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Cyprus Economy Update - July 2017

Cyprus Economy Update - July 2017

This alert covers updates regarding Cyprus’ economy, the increase in tourist arrivals and revenue, property sales’ contracts, company registrations, deposits and loans, interest rates, the statistics in house prices and construction, public debt figures, unemployment, inflation as well as foreign and retail trade.


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KPMG in Cyprus


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On the basis of the results of the Passengers Survey, arrivals of tourists reached 472.450 in June 2017 compared to 413.114 in June 2016, recording an increase of 14,4%. June 2017 had the highest volume of tourist arrivals ever recorded in Cyprus during the specific month.

For the period of January – June 2017 arrivals of tourists totaled 1.463.206 compared to 1.255.240 in the corresponding period of 2016, recording an increase of 16,6% and outnumbering the total arrivals ever recorded in Cyprus during the first six months of the year.


On the basis of the results of the Passenger Survey, revenue from tourism reached €291,5 mn in May 2017 compared to €244,7 mn in the corresponding month of the previous year, recording an increase of 19,1%.

For the period of January – May 2017 revenue from tourism is estimated at €649,2 mn compared to €530,2 mn in the corresponding period of 2016, recording an increase of 22,4% (Source: CYSTAT).

Cyprus upgraded by Moody's

Moody`s rating agency on the 28th of July 2017, has upgraded government bond ratings of Cyprus by one notch, to Ba3 from B1. Moody's maintained a positive outlook and said the short-term ratings have been affirmed, at Not Prime (NP) and (P)NP.

The fact that Moody’s maintained the prospects of the Cypriot economy on a
positive outlook means that it will probably proceed with a new credit rating
upgrade in the next assessment of Cyprus in November. Cyprus is now three
upgrades away from the investment grade of Moody’s.

According to Moody’s, the key drivers for the rating action are improvements in economic resilience that have occurred over the past two years and that seem likely to continue in the medium term, as well as the consistent fiscal outperformance and continuing favourable fiscal outlook for Cyprus.

The decision to maintain a positive outlook on the rating of Cyprus reflects Moody`s view that improvements in economic resilience and continuing fiscal outperformance are likely to be sustained, with a reduction in the debt-to-GDP ratio as well as a fall in the stock of non-performing loans held by the banks (Source:

Property sales

According to data published by the Department of Land and Surveys, for the
period January- July 2017, 1.240 property sales contracts by foreign buyers
were submitted in Cyprus, recording an increase of 41,5% from the equivalent period of last year when they amounted to 876. More specifically, in July 2017 property sales contracts by foreign buyers amounted to 251 compared to 191 in July 2016, representing an increase of 31,4%.

For the period January- July, the number of property sales contracts submitted in all areas of Cyprus by both Cypriots and Non-Cypriots amounted to 4.349 while in the equivalent period of last year they were 3.637, recording an increase of 20%. Out of the total property sales contracts up to July, 28,5% were in relation to foreign buyers.

Most property sales contracts by foreign buyers were in relation to Paphos
with 450 up to July, while Limassol is second with 426 contracts in the same
period. Moreover, there was an increase of 12,2% in property sales in the
Larnaca district with 203 contracts compared to 181 in the equivalent period of last year. Property contracts in the Famagusta area also increased, with 80
contracts from foreign buyers submitted. Lastly, 81 contracts were submitted in Nicosia recording an increase of 19,1% from last year.

Building permits area increase by 36%

An increase of 36.2% was recorded in the area of building permits issued in
the period January - May 2017, compared to the corresponding period last year, according to data released by the Statistical Service of Cyprus.

An increase of 8.9% was recorded in the number of building permits issued
in the period January - May 2017. During the period January – May 2017, 2.368 building permits were issued compared to 2.156 in the corresponding period of the previous year.

The total value of these permits increased by 28.3% and the total area by
36.2%. Τhe number of dwelling units recorded an increase of 41%. The number of building permits authorized by the municipal authorities and the district administration offices during May 2017 stood at 507, compared with 410 in the previous month and 440 in May 2016.The total value of these permits reached €108.6 million and the total area 109.9 thousand square metres. These building permits provide for the construction of 424 dwelling units.

