of the Energy Committee, Kostas Kostas, said in an interview.

He emphasized that this is a project of enormous importance, but specific reasons, such as technical difficulties and finding the necessary funds, may lead to its non-implementation. At the same time, he points out that the possibility of Turkey creating obstacles, citing the illegal Turkish-Libyan MOU.

Greek media reported that the Turkish navy is monitoring the work of an Italian ship within the Cyprus Exclusive Economic Zone (EEZ), which has undertaken the laying of telecommunication cables from Cyprus to Greece and then to Italy.

Nicosia will be taking all the necessary action in dealing with increasing cases of illegal Greek Cypriot property in the occupied North by Turkish developers and other foreign individuals, said President Christodoulides.

Philenews reported that the actions of the Republic of Cyprus to prosecute usurpers of Greek Cypriot properties are causing intense concern in the occupied territories. After the arrest of Simon Minstriel Aykut, other cases are being looked into although there are enormous difficulties. From the available evidence, it appears that Turks, Turkish Cypriots, Russians, Israelis, Iranians, British and Europeans are involved.

Global credit rating agency, Morningstar DBRS, has upgraded its growth forecast of the Cypriot economy by 0.3 per cent in 2024. In its revised June key macroeconomic scenario, the Cagency said it expects the Cypriot economy to grow at a rate of 2.7 per cent in 2024.

DBRS also revised the unemployment rate in Cyprus. Compared to its forecast last March, the agency now expects the unemployment rate to fall by a further 0.2 per cent to 5.9 per cent in 2024.

Egypt is an important partner of Cyprus in the region, said the Minister of Energy, Trade and Industry, George Papanastasiou, on the occasion of the EU-Egypt Investment Conference held on Saturday in Cairo. Cooperation mainly concerns energy, where there are discussions for natural gas from the EEZ of Cyprus to reach Egypt for liquefaction”. There are also Cypriot companies that have investments in Egypt, mainly related to fish farming. Contacts are being planned with the Ministers of Petroleum, Electricity and Trade of Egypt soon.

Average gross monthly earnings of employees in the first quarter of 2024 increased by 5.7% to €2,378, compared to €2,251 in the first quarter of 2023. 

The average gross monthly earnings of men are estimated at €2,564 and of women at €2,145.

40% of employees received in the first two months of 2024 gross monthly salaries below €1,500 (34% Cypriots and 52% non-Cypriots), 38% between €1,500 – €2,999 (42% Cypriots and 29% non-Cypriots), the 12% between €3,000 – €4,499 (15% Cypriots and 7% non-Cypriots), 6% between €4,500-€5,999 (6% Cypriots and 5% non-Cypriots) and 4% greater than or equal to €6,000 (3 % Cypriots and 7% non-Cypriots).

delegation from the International Monetary Fund (IMF) held informal discussions with members of the House Finance Committee during their technical assistance mission to Cyprus. The visit was arranged following a request from the Finance Ministry with the ultimate objective of streamlining the state salary structure. According to Philenews, Practices and methods implemented by the Troika in 2013, under the framework of the fiscal consolidation memorandum, are included as proposals in the study conducted by the IMF. Among the recommendations is the reduction of salaries and the abolition of the Cost of Living Allowance.

Over a hundred influencers from the UK, Germany and Turkey will have all costs covered to help promote tourism in the occupied north.

The 12th Invest Cyprus International Investment Awards presented by PwC Cyprus are taking place in Nicosia on the 3rd of July, paying tribute to major international investors in acknowledgment of their contribution to Cyprus.

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