Huge Changes Lie Ahead for Cyprus’ Economy

Cyprus recorded a cataclysmic year-on-year drop of 91.2 percent in tourist arrivals in December 2020 amid the pandemic travel restrictions, according to the latest official figures.

Tourist arrivals fell to 9,682 in December 2020 compared to 110,330 in December 2021, as reported by CyprusBusinessReport.com.

For the full-year 2020, just 631,609 tourists travelled to the island, in comparison to 3.976 million in 2019. This reflects a fall of 84.1 percent.

The biggest drop in tourism came from the UK, which showed a 91.1 percent fall, followed by Germany, a drop of 81.2 percent in tourism.

In March 2020, the government imposed a travel ban because of the pandemic. In June, there was a gradual lifting of restrictions.

By then, the damage was done.

Huge changes

For decades, economists have warned that Cyprus’ economy must diversify from tourism or risk national productivity being over-dependent on one sector. Tourism accounts for approximately 25 percent of the economy.

As reported earlier, mass bankruptcies threaten the economy, not least in the tourism sector.

Access to the international lending markets

The government’s most important weapon to fight an economic downturn is the ability to sell its bonds to the international markets, said Finance Minister Constantinos Petrides.

To do that, Cyprus’ fiscal position needs to be credible, meaning that mass bankruptcies would damage the island’s ability to borrow from international lenders.

Already, ratings agency Moodys mentioned that the pandemic threatens Cyprus’ fiscal position.

All of this means that the state and Treasury must take a serious look at tax incentives for local businesses, self-employed and households. First priority is survival and making that possible for the entities that make up the economy. Second priority is stabilisation and then long-term recovery.

Diversification

Not for the first time, we urge diversification into other sectors of the economy like the Arts, entrepreneurship, green jobs and other growth possibilities.

The change has happened to a certain extent. Cyprus’ economy has expanded into financial services, retail, and to some extent, industry. One overlooked sector is the Arts.

If you look around you right now, you will see the arts in action. Your table, chair, car, cup, even simple everyday things around us are designed. These things are functional art but the fundamentals are there – form and proportion materialised into something concrete we can use.

If one of the changes is a renewed effort to diversify the economy, it would have long-term benefits.