Address at the Host Country Investment Outlook Session
EBRD Annual Meeting, Nicosia, 11 May 2017
Ladies and gentlemen,
It is truly a pleasure and an honour to welcome you to the Host Country Investment Outlook Session, taking place within the framework of the 2017 EBRD annual meeting and business forum.
It is a fact that a few years back, Cyprus made the headlines for all the wrong reasons. A combination of loose fiscal policy, together with lax supervision and bad practices in the banking sector, lead Cyprus into a severe economic and financial crisis.
But since then, what has been achieved is nothing short of a remarkable recovery. The strong rebound confirms the resilience and strong fundamentals of the Cyprus economy and the excellent prospects of its key productive sectors.
The excessive public deficit, which for years stood at an unsustainable 5-6% of the GDP, has been fully eliminated, through a decisive effort which brought public expenditure under control. 2017 will be the 4th consecutive year with a balanced budget and with a very comfortable primary surplus.
Let me clarify that achieving a balanced budget was not an end in itself. It was the means which enabled us to maintain tax stability and certainly and to promote significant tax breaks and incentives aimed at supporting economic activity.
Corporate tax remains at 12.5%. A labour tax introduced in 2011 has been abolished as of the beginning of this year, thus making hiring easier. Likewise, a tax on property ownership has been scraped, and property transfer fees have been reduced by 50%, thus offering a boost to the property sector. Among others, we have also introduced a permanent tax deduction for all new equity invested in any Cypriot company on the basis of a notional interest rate and an additional tax break for investment in start-ups and innovative companies.
Maintaining a pro-business economic environment has been and remains a key policy priority.
In a similar manner, decisive action was taken in our financial sector.
Capital and solvency ratios have improved significantly and stand above the EU average. The regulatory framework and KYC procedures have been enhanced, banking sector supervision is now conducted by the ECB, and corporate governance has improved. In short, the banking sector of Cyprus has healed to a significant extent and has managed to attract significant foreign investment.
Ladies and gentlemen,
Cyprus currently enjoys one of the highest growth rates in the EU, just short of 3% of the GDP, and this is, in fact, the projection for the medium term. All the key sectors of the economy are now contributing to growth.
The financial and business services sector retains significant comparative advantages, including the world class expertise which has been attained over the years and a wide network of double tax treaties. In a very good example of government and industry working together, we are currently reforming the legal and administrative framework aiming to further develop investment fund management.
The Cyprus shipping industry remains strong and has been attracting new business throughout the last few years. Not everyone realises that Cyprus is, in fact, the largest ship management centre in Europe.
Tourism, is obviously a flagship industry, and I can tell you that we are already gearing for yet another record season. The advantages of Cyprus as a tourist destination include the fact that we enjoy the best weather in Europe.
Significant investment is underway in sectors ranging from Marinas and hotels, to renewable energy, medical facilities and pharmaceuticals. And hopefully, very soon, work will commence on the largest integrated casino resort in Europe.
The public sector has also been implementing major investment in higher education and research, in an effort to broaden the base and diversify our economy.
According to rough estimates, public and private sector investment in infrastructure, currently underway, exceeds 12% of the GDP.
Ladies and gentlemen,
The restoration of stability and confidence opens the way for new business and new investment opportunities.
And let me repeat at this point, how thankful and appreciative we are for the decisive presence and strong support of the EBRD during the last few years.
Our government remains committed to continue striving for an even friendlier environment for entrepreneurship and business.
We are not becoming complacent and fully realise that there is still more to be done. The legacy problems of the crisis have not been fully resolved yet, including a high stock of NPLs and unemployment which even though on a declining path, is still high.
Maintaining the reform momentum is imperative. An area which we consider as of high importance is the judiciary, where a major reform effort is underway, including a significant investment in e-justice and the establishment of a new specialised commercial court, as of 2018.
Cyprus is also committed to work for regional stability and co-operation. It is our firm belief that the Eastern Mediterranean is a region of opportunities and prospects, not least in the energy sector. Within this region, Cyprus is a stable and safe jurisdiction, an attractive base for business and investment.
Cyprus is a reliable member of the EU and the Eurozone, with a clear stance in favour of free trade and open markets on a global scale and with a strong commitment to the effort of maintaining stability, fostering investment and economic exchange and bundling bridges of co-operation and understanding.
Hosting the 2017 EBRD Annual Meeting has been an excellent opportunity and a decisive step in this direction.
Ladies and Gentlemen,
Thank you for your attention.