CyprusProfile talks to Stavros Pantzaris, Country Managing Partner of EY Cyprus, on key areas of opportunity or growth, and expectations for Cyprus in 2018
Cyprus has proven itself as a resilient and pro-business economy. Since the financial crisis in 2012–13, the country has earned several upgrades by international credit rating agencies and enjoyed the development of numerous large-scale projects. The resilience of our economy is reflected in the healthy capital and liquidity levels held by local banks today and the continued registration of new companies, funds and investment vehicles. In fact, every quarter in 2017 has proven strong and recently Moody’s released a report raising their real 2017 GDP growth forecast of Cyprus from 2.7% to 3.5%. GDP growth in 2018 is expected to continue to be around 3%.
When breaking down the GDP by sector, one can appreciate the significant role the professional services sector plays in the formation of the country’s GDP. Despite the various challenges faced, the sector proved to be resilient during the crisis and managed to maintain healthy levels of business. But, in order for professional services to continue to grow and prosper, it is imperative that we continue capitalising on our strengths (such as the solid legal framework, the attractive tax legislation and the high quality of services provided) and work around our weaknesses, mainly reducing bureaucracy and improving the efficiencies of the public administration. We should also continue to enhance our country profile in an effort to attract real business that will create substance in Cyprus and which will lead to the creation of new jobs and foster economic growth.
There are several growth areas for the sector, such as the demand for greater corporate transparency. It is of utmost importance to provide transparency and compliance to regulation and standards. Investors want access to more accurate and relevant information about companies, transactions, markets and risks. In Cyprus, we continue to adopt the policies aligned with the EU and are adopting International Financial Reporting Standards (IFRS) to harmonize accounting internationally. We are also seeing a strong push from the Cyprus government for companies to adopt processes and practices that adhere EU legislation or be subject to high penalties. It is imperative that we insist on issues of transparency and compliance in order to further enhance our country’s overall image and reputation. With regulators exerting more control and legislative/regulatory change, I believe there will be increased demand for professional services.
Additionally, we expect to see significant growth in M&A activity. According to recent reports issued by EY, there is visible strengthened M&A activity globally in the real estate sector with manufacturing and IT following behind. As far as our region in the Central & Southeast Europe is concerned, we continue to see strong numbers in M&A and I do foresee an acceleration in M&A activity during 2018 (also in Cyprus), both in the number of deals and size of the transactions.
In my view, Cyprus is exceeding expectations. In the past year we have seen unemployment continue to fall, while the labour pool continues to expand and grow in skillset. My outlook for 2018 is positive, however, there will be inevitable challenges such as, the high rate of non-performing loans. It is imperative that we continue examining our vulnerabilities as a country and exploring solutions alongside the government.