Economy

Real estate sector depends on outside factors

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Real estate sector depends on outside factors

The Cyprus economy has shown strong resilience, recording one of the highest growth rates in the European Union, according to Dr. Giorgos Mountis, CEO of Delfi Partners. The Cypriot economy grew by 2.4% in 2023 and is estimated to grow by 2.8% in 2024 and 3% in 2025. Inflation decreased from 8.1% in 2022 to 3.9%, with further reductions expected to 2.4% in 2024 and 2.1% in 2025. Efforts to contain inflation involved decisions that temporarily affected citizens’ incomes, with interest rate increases placing significant pressure on household incomes. However, optimism exists that the European Central Bank’s decisions will start to change in 2024, potentially leading to a decrease in domestic interest rates. Unemployment is at very low levels, approaching full employment, though many sectors face personnel shortages. The government’s strategies to employ and attract foreign labor could lead to an increase in the country’s population and economic development. The real estate sector remained resilient in 2023, with sales contracts increasing by 16% compared to 2022, reaching the highest level since 2008, driven by increased demand from non-European buyers. Apartment prices in 2023 exceeded those of 2010 for the first time, according to the Central Bank of Cyprus, leading to an increase in properties purchased for rental investment.

Famagusta tourism board targets German market

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Famagusta tourism board targets German market

The Famagusta Tourism Board (Etap) and local businesspeople attended the “ITB BERLIN 2024” international tourism exhibition last week to promote tourism bookings in Germany. Giorgos Kafkalias, an official from Etap, highlighted the significance of the German market for Cyprus tourism, noting it as the largest in Europe with potential for growth. Despite economic challenges in Germany, there was a moderate optimism for maintaining tourist levels, possibly with a slight decrease. German travel agents showed interest in various forms of tourism including hiking, cycling, diving, gastronomy, and agritourism, besides beach tourism. Etap emphasized the Famagusta district’s attractions, suitable for families, young couples, and visitors over 55. The district is renowned for its clean beaches, which have received international awards, and offers diverse experiences throughout the year. A mobile app providing a virtual tour of Famagusta’s points of interest was also promoted. Etap plans to participate in major international tourism exhibitions to promote the district and support Cyprus’s tourism promotion efforts.

Gold rally could extend beyond recent highs

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Gold rally could extend beyond recent highs

Gold has increased by nearly 19% since a low in October and about 7% in the past month. UBS strategists suggest there might be a short-term pullback in gold prices, but the rally could continue over the year. Factors supporting gold include potential Federal Reserve rate cuts, central banks and investors buying gold, and increased geopolitical risks. Gold prices have surpassed ,180, reaching near ,200 highs in Asian trading. The Federal Reserve’s potential rate cuts this year and ongoing geopolitical tensions are supporting gold’s value. Fed Chair Jerome Powell indicated the U.S. economy is healthy, and rate cuts could begin once there is confidence in inflation’s downward trajectory. Futures markets anticipate a 70% chance of the Fed cutting rates by mid-June, with a total of one percentage point reduction by year-end. U.S. Nonfarm Payrolls (NFP) data for February showed 275,000 jobs added, exceeding expectations and potentially influencing Fed rate decisions. China’s inflation data for February indicates a return to normal consumption levels, positively affecting gold prices as China is a major consumer of gold. The Chinese Consumer Price Index (CPI) increased by 0.7% year-over-year in February, and the Producer Price Index (PPI) declined by 2.7% year-over-year in the same month. Upcoming U.S. CPI and Retail Sales data for February are awaited for further market direction, with CPI expected to increase by 0.4% month-over-month and Retail Sales projected to rise by 0.7% month-over-month.

Gold extends rally above $2,160 ahead of US NFP

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Gold extends rally above $2,160 ahead of US NFP

The price of gold reached a new all-time high above ,160, influenced by a weaker US Dollar, a decline in US Treasury bond yields, and expectations for a rate cut by the Federal Reserve in June. Dovish commentary from central bank policymakers, including Fed Chair Jerome Powell and European Central Bank chief Christine Lagarde, also supported gold prices. Powell indicated the Fed is close to being confident enough to cut rates, while Lagarde suggested the ECB might ease policy in June. Additionally, geopolitical tensions and safe haven buying, particularly following a Houthi attack in the Red Sea, contributed to the demand for gold. Despite investors pulling metal out of Gold-backed ETFs, central banks remain strong buyers of gold.

No fuel to run the economy

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No fuel to run the economy

Inflation in Cyprus was reported to be lower than expected and below the Eurozone target average of 2%. Despite this, the real economy is facing challenges with small to medium-sized enterprises closing almost daily due to rising electricity costs and fuel prices, which are expected to increase further due to a rise in world crude prices. Small businesses are also burdened by local fees and taxes. The consumers’ association criticized the Energy Ministry for a lack of transparency regarding the formula for determining fuel prices at the pump, suggesting that more openness could have reduced fuel prices by about 3-4 cents a litre during October to December. Additionally, the price of olive oil increased by 54% over the past year, with a further 3.4% increase in February. Some goods and services have helped keep the consumer price index in check, but prices in several sectors continue to rise due to a lack of healthy competition in the Cyprus economy. The “photovoltaics for all” scheme has been criticized for not adequately supporting households unable to invest in lower-energy appliances. The current administration has been reluctant to introduce more support measures for vulnerable people, aiming to maintain a sound fiscal policy.