Most building permits in May 2017 were issued in Nicosia, reaching 189, followed by Limassol with 154, Larnaca with 81, Paphos with 60 and Famagusta with 23. (Source:

House prices

House prices, as measured by the House Price Index, increased by 4,1% in
the first quarter of 2017 compared to the same quarter of last year. However
prices dropped by -1.4% compared to the last quarter of 2016. These figures
come from Eurostat, the statistical office of the European Union.

Meanwhile, house prices rose by 4.0% in the euro area and
by 4.5% in the EU in the first quarter of 2017 compared with the same quarter
of the previous year. Compared with the fourth quarter of 2016, house prices
rose by 0.4% in the euro area and by 0.7% in the EU in the first quarter of
2017 (Source:

Construction increases 36.7%

Production in the construction sector in Cyprus increased by 9.7% in the first quarter of 2017 in quarterly basis and by 36.7% in annual basis, according to first estimates from Eurostat, the statistical office of the European Union.

Meanwhile in May 2017 compared with April 2017, seasonally adjusted production in the construction sector decreased by 0.7% in the euro area (EA19) and by 1.1% in the EU28. In April 2017, production in construction grew by 0.3% in the euro area and by 0.2% in the EU28. In May 2017 compared with May 2016, production in construction increased by 2.6% in the euro area and by 2.5% in the EU28 (Source:

Company registrations

New company registration applications recorded an increase of 1.2% in the
first half of 2017. Specifically the number of applications amounted to 6.442,
compared with 6.366 in the same period last year. According to the Department`s data, in June the number of applications for registration of a new company amounted to 954, compared with 1.016 in June 2016. The number of new company registrations recorded a decline only in 5 out of the 20 last months.

Compared to May 2017, the number of applications has decreased by 16.4%.
Moreover, according to the Registrar of Companies, the number of applications for name approval rose to 2.255 in June 2017, compared with 2.325 in June 2016, showing an increase of 4.2%.

The total number of registered companies stood at 213.276 at the end of
June 2017, compared with 213.206 at the end of the previous month. The new registrations in the first half of 2017 amounted to 6.308 (Source:

Deposits and Loans

Total deposits in the Cypriot banking system in June amounted to €48,5 billion, marking a net decline of €433 million compared with May. On the other hand deposits in May registered a net increase of €168 million. The annual growth rate stood at 4.2%, compared with 5.9% in May 2017. 

Meanwhile total loans continued their decline with outstanding amounts reaching €54,3 billion in June. Total loans declined by €43,4 million compared with May. On an annual basis, total loans declined by 0.7% compared with a 1.6% reduction in May (Source:

Interest Rates

Mortgage interest rates in the Cypriot banking system declined to 2.76% in May 2017, marking a new historic low, according to figures released by the Central Bank of Cyprus. Compared with April the mortgage lending rate marked a reduction of 12 basis points. Interest rates for consumer credit in May also declined to 4.04% from 4.19% in the previous month. The interest rate on loans to non-financial corporations for amounts up to €1 million registered a decline to 3.92%, compared with 4.06% in the previous month.

Interest rates for loans to non-financial corporations for amounts over €1 million recorded an increase to 3.70%, compared with 3.60% in the previous month. On the other hand, interest rates on deposits from households with an agreed maturity of up to one year remained unchanged at 1.37%, compared with the previous month. The corresponding interest rate on deposits from non-financial corporations rose to 1.48%, compared with 1.37% in the previous month (Source: 

Public debt decreases to 107% of GDP

Cyprus' public debt decreased to 107.0% in the first quarter of 2017 from 107.8 in the last quarter of 2016, according to Eurostat.

Meanwhile at the end of the first quarter of 2017, the government debt to GDP ratio in the euro area (EA19) stood at 89.5%, compared with 89.2% at the end of the fourth quarter of 2016 (Source:


The unemployed persons, registered at the District Labour Offices on the last day of July 2017 reached 31.670 persons. Based on the seasonally adjusted data that show the trend of unemployment, the number of registered unemployed for July 2017 decreased to 33.423 persons in comparison to 33.649 in the previous month.

In comparison with July 2016, a decrease of 4.442 persons or 12,3% was recorded which was mainly observed in the sectors of construction (a decrease of 1.103 unemployed persons), public administration (a decrease of 1.006), trade (a decrease of 725), manufacturing (a decrease of 488) and financial and insurance activities (a decrease of 327) (Source: CYSTAT).


