These are interesting times for Cyprus, with not one, but two presidential elections in the last few weeks. The first saw Nicos Anastasiades re-elected for a second term as the country’s president. While in the Cyprus Chamber of Commerce and Industry, Christodoulos Angastiniotis took over as president from the outgoing Phidias Pilides.
Before leaving office, Mr. Pilides spoke to SEUS about the current state of the Cypriot economy, the role the CCCI has played in its growth, and their on-going commitment to improvement.
With Eurostat figures showing an increase in GDP of 3.5%, forecasters are predicting a 3% average growth for 2018-20. If this holds true, Cyprus could be one of the fastest growing economies in the Eurozone.
“We had a very big crisis here,” states Mr. Pilides plainly. “Unemployment was at 18% and rising, lots of businesses were in trouble, as of course were the banks. I think it’s honest to say that people were just not expecting the recovery of Cyprus to come so soon.”
Like all good business plans, tackling the country’s recovery was carried out on several different fronts, but it was the hard work of the Cypriot people that was at the heart of it.
“The resilience of the island’s SMEs was impressive,” maintains Mr. Pilides. “They went through hard times, having to cut down employee numbers and be innovative with salaries and other cost-cutting measures. The outlook is now one of recovery though, and we are on the path to restoring things to the way they were before the crisis.”
The reward for all the hard work came in April 2016 with the last of the capital controls lifted. And yet, Mr. Pilides believes this is not the time to rest on their laurels.
“The fiscal reforms need to continue in order to make sure the recovery is ongoing,” he asserts. He believes that this is the only way to produce the right conditions for a healthy economy in the future.
Cyprus’ brush with near disaster and their subsequent recovery, however, has not gone unnoticed, and government reforms over the last four years have played a vital role in attracting new investment.
During this recovery period, the island has seen more than four billion euros in investments, which, considering the national GDP falls between 17 – 18 billion, is a considerable achievement.
“This clearly shows that investor confidence in Cyprus is coming back,” says Mr. Pilides. “We have been continuously upgraded by the international credit agencies, so I have no doubt that the confidence is there. But my personal experience here in the chamber is that I see there are a lot more businesses interested in investing in Cyprus or setting up a base here.”
So what is it that’s making investors hesitate in what appears to be a stable economic platform? Multiple factors could be at play. While the government has introduced a raft of structural reforms to boost the country’s competitiveness, Mr. Pilides feels they have not gone far enough.
“First and foremost there should be structural reforms of the public service,’” states the former CCCI President. “Unfortunately, public service is not moving at the same pace as the private sector, and there are distortions in terms of benefits for its workers in comparison to the private sector.”
This inequality, he maintains, produces inherent difficulties in the economy, referring to what is a frequent and heated debate in the public domain. According to the IZA Journal of European Labour Studies, Cyprus consistently ranks in the top five EU countries with the highest public/private sector pay disparity.
In other sectors of the business community, Mr. Pilides is also cautiously optimistic about the bank’s recovery process, despite a significant amount of none performing loans. “Overall though, everything seems to be going in the right direction,” he says optimistically.
“All sectors of the economy are showing significant growth, unemployment is coming down, and we should push ahead with the privatisation program,” he explains. “I also think there should be incentives coming into the economy for new entrepreneurs to encourage the creation of new enterprise.”
This area, in particular, is one that the CCCI has been giving considerable attention to startups and new businesses. Mr. Pilides is also keen to point out that the chamber has hosted several events in Cyprus, especially for younger aspiring entrepreneurs.
Interestingly, these events have been bi-communal, attended by both Greek and Turkish Cypriot youths. This supports one of Mr. Pilides other high hopes for the future of Cyprus, reunification.
“I’m a great believer in the fact that reunification would unleash the full potential of Cyprus,” he proclaims.
“Cyprus is gifted with many advantages geopolitically and in infrastructure, we have everything it takes to succeed and our only constraint is the fact that we are not a united country. If the two communities come together in a unified country, the potential is unbelievably great.”
The outgoing CCCI President is not the only one who believes this. In a frequently updated study by PRIO (The Peace Research Institute of Oslo), analytic predictions show that the GDP of Cyprus could triple within 20 years if there is a reunification solution. “All sectors would benefit,” says Mr. Pilides hopefully.
The re-election of President Nicos Anastasiades is believed to be a steady pair of hands at the helm for another five-year term. Many hope, therefore, that his promise of reactivating unification talks will have a positive outcome for the entire island.