EURUSD recovers after release of US NFP

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EURUSD recovers after release of US NFP

– The EUR/USD pair increased after US Nonfarm payrolls data showed a decrease in Average Hourly Earnings and an increase in the Unemployment Rate.
– The US economy added 275,000 jobs in February, more than the 200,000 expected.
– Average Hourly Earnings rose by 4.3% YoY and 0.1% MoM, both below the predicted 4.4% and 0.3%.
– The Unemployment Rate increased to 3.9%, higher than the expected 3.7%.
– This data could lead the Federal Reserve to cut interest rates earlier than anticipated.
– Francois Villeroy de Galua, Governor of the Bank of France and ECB Governing Council member, stated a rate cut in spring is “very likely.”
– Joachim Nagel, Bundesbank President, mentioned the increasing probability of an interest-rate cut before the summer break.
– ECB President Christine Lagarde indicated June as the next key date for reviewing policy on interest rates.
– The EUR/USD is in a short-term uptrend due to the anticipation that the US Fed might lower interest rates sooner than the ECB.
– Technical analysis suggests a tentative short-term uptrend for EUR/USD, with recent signs indicating a possible correction.

A strategic EU role for the Cyprus problem

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A strategic EU role for the Cyprus problem

The text discusses the flaws in the traditional negotiations process regarding the Cyprus problem and suggests that a solution requires a slow, incremental process of “deliberative democracy” and strategic international coordination to incentivize leaders towards a negotiated settlement. The EU and the US play crucial roles in this process. The text highlights how the US improved its relationship with Greece, making it a strategic partner in southeastern Europe through military and energy developments, suggesting a similar approach could be applied to Cyprus. The text proposes enhancing Cyprus’s role in humanitarian assistance as a geopolitical incentive, mentioning the Republic of Cyprus’s involvement in evacuations and support in various crises. It discusses the EU’s engagement with Cyprus through the Task Force for the Turkish Cypriot community and suggests that strategic political decisions on Cyprus could be better managed by placing them under the Secretariat-General of the European Commission. The text concludes with the author’s credentials and involvement in Cyprus negotiations.

Cyprus: weak tax administration and prolific tax evasion

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Cyprus: weak tax administration and prolific tax evasion

– Tax evasion in Cyprus is defined as the deliberate non or underpayment of taxes and is illegal, while tax avoidance involves using legal methods to minimize tax owed.
– Weak and ineffective tax administration in Cyprus contributes to large-scale tax evasion.
– The Tax Department’s primary goal is to collect taxes and enforce payment in accordance with tax laws.
– Tax collections in Cyprus are below potential, with a significant shortfall attributed to widespread tax evasion.
– It is difficult to quantify tax evasion levels, but as of end-September 2023, taxes owed to the state amounted to €3.4 billion, with nearly €900 million deemed uncollectible.
– Self-employed persons in Cyprus paid on average €1,080 in personal income taxes in 2022, compared to employees who paid on average €1,920.
– Tax evasion and avoidance deprive the government of revenue, limit the scope for reducing tax rates, and hurt honest taxpayers.
– Cyprus’s reputation for weak law enforcement and corruption attracts corrupt politicians and criminals from abroad.
– The inefficiency of Cyprus’s tax administration contributes to tax evasion, with personal income tax returns taking about five years to process.
– The government has been promised €24.2 million from the EU’s Recovery and Resilience fund to improve tax administration efficiency.
– Increased digitalization and coordination between tax units could help curtail tax evasion and avoidance.
– Simplifying the tax registration and filing process could encourage greater tax compliance.
– Government policies that delay the submission of tax returns and payments foster tax evasion and avoidance.
– Enhanced digitalization of public services and harsh penalties for late tax payments are suggested to enforce timely tax payment and compliance.

Britain, ’s Tesco raises store worker pay by 9.1 per cent

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Britain, ’s Tesco raises store worker pay by 9.1 per cent

Tesco, Britain’s largest retailer, announced a 9.1% increase in hourly pay for store workers, raising the base pay from 11.02 pounds to 12.02 pounds starting April. This pay rise, negotiated with the shopworkers’ union USDAW, surpasses the government’s national living wage increase of 9.8% to 11.44 pounds an hour. Tesco’s London workers will receive 13.15 pounds an hour. The pay rise will cost Tesco over 300 million pounds. Other UK retailers, including Sainsbury’s, Asda, Marks & Spencer, Amazon, Aldi, Lidl, and Costa Coffee, have also announced pay increases for 2024.

Europe needs fast, focused tech industry policy, Dutch minister says

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Europe needs fast, focused tech industry policy, Dutch minister says

Europe needs to rapidly and assertively support crucial technology sectors due to US-China trade tensions, according to the Dutch economic affairs minister, Micky Adriaansens. The Netherlands is focusing its industrial tech policy on protecting and promoting key technologies, notably semiconductors, with Dutch company ASML being a significant player. The European Chips Act aims to counter US and Chinese chip subsidy programs but has only approved French government support for STMicroelectronics to build a factory in Crolles, France. Plans by Intel and TSMC to build plants in Germany are pending European Union approval. Adriaansens emphasized the need for Europe to act more swiftly in executing its tech strategies and highlighted the challenges the Netherlands faces as a small trading nation. The Dutch government has supported US efforts to limit ASML’s exports to China and has introduced security vetting for foreign tech investments, though Adriaansens cautioned against further isolating China technologically.