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Cyprus Economy Update - August 2016

Cyprus Economy Update - August 2016

This alert covers updates regarding the recent upgrade of the Cyprus economy by Standard and Poor’s (S&Ps), tourist arrivals, the Cyprus economy growth rate, the number of sales contracts submitted to the Land Registry, the deposits in the Cyprus banking system, the interest rates on loans and deposits, the building permits, company registrations, unemployment, trade deficit, retail trade and exports. Furthermore, Cyprus signed a deal for the transfer of natural gas via pipeline to Egypt, once extraction starts, and the Council of Ministers approved the revised scheme for granting Cypriot citizenship to non–Cypriot entrepreneurs/ investors.

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S&P upgrades Cyprus

Ratings agency Standard & Poor`s upgraded on 16th September 2016 its assessment of Cyprus to BB. The outlook is positive.

S&P expects the Cypriot economy will expand by about 2.7% this year, surpassing their March 2016 forecast, with annual growth at about 2.5% in real terms in 2017-2019. It said that Cyprus' recovery is supported by resilient business services, tourism, gradually reviving private consumption and construction. The restructuring in the financial sector is advancing, but the Agency expects it will be a few years before the sector contributes to economic growth.

They think that the sovereign`s budgetary position will continue improving over the next few years, standing at close to balance or in surplus, with gradually declining government debt.

S&P said that the positive outlook reflects its view that they could upgrade Cyprus within the next 12 months if its reduction of currently high levels of nonperforming loans accelerates, indicating a convergence of Cyprus` credit and monetary conditions, including the monetary transmission mechanism, with those of the Eurozone (Source: www.cna.org.cy).

Tourism

On the basis of the results of the Passengers Survey, arrivals of tourists reached 482.132 in July 2016 compared to 414.527 in July 2015, recording an increase of 16,3%. An increase of 7,1% was recorded in tourist arrivals from the United Kingdom (from 155.813 in July 2015 to 166.874 in July 2016) and 39,3% increase from Russia (from 96.085 to 133.892). On the other hand a decrease of 4,2% was recorded in tourist arrivals from Greece (15.120 in July 2016 compared to 15.780 in July 2015).

For the period January – July 2016 arrivals of tourists totalled 1.737.372 compared to 1.450.427 in the corresponding period of 2015, recording an increase of 19,8%.

On the basis of the results of the Passenger Survey, revenue from tourism reached €301,0 mn in June 2016 compared to €259,0 mn in the corresponding month of the previous year, recording an increase of 16,2%.

For the period January – June 2016 revenue from tourism is estimated at €831,2 mn compared to €730,9 mn in the corresponding period of 2015, recording an increase of 13,7% (Source: CYSTAT).

Increase in property sales

Real estate property transactions registered a 50% rise in August 2016 marking an annual rise for the thirteenth consecutive month. The 50% increase in August follows a 26% increase in July, 42% increase in June and a 17% increase in May.

According to data released the department of lands and survey overall contracts of sale reached 451 in August 2015 compared with 301 in August 2015. Sale contracts for the period of January – August 2016 rose by 30% reaching 4.088 from 3.155. These figures also include transactions relating to loan restructurings, recoveries and debt-to-asset swaps agreed between the banks and borrowers (Source: www.cna.org.cy).

KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative ("KPMG International") a Swiss entity. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International Cooperative ("KPMG International") or KPMG member firms.

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