By Steven G. Traylor*
Years of economic decline for the Mediterranean ‘playground of the gods’ has seen an implosion: one in four construction firms bankrupted, Cyprus banks saddled with non-performing loans and, personally devastating, ordinary people’s lives put into disarray following the global economic meltdown and a snail pace European-Cyprus recovery.
This is the news locals have been reading and hearing since 2011 and before.
But today, the economy of Cyprus is beginning to show early signs of rebound, with the first quarter of 2015 demonstrating positive growth for the first time in years. A possible light at the end of the tunnel for Cyprus or only a brief reprieve in the news we are all used to consuming?
“After 14 consecutive quarters of negative rates, growth has been recorded. This is certainly a significant development that confirms the positive outlook for the Cyprus economy,” confirmed Minister of Finance Harris Georgiades in a statement following the release of the economic forecast supplied by the government office the Statistical Service, Cystat on May 15.
In the first week of June, the finance ministry updated its forecast to 0.2 per cent GDP first quarter growth in 2015.
Another possible indicator that Cyprus has started to turn the corner is consumer confidence which increased to -21.90 in April from -31.90 in March. Zero represents neutrality and +100 would be extreme confidence. The highest ever was -13.00 in 2001 while in April 2013 it hit a record low of -64.40.
People are starting to think more positively about their daily lives, and the confidence level is rising according to the European Commission report on Cyprus
Improved consumer confidence can be a signal people are ready to return to spending – thus showing Cyprus is headed in the right economic direction. Statics for the second quarter will soon be available. As personal consumption (spending) accounts for around 80 per cent of GDP – retail sales are important in determining future economic trends.
Despite all, there are prospects for business development and the island does have its share of success stores; that in essence say ‘we are moving forward’ independent of what government forecasts report or predict.
One aggressive Greek firm certainly thinks Cyprus is the place to be for retail store development, and has put its money where its mouth is with the opening of two stores in the past 12 months, one in Paphos and Nicosia. Cyprus is a first for this Greek retail merchant, and success has been achieved here locally.
Starting in 2010, Greek businessman Panagiotis Amanatiadis decided to go into the retail store consumer products business, and contacted a successful established retailer with 457 stores in 26 countries.
Tiger Greece and eventually Tiger Cyprus was born as a JV with Tiger Denmark and Amanatiadis the local partner. Since then, Amanatiadis has opened 12 stores in Greece and Cyprus.
Not bad for two countries portrayed as poster children for economic demise.
“We see Cyprus as an opportunity, as an interesting market that has the need of what our (Greek) brand offers to the market – consumers,” said.
Amanatiadis. With some 90 per cent of Tiger’s products selling for less that 15 euros each, it is easy to see why Tiger has been successful throughout Europe and now here in Cyprus.
Tiger’s aggressive prospect for Cyprus suggests ‘thinking-out-of-the-box-types’ believe in the future of the island and will plan their business strategy accordingly for 2015 and beyond. “Two more Tiger retail stores are planned for Cyprus in the coming years,” according to Christos Tsiantzis, area manager, Greece and Cyprus. Beyond that, more could follow in years to come.
In February, the European Bank for Reconstruction and Development predicted a positive up tick for Cyprus and stated publically on their website, “now we see a rebound – a modest 0.7 per cent rise – but a rebound all the same.”
Some see the light at the end of the tunnel and voice their belief accordingly.
One Nicosia shop merchant and 32-year veteran of the Ledra Street district is optimistic about the future of Cyprus.
“You can see people are going to the banks, more easily now,” he said. “Banks are more willing to make loans, things are starting to pick up and you can see in the economy.”
His belief is positive – things are getting better.
Andreas and his wife are in the family business of jewellery, lace and sterling silver sales mostly for summer tourists.
“Last winter was a little more difficult. January, February and March was the difficult months in our business. But starting in May, things are starting to pick up,” he said.
From street merchant to respected Cyprus economist Fiona Mullen, director of Sapienta Economics Ltd and LLF Strata Insight Ltd, who adds positive support for an economic upturn.
“Cyprus did well on tourism in January-April with a rise of 13 per cent despite the rouble crash affecting Russian tourists. For 2015 I am expecting growth of 0.6 per cent and for 2016 2.4 per cent.”
This all good news for a beleaguered public used to negative economic headlines on a continued basis.
“I also think this is the first time that we have had a proactive government with respect to tourism,” Mullen concluded. “This year there was a concerted effort … to reform the public service and make it more accountable, and to cut red tape will be valuable in the long run.”
Despite the positive attitudes of proactive businessmen, local merchants and professional economists, Cyprus has gone through a long period of economic trauma. Many For Rent signs dominate busy areas; a lot of retail and office space still needs to be absorbed. Cyprus still has a long road ahead before it returns to a solid economy.
The end results will come about through improved consumer spending – brought about by strong and robust consumer confidence – plus a sustained absorption of existing real estate projects that the banks would like to take off the non-performing loans balance sheet, and return to the market place.
Early signs are there.
(*) Steven G. Traylor is a Cyprus Business Mail’s Business Correspondent