Cyprus’ main trading partners, Greece in particular,
remain mired in recession. Its two largest banks – key employers – will be restructured
and unemployment will undoubtedly rise. Meanwhile, the government will be
cutting spending and raising taxes, laying off public sector workers and
embarking on some strict labour and product market reforms – as part of the
standard Troika bailout package. Many of these reforms are needed but as we
have seen across Europe, when combined with other impacts mentioned above, a downward
spiral can be created.
The key hope for growth remains tourism. However, with
the euro remaining strong and the prospect for political and social unrest in
Cyprus still high, it is difficult to see a huge boost in this area. It will
continue to truck along but is unlikely to fill the gap left by other areas of
the economy shrinking. As we have discussed before, the prospect of growth from
large gas revenues remains a pipe dream for now.
With all of this in mind we have put together a
comparison of some of the previous growth estimates, along with the implicit
ones included in the latest troika report and some of OE’s initial (optimistic)
projections (click to enlarge).
All of this remains uncertain, depending on when capital
controls are removed and how investors respond but it does not make pretty
reading. All previous hopes for the economy are off the table and expectations
need to be severely adjusted. The Troika's estimates are very optimistic, particularly in terms of returning to rapid growth in 2015 and 2016. Furthermore, if the growth estimates included in
the bailout prove to be overly optimistic it means Cyprus will, just as Greece
did, require further financial assistance.
8 comments:
Those estimates by the troika are simply ridiculous. Their assault on reason continues. Given the fact the island's GDP is a mere combination of banking and public spending and adding in a highly uncertain business environment I think even your initial estimate for 2014 and 2015 is too optimistic. Time will tell. But the troika obviously has no interest in re-gaining any credibility.
1.Hockeystick recoveries are very seldon. These are even more optimistic tan that, so will not happen.
8% dip looks pretty optimistic anyway and the jump in the years after that can only come up in the minds of people that have been smoking certain stuff and the strong variety or are heavy on Prozac.
2. From there as things will likely be much worse it is also clear that we will see Cyprus several times being rescued.
3. Betting on Tourism is beyond moronic, probably with stress on high end and Asians (assumed as you didnot mention that). There are about 2000,0016 other countries doing that as well of which 2000,0015 go for high end and Asians. Sextourism and 'The Great Unwashed'/easy dope are probably more realistic markets if you can keep the eyes close for the other negative consequences.
4. Tax-haven might still work but now without banking industry attached. Just put the bankaccounts in a country where they at least know how to write riskmanagement.
Ireland as a aircraftcarrier for Europe and the wider region. 12.5% tax seems attractive, especially for capital intensive activities (as long as they are EU).
Imho good country to live in, so might be attractive for foreign not location dependent say internet cies. Work for Europe via the internet or as hub and are taxed at 12.5% (and have nice weather).
Quality of the workforce looks a bit dubious however. Could however import the Greek top as well. Nothing wrong with the people it is just the lack of proper education. But with the education they have got as long as you can pick the top 10-20% no problem, these are as good as any Western European. Anyway they should invest in education as that is likely the only way forward. And stress that English is also their language eg high end Asian tourists usually like that (but will not know).
5. They could try to get the gas money a bit earlier. But they will need a few proper British or American investment bankers for that not the piggybankers they have themselves. And a few proper oilmen.
Btw I feel a bit unappreciated, and so will probably feel the likes of Christina.
If you would eg look at my (all back of an enveloppe btw) estimates of growth and deficit deductions (don't waist your time btw) you will see that these are several times more accurate than those of the IMFs and ECBs of this world not even to mention the Southern governments.
So as the crisis is now in its third year you would expect the international financial press to have picked that up by now. But in no way.
One would have expected headlines like 'Christina Speight says: the Euro is doomed'. But what do we got people that never have spoken the truth in their live even in kindergarten, like a Berlusconi are quoted instead. Which opens a lot of questions about his mother and education in general but that is another issue. I can tell you I wouldnot have got away with it.
Or we have IMF figures probably made in an Amsterdam coffeeshop iso 'Rik just made in 2 minutes a back of the enveloppe calculation good stuff' headline. Even if it only was to show the world that other people than herbal material (the strong variety) smokers also have an opinion on these issues.
The standards in the modern so called serious press are really dropping fast.
If they exit the Euro, the OE prediction is feasible. If not, it is optimistic.
The others are in cloud cuckoo land.
Rollo
GDP will most likely drop around 50% if they leave. Mainly by devaluation of the own currency. Which is a problem for a country that has to import a lot.
Will there be any kind of growth at all? Well at least not in the nearest decade for sure. I might not be a financier, but I see what is going on...and what makes me curious the most is that: this crises did not come out of the blue. Cypriot government knew that something like that would eventually happen. Why wold they choose to be ignorant...this is what makes me wonder.
Alicia from borrow easily with Pay Day Loans@ online
"Where will Cypriot growth come from?"
Simple. Get out of the EU, become independent and get rid of the Euro in rthe process.
There'll be a modest period of turbulence but they can be buoyed that all those bullies can go away for good,
Tourism (crippled by the strong euro) would boom and they could use the climate to produce specialist fruit and vegetables.
One other point which would help would be if along that road they could bury the hatchet with the Turks in the other half of Cyprus and accept a federation of the two parts of the Island as the Turkish leader offered not sao long ago. This might not have popular to start with but I beg them not to spurn the hand of peace again.
We in Cyprus appreciate the Troika and the Eurogroup offering to help us clean up the mess after they turned our President Anastasiades into a suicide bomber and destroyed the Cyprus economy in one hour on Greek Independence Day, 25 March, 2013. This memorable D-Day (Day of Economic Destruction) will be exploited by Cyprus Politicians in exactly the same way as they have used the Turkish Invasion of Cyprus, 20 July, 1974 to justify almost 40 years of theft from the Private Sector. The irony is that the forces of Pan-Hellenistic Nationalism now have justification to blame the leaders of the European Project for the implosion of the Greek and Cypriot states. Cyprus' path to ruination was abetted in 2008 when its corrupt politicians found they could borrow from the markets at the same rates as countries like Germany. The Euro was in fact a poisoned chalice. It is now too late to save Cyprus. Germany, itself a once-divided state, should have helped Cyprus to re-construct its fragile economy. But no, the temptation for short-term political gain outweighed any long-term economic vision or political courage (which Margaret Thatcher possessed). While the European Convention on Human Rights is exemplary in protecting the rights of non-European refugees and fugitives from justice, it is discarded when it comes to the rights of European Citizens. Sadly, the suicide bomb used by the Eurogroup to destroy Cyprus will add to the migration of economic refugees to Holland, Germany, France and the UK. It will also encourage a higher level of illegal activities by desperate Cypriots. The main areas of tourism, Kyrenia and Famagusta, were stolen by the Turkish invaders. How can tourism be expected to recover from two invasions? Investment in oil and gas might have been the one hope for Cyprus' recovery, but even that has been destroyed in the Eurogroup Blitzkrieg.
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