Filenews 19 June 2021 - by Theano Thiopoulou
Cyprus is in negative first place as the country most vulnerable in Europe due to the tourism sector and lending exposures that exist from companies in the wider sector to banks.
The last report of the International Monetary Fund, published the day before yesterday, refers in particular to tourism, while the positive picture of the country is noted. The Fund's technocrats give Cyprus a negative first, stressing that "the high exposure of the Cypriot banking system to the tourism sector increases the risk of servicing loans. Loans for accommodation and catering services were 46% of the Tier 1 capital of banks, one of the highest in the euro area."
According to IMF data, the five most vulnerable countries are filled by Greece, which is in second place. Greek loans for accommodation and focus accounted for 40% of the Tier 1 capital of Greek banks. Ireland follows, with loans in the tourism sector accounting for 20% of the banks' Tier 1 capital, followed by Spain and Portugal having loans corresponding to 18% of category capital
The Cypriots do not compensate
Cyprus' high dependence on international arrivals indicates a slower prospect of a short-term recovery, the Fund says. The smaller share of domestic tourism cannot compensate for the decline in international arrivals. In addition, the technocrats clarify, the major countries of the Cyprus tourism market have made good progress in vaccinations. Two of the top three countries of origin (UK and Israel) are advanced in vaccination, with around 60% and 110% of the population having completed vaccinations by mid-April. Another positive factor is that two of the top three markets (Russia and Israel) expect a faster recovery in 2021. The IMF notes that "the share of its top three markets (UK, Russia, Israel) remains very high, making tourism vulnerable to developments from these countries. Greater diversification of the tourism market will help Cyprus cope with the shock."
The IMF report notes that flights continued to decline in early 2021 and this is not a good sign for Cyprus' tourism, given its full dependence on air travel. Hotel occupancy remains low, around 10% to 15%, compared to southern European competitors such as Portugal and Greece. For Cyprus, based on the current rate of vaccine disposal in the country, as well as the inbound tourism vaccination programme, IMF analysts have forecast that an average recovery of 30% of the 2019 level is expected in 2021, with a full recovery by 2024.
MORE EASY THE ECONOMY OF EXPENDITURE
The Cypriot economy, the IMF report says, is he very dependent on tourism, making it more vulnerable to the shock impact of the Covid-19. Tourism receipts accounted for more than 18% of Cyprus' total exports in 2019. The remaining tourism expenditure (inbound minus outbound) reached around 8% of GDP in 2019. Tourism also has a big impact on businesses outside hotels (food services, retail, transport, construction, other services). Cyprus' economy, the IMF notes, is very dependent on tourism-related industries, with the total direct and indirect contribution accounting for almost 14% of GDP in 2019, which was higher than in many other European countries. Tourism and related services also made a large contribution (approximately 13%) to the total employment.
Cyprus 3rd in debt growth
Third in the European ranking with the largest increases in public debt is Cyprus, with an increase of 24.2%, according to data published yesterday by Eurostat. Large increases occurred in Greece (+25.1%), Spain (+24.5%), Italy (+21.2%) and Spain (+21.2%). and France (+18.1%). The general government gross debt-to-GDP ratio increased in the European Union (EU27) by 13.2 percentage points (from 77.5% at the end of 2019 to 90.7% at the end of 2020). in the euro area debt increased by 14.1 percentage points (from 83.9% of GDP at the end of 2019 to 98.0% of GDP at the end of 2020).
The share of public debt held by the domestic financial companies sector at the end of 2020 was the highest in Sweden (73%), Croatia and Denmark (from 67%) and the Czech Republic (64%).
At the end of 2020, the ratio of the initial short-term debt maturity to the total debt for the general government was increased in Sweden (29.9%), Denmark (21.6%), Portugal (16.7%) and Portugal (16.7%). Finland (15.6%) as well as Norway (21.3%). The short-term debt ratio also exceeded 10% in the Netherlands, Italy, France, Germany, Malta and Ireland.
At the end of 2020, the highest shares of short-term residual maturity debt in terms of total central government debt were reported: Sweden (39.7%), Estonia (28.4%), Portugal (26.4%), Latvia (23.8%) and Latvia (23.8%). and Italy (23.4%). The lowest shares were observed in Bulgaria (3.1%). Romania (3.6%).
Of the reference countries, only three issued more than 50% of their debt in foreign currency: Bulgaria (82.0%), Croatia (72.1%) and Croatia (72.1%). and Romania (51.1%). The average cost of the central government's gross debt ranged between 0.4% in Estonia, 0.7% in Finland, 0.8% in Germany and 3.2% in Hungary and 3.8% in Romania in 2020.