In July 2017, the Consumer Price Index decreased by 1,16 units to 98,03 units compared  to 99,19 units in June 2017. Compared to July 2016, CPI is decreased by 0,7% while for the period January-July 2017, CPI is increased by 1,0% compared to the corresponding period of the previous year.

In the twelve-month period from August 2016 to July 2017, in comparison to the period from August 2015 to July 2016, the annual average rate of change of the CPI was 0,3%. The corresponding annual average rate of change of the CPI in the previous twelve month period was -2,0%. (Source: CYSTAT).

Retail Trade

On the basis of provisional estimates, the Turnover Volume Index of Retail Trade for May 2017 increased by 8,2% compared to the corresponding month of the previous year and reached 94,7 units (base 2010=100). For the period January-May 2017, the index is estimated to have recorded an increase of 3,2% compared to the same period of 2016.

On the basis of provisional estimates, the Turnover Value Index of Retail Trade for May 2017 increased by 8,9% compared to the corresponding month of the previous year and reached 93,8 units (base 2010=100). For the period January-May 2017 the index is estimated to have recorded an increase of 4,9% compared to the same period of 2016 (Source: CYSTAT).

Foreign Trade

On the basis of preliminary estimates for Foreign Trade of Cyprus in May
2017, total imports / arrivals were €673,4 mn, of which €453,2 mn were arrivals
from other Member States of E.U. and €220,2 mn imports from Third Countries.
Total exports/dispatches were €264,1 mn of which €100,1 mn were dispatches to other Member States of E.U. and €164,0 mn exports to Third Countries. (Source: CYSTAT)

Price Index of Construction Materials

The Price Index of Construction Materials for June 2017 reached 100,46 units (base year 2010=100,00), recording a decrease of 0,14% compared to May 2017. For the period January - June 2017, the index recorded an increase of 0,41% compared to the same period of 2016 (Source: CYSTAT)

Industrial Output Prices Index

The Industrial Output Prices Index for June 2017 reached 101,3 units (base 2010=100), recording an increase of 0,1% compared to May 2017.

For the period January-June 2017, the index showed an increase of 4,2% compared to the corresponding period of the previous year.

For Manufacturing, the index for June 2017 reached 103,2 units, recording an increase of 0,2% compared to May 2017 (Source: CYSTAT).

Registration of Motor Vehicles

In January-July 2017 the total registrations of motor vehicles increased by 31,0% to 25.896, from 19.766 in the corresponding period of 2016.

The registrations of passenger saloon cars increased by 30,6% to 21.351, from 16.343 in January-July 2016.  (Source: CYSTAT)

Amendments to the definition of tax resident for individuals | July 17, 2017

As of January 1st, 2017, the Cyprus Income Tax Law is amended with regards to the definition of “resident of the Republic” for individuals. The amendment shall also have effect on other tax laws, to the extent where such laws refer to Cyprus tax resident individuals as these are defined in the Cyprus Income Tax Law.

Under the provisions of the Cyprus Income Tax Law, the term "resident
of the Republic", when applied to an individual, means an individual who
stays in the Republic for a period or periods exceeding in aggregate 183 days
in the tax year.

The definition has been amended to also provide that, an individual who
does not stay in any other country, for one or more periods exceeding in
aggregate 183 days in the same tax year and is not tax resident in any other
country for the same year, is deemed as a resident in the Republic in that tax
year, if all of the following conditions are met:

  • the individual stays in the Republic for at least 60 days in the tax
  • exercises any business in the Republic and/or is employed in the
    Republic and/or holds an office with a Cyprus tax resident person at any time
    during the tax year, 
  • maintains (by owning or leasing) a permanent home in the Republic.

The law is further amended to clarify that an individual that cumulatively
meets all the above conditions shall not be treated as a Cyprus tax resident in
the tax year if, during that year the exercise of any kind of business in the
Republic and/or employment in the Republic and/or holding of an office with a tax resident person in the Republic is terminated.

The new provisions shall become applicable from tax year 2017 onwards with
the publication of the amending law in the Official Gazette which is expected
to take place on Friday, July 21st 2017.

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