OEB and CCCI weigh in on Cyprus' investment prospects in 2025

The Secretary General of the CCCI, Philokypros Roussounides, expects steadily rising growth rates for Cyprus in 2025, while the Director General of OEB, Michael Antoniou, says fluid conditions in the global economy make anticipating the course of the Cypriot economy risky at this stage, while also noting, however, that Cyprus has proven that it has the resilience and, above all, the adaptability to cope.

"We are trying to understand the implications of the US decisions," said Antoniou (pictured above left), who also noted that Cyprus' macroeconomic conditions create a basis for optimism.

On his part, Philokypros Roussounides (pictured above right) described the tax reform as a very important issue and emphasised that "it should not create other side effects or negative impacts on our attractiveness as an investment destination and on domestic businesses."

The two employers' organisations' representatives spoke to InBusinessNews about, among other things, the prospects of the Cypriot economy and businesses, attracting foreign investment to Cyprus and tax reform.

Fluid data and the US factor

At this stage, making estimates on the course of the Cypriot economy in 2025 are risky, however, Cyprus has proven that it has the strength and, above all, the adaptability to cope, Cyprus Employers and Industrialists Federation (OEB) Director General Michael Antoniou told InBusinessNews. He went on to explain that the new year began with fluid conditions in the global economy, with geostrategic and geopolitical developments which are once again leading to uncharted waters.

"We are trying to understand the implications of the US decisions, not only on the tariffs but also on taxes," Antoniou said, noting that decisions are imminent in April on purely tax issues, in addition to tariffs, which may affect Cyprus directly, but mainly indirectly, in a new scenario of global trade, "which we again need to understand, see the ways in which it affects us and reposition ourselves within an environment which, along with the risks it brings, always offers opportunities."

"We have all the ingredients to be optimistic"

According to Antoniou, Cyprus' macroeconomic conditions create a basis for optimism. "National debt has decreased greatly as a percentage of GDP, we have continuous production of primary surpluses, one of the historically lowest unemployment rates and one of the historically high employment rates, and inflation that is within the ECB's targets, so we have all the ingredients to be optimistic about the course, but a lot of caution is needed," he pointed out.

Increase in spending based on the economy

Regarding state spending, the position of the OEB is clear and is that an institutionalised mechanism must be found which will bind the partners, but mainly the powers - the executive and the legislative - over time, so that any increases in spending are in line with the returns of the economy, in such a way that does not create corrosive threats to the foundations of the health of the economic structure.

OEB was referring to fixed and inelastic government expenditures, the main ones being the state payroll and social expenditures.

"For both, but especially for the state payroll, we must agree on the formula by which some cuts will be introduced, namely an upper limit, that whenever the state payroll increases, the rate of increase will not create risks for the real economy," Antoniou, who referred specifically to the Federation's proposal, explained.

"This is the 2014 agreement between the Ministry of Finance and (Pancyprian Public Servants Trade Union) PASYDY," he explained, "which provides that the rate of increase in the state payroll, which includes general increases, salary scale increases, the Cost of Living Allowance (CoLA) and new hires, will never exceed the rate of increase in the Cypriot GDP."

A similar formula, he added, can be found for the state's social spending.

Private sector

In the private sector, the two constants that have to do with the rate of increase in spending are the revision of the national minimum wage and CoLA.

"We must agree on formulas that do not threaten the economy, when they are applied. And we have seen that in addition to inflation, we must monitor the GDP growth rate, the fluctuations in national productivity and the way the unemployment rate changes," he explained on the subject.

Foreigner investors are monitoring the tax system

Regarding the development aspect, Antoniou underlined that Cyprus must constantly renew and adapt its attractiveness as an investment destination, citing as an example tax issues and more broadly the incentives that a jurisdiction such as Cyprus can offer to attract capital, with a real presence and activities on the island.

"There has been good activity in recent years from substantial investments that add value to the country, in cutting-edge technologies, but also in many other fields of economic activity," he said.

"Internationally, they are awaiting on our decisions on the issue of tax reform, which the OEB says must be completed quickly, because it is creating a slight numbness among investors, who want to know what the final scenario will be," he said, adding that, "although all discussions are taking place with the aim of making the tax system even more attractive, investors want to be sure before proceeding with their investments."

Antoniou noted that Cyprus has many advantages, which are convincing and create an increased presence of investment activities in our country, as a result of which the necessary infrastructures, mainly for housing, foreign language schools and traffic infrastructures, have not had the time to be developed at the same pace. There are also needs for office space, however, they are not as pressing.

Communication channel with the government

Asked about OEB’s degree of satisfaction with the government's actions to assist business and the economy in general, the OEB Director General noted that the Federation "has an open channel of communication with the government and there is a two-way flow of information and submission of specific and costed proposals for the tax and compensatory measures of the green transition, which is a huge challenge.

We are talking about investments of €21 billion by 2030, of which €16 billion will come from the private sector and the remaining €5 billion from the public sector."

Explaining that it is extremely difficult to achieve the goals if no action is taken, Antoniou added that OEB is in open communication and cooperation with the government staff towards achieving the goals.

Growth rates steadily rising

It seems that Cyprus will move at steadily upward growth rates, higher than the EU average, the Secretary General of the CCCI, Philokypros Roussounides told InBusinessNews on his part, adding that the above, in conjunction with the upgrades of the economy by international rating agencies, enhance the country's investment attractiveness, while due to its reliability, it will be able to borrow at lower interest rates.

In fact, as he noted, based on the above and with an attractive investment programme, which, as he said, should be reviewed, Cyprus may be able to move even higher than the calculated growth indicators.

Philokypros Roussounides described the tax reform as a very important issue and emphasised that "it should not create other side effects or negative impacts on our attractiveness as an investment destination and on local businesses."

Granting loans to businesses

The Secretary General of the CCCI requested more flexibility from banks, regarding the various parametres they examine for granting loans to businesses, underlining that the procedures "should be carried out more quickly, flexibly and with fewer obstacles and bureaucracy, a practice that can also be considered a repellent factor for domestic or foreign investors."

"Unfortunately, there have been many such examples recently," he noted.

Tax reform

Regarding the promoted tax reform of Cyprus, he pointed out that "we should be extremely careful, frugal and detailed in our country's tax reform, so that it remains attractive and provides incentives to domestic businesses, in addition to foreign ones."

At the same time, welcoming the recent announcements of the President of the Republic, he clarified that the situation should be reassessed at regular intervals, so that the necessary improvements can be made where and when needed.

(Source: InBusinessNews)