CYPRUS – more growth, & tourism hits record levels.

There have been many positive developments and news items concerning Cyprus recently, so I have summarised them below:

1.      The redesigned Citizenship-by-Investment Program

The Cabinet in Cyprus decided on the 13th of September on a redesign of the Citizenship-by-Investment Programme.

The new CIP abolishes the collective investments of €2.5m and it introduces, therefore, a faster process as applicants need not wait for groups of at least 5 investors to form. Moreover, the programme allows now the naturalisation of parents of the main applicant and of the spouse provided they buy a housing unit of €500,000+VAT. Other changes is the recognition of spouses on the basis of Civil Unions for the purpose of the programme.

Individual applicants will now need to invest a minimum of €2.0m if they invest in residential property only or €2.5m for other investments. The speed of approval remains as before and the issue of passports will need to be preceded by a residency period of about 6 months. Applications for residency and citizenship are made simultaneously.

Overall, the process has been made simpler and speedier while the inclusion of parents as dependents is a major advantage for some applicants thereby reducing the cost per passport.

2.      Standard & Poor’s upgrades the economy of Cyprus

The rating agency S&P has upgraded the Cyprus economy in its latest review from BB- to BB with a positive 12 month horizon. S&P forecasts a growth rate of GDP of 2.7% for 2016, up by 35% from an original forecast of 2.0%. S&P notes that the risks for banks have declined and provided that NPL’s continue their decline Cyprus will be upgraded to ‘Investment Grade’.

The Minister of Finance stated that although Cyprus is two places behind the investment grade, foreign investments have been increasing in Cyprus which is a sure vote of confidence in the country and its economy. The upgrading of the country will reduce its cost of borrowing thus helping further in its economic development.

Yields on the 10-year bonds have declined to a historical low of 3.606% continuing on a declining trend. The upgrade by S&P is anticipated to fuel this decline further.

3.      A new record set in tourist arrivals

Tourist arrivals in August have hit a new record increasing by 16.9% on a yearly basis and reaching for the first time the figure of 458,645 arrivals. The number of arrivals for the period of Jan-Aug 2016 exceeded the 2 million mark and reached 2,196,017 recording a rise of 19.2% on a yearly basis.

Arrivals from the UK rose by 9.9% while the rise from Russia for August was 36.8%. Similarly, arrivals from Greece rose by 16.8% and from Lebanon 22.8%.

Fully booked flights from the Middle East have been the norm over the past few months while hotels have been working mostly at full capacity.

Cyprus is currently in the process of redefining its tourist product with Limassol clearly destined to become a high-end destination boasting upgraded world class 5+-star hotels. It is anticipated that the next 3-5 years will see Limassol’s apogee as it attracts both high-end tourism and high-end businesses, drawn by the city’s openness, facilities, infrastructure, safe and friendly environment and economic prospects. Major oil companies are currently in the process of locating in Limassol in view of their on-going work in relation to the exploitation and exploration of natural gas resources in Cyprus’ EEZ.

4.      Income from the gas deposits

The Government has announced that it expects the first income rom the natural gas finds to start flowing in 2020. The expected income from the first gas field is set at 500-600m per annum. This amounts to about 3% of GDP and concerns one of the 13 blocks available for exploration/exploitation.

The Minister of Finance stated that 50% of the proceeds will go toward the repayment of the public debt until it reaches 80% of GDP. From then on 25% of proceeds will be going toward the public debt until it reaches 60% of GDP. The remaining proceeds will be used for an investment fund to cater for the needs of future generations.

 

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