Download - Sapienta economicscypruseconomywista 130919
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The Cyprus economy six months on: Turning the corner or worse to come?
By Fiona Mullen
Director, Sapienta Economics Ltd
Partner, Strata Insight energy advisory [email protected]
www.sapientaeconomics.com
www.stratainsight.com
+357 99 338 224
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First, the bad news…
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Bank of Cyprus still vulnerable
-18,000
-16,000
-14,000
-12,000
-10,000
-8,000
-6,000
-4,000
-2,000
0
2,000
Jan-12 Jul-13 of which BOC estimate
1,304
-16,541
-9,000
Funding gap (deposits minus loans, EUR bn)
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GDP worst since 1974 (-16% & -19%)
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
2011 2012 2013 2014 2015 2016
Real GDP growth forecasts (% change)
European Commission, Sep 2013 Sapienta Economics, Aug 2013
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Debt more than doubles (x2.5)
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
128.4
48.9
126.9
Debt/GDP ratio (%)
Sapienta Economics, Aug 13 European Commission, Sep 2013
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Unprecedented unemployment
0.0
5.0
10.0
15.0
20.0
25.0
30.0
2001 2003 2005* 2007 2009 2011 2013 2015 2017
4.7
17.2
25.1
Unemployment rate % (break in series 2005)
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The lost generation
0
5
10
15
20
25
30
35
40
2012 Q1 2013 Q1
26.7
37.5
Youth unemployment (% of 15-25s)
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Gas export date too optimistic?
• Government expects first gas exports: 2020
• Sapienta expects first gas exports: 2028
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But there is some better news…
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Five surprises on the upside
• Budget deficit
• Pace of GDP decline
• Capital flight
• Liquidity stress in the banking system
• Exports of goods (also shipping?)
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H1 budget deficit cut in half
-450
-400
-350
-300
-250
-200
-150
-100
-50
0
2012 H1 2013 H1
-440.8
-202.9
Budget deficit, Jan-Jun (EUR m)
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GDP decline less than feared
• Real GDP declined -5.3% in first half of 2013
• Troika says -8.7% whole year
• Means -12% in H2!
• Q3 wasn’t that much worse than Q2
• So mathematically nigh impossible
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My forecasts have been improving
-15.0
-6.1
-16.0
-14.0
-12.0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
2011 2012 2013 2014 2015 2016
Sapienta Real GDP growth forecasts (real % change)
Apr
May
Jun
Jul
Aug
Sep?
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Capital flight (ex haircuts) is easing
-3,752
-956
-4,000
-3,500
-3,000
-2,500
-2,000
-1,500
-1,000
-500
0
Jan-13 Feb Mar Apr May Jun Jul
Drop in deposits (net of haircuts) EUR m
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ELA is falling
11,400
9,850
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13
Emergency Liquidity Assistance (EUR m)
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Exports of goods are booming
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2
Nominal growth in exports of goods y/y % change
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Shipping up?
• Turnover up 54% y/y in Q1
• But only 3% y/y in Q2
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Turning the corner or worse to come?
• Positive view:
• Unemp. rise = few barriers to adjustment
• Traditionally resilient economy?
• Negative view:
• The worst is yet to come?
• Ireland took 9 quarters to reach bottom
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Now for the shameless plug…
• You need
• Sapienta Economics for :
Macroeconomy, fiscal, political stability
• Strata Insight for:
Hard to get info on govt’s energy policy
What’s going on behind the news
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Thank you for listening
Fiona Mullen
Director, Sapienta Economics Ltd
Partner, Strata Insight energy advisory [email protected]
www.sapientaeconomics.com
www.stratainsight.com
+357 99 338 224