Eurozone business in services-led bounce in April
Overall business activity in the eurozone expanded at its fastest pace in nearly a year, driven by a buoyant recovery in the service industry.
services sector
US quarterly earnings to feature big growth in tech-related companies
Big technology-related company earnings are expected to lead S&P 500 profit growth in the upcoming US reporting period, refueling optimism for stocks after a weak start to April.
UK economy, ’s growth points to exit from recession
Fact: Britain’s economy is on course to exit a shallow recession after output grew for a second month in a row in February, with GDP expanding by 0.1 per cent in monthly terms.
Services sector records strong growth in 2023
– The services sector in Cyprus performed well in 2023, with significant improvements in various key areas.
– Accommodation and catering services saw an increase of 18.9%, administrative and support services grew by 15.5%, professional, scientific, and technical activities by 2.7%, and information and communication by 2%.
– Tourism sector showed improvement in 2023, with tourist arrivals reaching 3,845,652, approaching pre-pandemic levels of 2019.
– The UK had the most tourist arrivals in Cyprus in 2023, followed by Israel, Poland, and Germany.
– The Shipping sector transported 98% of raw materials and essential goods in Cyprus in 2023, contributing about 7% of GDP.
– Oev undertook various initiatives in 2023, including research on digital skills, Innovation Awards, and promoting digital skills and AI adoption.
– Oev also organized a Business Mission to Greece, Information Day on dispute resolution methods, and supported the newly established Tourism Promotion Agency.
Cyprus sees rise in hourly labour costs in 2023
The hourly labour cost in Cyprus rose to €20.1 in 2023, compared to €19 in 2022. The hourly labour cost in Greece was €15.7 in 2023, among the lowest in the EU. The lowest hourly labour cost is in Bulgaria at €9.3, and the highest is in Luxembourg at €53.9. In the EU, the hourly labour cost in the industry sector was €32.2 in 2023, and in the construction sector, it was €28.5. The hourly labour cost across the entire economy increased by 5.3% in the EU and by 4.8% in the Eurozone in 2023 compared to 2022. The largest increases were recorded in Croatia, Lithuania, and Estonia. The share of non-wage costs in the total labour cost for the entire economy was 24.7% in the EU and 25.5% in the Eurozone.
Morningstar DBRS keeps Cyprus at BBB, , ‘stable’ trend
Morningstar DBRS has confirmed Cyprus’ sovereign ratings at BBB (high) due to strong economic growth, but warned of exposure to geopolitical shocks and constraints from a small services sector. The stable trend balances favorable economic and fiscal developments against downside risks. Economic growth is driven by tourism, ICT relocations, and investment projects, with the Central Bank forecasting GDP growth to strengthen. Public debt has decreased, with further declines projected, and interest burden offset by favorable debt profile. Challenges include non-performing loans in the banking sector and low labor productivity. The ratings are supported by a stable political environment, sound fiscal policies, and EU membership.
Cyprus banks to maintain stability, but lower profits, says Moody, ’s
– Risks associated with loans for Cypriot banks are expected to decrease due to economic growth, declining inflation, and unemployment rates.
– Moody’s predicts a decline in bank profits from recent highs.
– A gradual decrease in net interest margins is anticipated due to rising deposit costs and falling interest rates, influenced by competition and high levels of private sector debt.
– Stricter loan criteria and loan restructuring efforts are improving loan quality and reducing problematic loans.
– Asset quality risks from foreclosed properties are diminishing, supported by a strong real estate market.
– The banking sector in Cyprus is characterized by a low loan-to-deposit ratio and ample liquidity reserves.
– Cyprus’ GDP is forecasted to grow by 2.8% in 2024 and 3.2% in 2025-27, outpacing the euro area by 0.8% in 2024.
– Economic growth is supported by diversification in the services sector and significant foreign direct investment projects.
– Moderate growth in the loan portfolio is expected due to the banking system’s saturation, high private sector debt, and elevated interest rates.
– Monetary policy is expected to remain restrictive, even with interest rate reductions by the European Central Bank.
– The NPE ratio is expected to decrease below 3% this year.
– The proportion of foreclosed assets relative to bank equity is decreasing, supported by the real estate market.
– Capital risks are declining, with banks completing risk release and balance sheet restructuring.
– The Common Equity Tier 1 ratio for assessed banks increased to 18.8% at the end of 2023.
– Moody’s assessment focuses on Cyprus’ two largest domestic banks, Bank of Cyprus and Hellenic Bank, which represent a significant portion of the banking system’s assets.
– The weighted average Baseline Credit Assessment of the two major banks is ba2, with a weighted average asset-based deposit rating of Baa3.
Green taxes: , ‘pay now, or later…but you have to pay’
The announcement of a new carbon or ‘green’ tax on motor fuel in Cyprus has been met with widespread disapproval from trade unions, industry leaders, and consumer advocacy groups, despite a general acknowledgment of its necessity. The tax will begin at 5 cents per litre in 2024, with additional levies on water consumption and hotel stays. It is expected to disproportionately affect low-income households, with an estimated average household spending increase of 0.37% in 2024, translating to a monetary welfare loss of €121 per household. The government has promised fiscal neutrality, planning to return the extra money spent by the public through offsets, including a €100 cash-back for low-income families in 2024. The green tax is part of a broader tax system overhaul aimed at encouraging a shift towards greener energy and reducing reliance on fossil fuels.
Cyprus inflation rises by 1.8 per cent in February
Cyprus experienced a 1.8 per cent inflation increase in February 2024, primarily driven by the services sector. This follows decreases in inflation rates in November and December 2023, and January 2024. The February 2024 Consumer Price Inflation (CPI) rose by 1.03 points to 114.93 compared to 113.90 in January 2024. Inflation rates for November 2023 fell to 1.71 per cent, December 2023 saw an increase of 1.64 per cent, and January 2024 had an increase of 1.69 per cent. Year-over-year, the largest change in February was in Services, with a 3.7 per cent increase. Agricultural Products saw the most significant monthly change with a 5.6 per cent rise. The Restaurants and Hotels category experienced the greatest annual change with a 6.2 per cent increase, while the largest monthly changes were in Clothing and Footwear (3.1 per cent) and Food and Non-Alcoholic Beverages (2.7 per cent). For January and February 2024, compared to the same period last year, notable changes were in Restaurants and Hotels (5.9 per cent) and Other Goods and Services (3.7 per cent). The categories with the most significant positive impact on the February 2024 CPI change compared to February 2023 were Restaurants and Hotels (0.62) and Food and Non-Alcoholic Beverages (0.43). Compared to the previous month, the greatest impacts were from Food and Non-Alcoholic Beverages (0.60) and Clothing and Footwear (0.22). Catering Services had a substantial impact on the annual CPI change for February 2024 (0.60), and Fresh Vegetables had the most significant monthly impact (0.38).