Cyprus will be affected by inflationary pressures and higher energy costs due to its dependence on oil imports for electricity generation, according to European Central Bank President Christine Lagarde.
Lagarde also stressed that the tourism sector in Cyprus will see a decrease in the number of visitors from Russia and Ukraine, which accounted for 27% and 5% of total arrivals in 2021 respectively. Moreover, she said, given the importance of Cyprus as a hub for foreign direct investment to and from Russia, professional services such as accounting, consulting and legal services are expected to be affected.
“I recognize that Cyprus, like all of Europe, is now facing growing uncertainty,” she stated.
However, the head of the ECB, in her speech at an event organized by the Central Bank of Cyprus, noted that the fundamental growth of the Cypriot economy has strengthened in recent years thanks to the hard work done after the banking crisis in 2013.
In particular, nonperforming loans have fallen from about 50% of total loans in 2014 to single digits at the end of last year. Overall, the banking sector is highly capitalized and liquidity and exposures in Russia are limited.