A difficult and demanding environment in the short term for Cyprus was described by the President of the European Central Bank, Christine Lagarde, as a result of the war in Ukraine.
In her speech at an event organized by the Central Bank of Cyprus, on the occasion of her visit to Cyprus, Ms. Lagarde stressed that & # 8220; Europe is entering a difficult phase. We will face, in the short term, higher inflation and slower growth. There is considerable uncertainty about the magnitude and duration of these phenomena. The longer the war lasts, the higher the cost & # 8221 ;.
“This is a major economic disruption, given our geographical proximity to Russia and our dependence on Russian oil and gas,” he added. This disorder will be felt here in Cyprus & # 8221 ;.
In particular, as far as Cyprus is concerned it sees the following major challenges:
-It will be affected by the inflationary pressures that has the highest energy costs due to its dependence on oil imports for energy production. [
In the tourism sector, the number of visitors from Russia and Ukraine will decrease, representing 27% and 5%, respectively, of the total arrivals in 2021.
-Given the importance of Cyprus as center of foreign direct investment to and from Russia, professional services, such as accounting, consulting and legal services, are also expected to be affected.
Despite the challenges, Ms. Lagarde noted that the fundamental economic growth of the Cypriot economy has become more robust in recent years, thanks to the hard work done since the banking crisis of 2013. More specifically, non-performing loans fell by about 50% of the total of loans in 2014 in single digits at the end of last year. Overall, the banking sector has a high level of capital adequacy and liquidity and openings to Russia are limited. & # 8221;/p>
Read the whole speech in Greek here.