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Investment activity is still below pre crisis levels

27/09/2019 11:28

Investment activity is still below pre crisis levels, EIB Secretary General says.
 
Energy costs, the availability of finance, access to digital infrastructure, the availability of skilled staff and uncertainty about the future are long term barriers Cypriot businesses are faced with, according to the European Investment Bank’s 2019 Investment Survey, presented on Thursday, in Nicosia, during a conference organized by the Nicosia Chamber of Commerce and Industry and the EIB.
 
In her address, EIB Secretary General Marjut Santoni said that although aggregate investment improved in 2018 it was still over 20% below pre crisis levels.

Cyprus experienced strong rebound in 2018, with real GDP growth averaging 3.5% from 4.5% in the previous year. Growth in 2018 was supported primarily by private consumption, she noted, adding that going forward it is projected that economic expansion at 2.9% in 2019, at 2.6% in 2020 with private consumption remaining a key growth driver.

Structural reforms momentum over the post crisis period was instrumental in achieving more solid economic performance and has paved the way to receive sovereign credit upgrades that enabled the sovereign rating to access international credit markets at more favourable terms, she pointed out.

Santoni also said that "economic recovery post crisis improved repayment capacity of legacy loans but high indebtness still exposes Cyprus to international market volatility."

According to the EIB official the main driver for investment recovery in the corporate sector particularly in terms of firms’ readiness to catch the digitalization challenge.

However, she added, the business environment still creates concerns for companies. The proportion of firms in Cyprus citing uncertainty, high energy costs, availability of skilled staff as the principle long term barriers to investment has increased since our last survey, she added.

“Unsurprisingly, investment activity by Cypriot businesses is one of the areas picking up and we have a particular interest in identifying the main long-term barriers they face, cited in the EIB’s 2019 Investment Survey as energy costs, the availability of finance, access to digital infrastructure, the availability of skilled staff and uncertainty about the future”, Energy, Commerce and Industry Minister Yiorgos Lakkotrypis said speaking at the conference.
 
He added that these are bottlenecks to doing business also identified by the Government and for which concrete steps are already been taken, such as the introduction of a Competitive Electricity Market to reduce energy costs.
 
He also said that Cyprus is now moving forward with plans to import LNG for electricity generation by the end of 2021, the capital expenditure for construction of the infrastructure projects to facilitate LNG imports stands at 300 million euro, of which a grant of 100 million euro has already been secured from the EU.
 
“The aim, of course, of our restructuring efforts in the electricity market, is for Cyprus to have by 2022, an energy mix that consists of 20% RES and 80% natural gas. As such, we will no longer rely on heavy fuels for electricity production, reducing both the environmental impact and prices for end consumers”, he stressed.
 
Regarding the concerns expressed by Cypriot firms on the availability of finance, Lakkotrypis noted that the Government is doing its best to support entrepreneurs, adding that his Ministry is operating support schemes that for the 2014-2020 period add up to almost 100 million euro.
 
Moreover he said that the Government is moving ahead with setting up a Technology Transfer Centre, intended to provide services to researchers for commercialising their research through the licensing of existing or newly established companies and that the income tax law regime has been reviewed, with an eye to providing tax incentives to innovative SMEs and start-ups in Cyprus.
 
“The Government’s intention is to facilitate and promote the creation of alternative financing mechanisms like crowd funding, venture capitals and business angels, in order to meet the financial needs of innovative enterprises, especially in the tech industry. Our goal, to transform investments made in research into competitiveness and, ultimately, real value for the economy”, the Minister stressed.
 
He also noted that Cyprus and the EIB have been working closely together for more than 35 years, with the Bank’s total funding in Cyprus adding up to 4 billion euro and involving more than 50 public sector and 500 private sector investments, while between 2014 to 2019, EIB funding reached 1.5 billion euro, through a series of targeted financial instruments.