[CYPRUS TIMES] Which sectors in Cyprus may be affected by the Ukrainian crisis

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Which sectors in Cyprus may be affected by the Ukrainian crisis - Need to be alert to the impact on the economy due to Ukraine, say academics and economic players

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As the international community watches with bated breath the developments surrounding the Ukrainian crisis, concerns in Cyprus are intensifying as the country's open economy is not expected to be unaffected should the crisis worsen.

Tourism, business, banking sector and grain prices are the main sectors likely to be affected, according to assessments by academics and economic actors who spoke to CNA. At the same time, the need for Cyprus to be vigilant is noted,[/B] in order to avoid maximising any impact.

Andreas Milidonis, Associate Professor of Finance at the University of Cyprus, told CNA that the Central Bank of Cyprus should be alert to any impact on Cyprus' banking sector, those banks that have a large exposure either directly or indirectly to Russia in deposits, loans or other business operations that would be affected by the worst-case scenario.

He added that Cyprus would be well advised to be vigilant regarding any sanctions being discussed towards Russia by the EU, the US and the UK. In particular, he said, if the US implements the worst-case scenario already being discussed, which is to cut off Russian banks from the "swift" system for transferring money internationally.

"Logically, our Ministry of Finance and the Central Bank should be on alert at this moment to handle any adverse consequences that may occur to the Cypriot economy, either through banks, tourism or business, from possible sanctions on Russia, especially from the EU and America," he said.

At the same time, he referred to the possible economic impact on the occupied territories which are directly affected by the Turkish economy.

"The economy of the occupied territories is affected through the Turkish lira which is currently supported by foreign currency, the inflow of which is expected to decrease through the expected decrease in tourists from Russia and Ukraine."

He said in 2021, one in four tourists in Turkey were from Russia and Ukraine and about one in six dollars in tourism revenue coming into the country was again from Russian and Ukrainian tourists.

He added that inflation in Turkey is expected to be affected by the increase in the price of energy which will negatively affect the Turkish lira.

Director General of the Federation of Employers and Industrialists (OEB) Michalis Antoniou told CNA that the biggest concerns are focused on the tourism and grain sectors.

With regard to tourism, he said that it is known that Russia is the second largest tourist market for Cyprus and a possible conflict would affect the willingness of Russian or Ukrainian tourists to visit Cyprus. The OEB, he said, is anxiously following the developments and the efforts being made by both the Deputy Ministry of Tourism and tour operators to secure tourists from alternative markets. However, he said, things are marginal as summer is approaching. With regard to grain prices, he said that because these countries are large markets, it is not known how much the price will shoot up and whether the supply will be affected. Finally, he hoped that there will be nothing serious or that it will be manageable in terms of the impact on Cyprus.

The risk of a significant increase in grain prices was mentioned by the President of Panagrotikos Kyriakos Kailas. He told CNA that when there are shortages in grain production, as happened last year, the EU gives permission for imports from third countries such as Russia and Ukraine that produce large quantities of grain. Any conflict or EU sanctions would affect imports from these countries and lead to an increase in international grain prices, which he said are already high. He noted that Cyprus produces 40 per cent of its grain needs and imports the remaining 60 per cent, mainly from Romania and Bulgaria. However, as he said, in case of generalised shortages from these countries, the next markets to be opened would be Russia and Ukraine.

At the same time, he expressed the view that no particular shortages will be observed in Cyprus in terms of grain, since this year will be a good year and after two months domestic grain can be utilised. This, he said, would ensure a sufficiency at least for the four months to come.

Source: CNA

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