Forging a New Relationship - Malta and Cyprus

Last week, Exante’s Patrick J O’ Brien met with Minister of Foreign Affairs of the Cypriot Republic, Mr Ioannis Kasoulides and Cypriot Finance Minister Harris Georgiades at The Presidential Palace in Cyprus to discuss the strong ties between Malta and Cyprus as its nation heralds a new economic dawn.

Like Malta, Cyprus's economy relies heavily on the financial services sector. Just four years after a €10 billion bailout the country is back in business, with expectations that its economy is to grow between 2.5 percent and 3 percent this year with renewed confidence in the banking sector helping further this growth.

Finance Minister Harris Georgiades confirmed that the Cypriot economy had rebounded strongly making up lost ground adding that Public finances ended last year with a slight fiscal surplus of 0.1 percent of GDP. Both Ministers said authorities are confident the economy is on an upward trajectory despite risks, adding it's in the hands of Cypriots to avoid past mistakes that brought Cyprus to the brink of financial ruin.

Acknowledging Malta’s resilient financial sector both Ministers expressed a wish to strengthen the already excellent and long-established friendly relations between the two fellow Mediterranean islands stating that it was a time for dual collaboration. Last year saw a hive of meetings between Ministers of the two Islands as discussions centred on Malta’s Presidency of the Council of the EU, Mediterranean regional issues such as the Middle East, the situations in Syria and that in Libya, as well as energy.

Forging a New Relationship - Malta and Cyprus

Exante’s Communication Director interviewing Minister of Foreign Affairs of The Cypriot Republic, Mr Ioannis Kasoulides

Noting that the economy in 2018 will outperform the targets, Georgiades said however that "one needs to be more cautious in the medium term,” due to downside risks. Issues, he stated, that Malta also needs to be mindful of. He noted that high public debt leaves little room to the government to proceed with more growth-friendly actions, such as a tax reforms.

Echoing the Finance Minister points, Ksoudlides pointed out external downside risks, such as Brexit, elections in major EU countries in 2017, a possible economic shift in the US following the election of Donald Trump, as well as upside factors such as future natural gas monetization and the solution of the Cyprus problem. It was clear this downside risks could include a possible economic slowdown in the UK and depreciation of the pound sterling post-Brexit, causing a potential economic decline in the Eurozone.

The Finance Minister pointed out that economic recovery in Cyprus took place on the backdrop of a favourable external environment such as high tourist sector performance due to regional volatility and an accommodating monetary policy by the ECB, while he described a possible solution to the Cyprus problem as a "step into the unknown.” This March delegations from Cyprus will visit Malta to meet with their Maltese counterparts to discuss the current political climate in the EU.