Financial Analysis on Cyprus 2012

Cyprus: Together they can prosper.

With access to bank accounts still restricted and financial control measurements in place, Cypriots are stockpiling their money. The grim reality is that, due to the collapse of their financial industry, GDP will contract by 8.7% and with further contractions estimated at 3.9% for 2014 (projected by the EU Commission). (https://mninews.marketnews.com/index.php/eu-commission-slashes-cyprus-2013-gdp-forecast-87?q=content/eu-commission-slashes-cyprus-2013-gdp-forecast-87) Furthermore, Cypriot Finance Minister Harris Georgiades announced more worrying projections: “GDP fall could be double digits.” (http://www.eubusiness.com/news-eu/cyprus-economy-gdp.oos)

As many countries are suffering right now in the European Union (EU), there is light at the end of the tunnel for Cyprus. Unlike other EU countries, Cyprus has two potential growth sources which can be exploited. One is a significant gas discovery of Aphrodite gas field off the coast of Cyprus. Depending on logistics, it is reported by Morgan Stanley that the estimated worth of the discovery somewhere from 5 to 32 billion Euros (http://hellenicleaders.com/wp-content/uploads/2013/05/Memo-Cyprus-Natural-Gas-HALC-.pdf). The other source is its tourism industry, which is not optimized fully; there is still much room for foreign investment. An interesting perspective on this matter is the ban on gambling in Turkey. Wealthy Turks gambling in Cyprus is where the real influx of Turkish money comes from (http://www.presseurop.eu/en/content/article/306381-gambling-behind-green-line), however, there is still room for future investments.

The logistics of the gas field is more important than one would assume at first sight. The politics involved with this are tricky, to say the least, but the role of Turkey will be crucial. Turkish-Cypriots are laying a sizeable claim on the gas field, because of the costs involved transporting it; the cheapest way to do this would be through a pipeline...