Cyprus: Important Economic Links With Russia Increase Risk
The introduction of sanctions and counter sanctions due to Russia's invasion of Ukraine has increased the downside risks to otherwise strong medium term economic prospects for Cyprus. DBRS Morningstar takes the view that the main transmission channels for Cyprus are through tourism revenues and higher energy prices. The tourism exports to Russia, which is a key source market for Cyprus, are set to take a hit in 2022. That said, DBRS Morningstar takes the view that the economic benefits from an improving pandemic situation in Europe and the stimulus provided by EU funds will mitigate the risks and continue to underpin Cyprus's economic recovery.Key Highlights include:
• Russia's invasion has increased the downside risks to Cyprus's economic prospects.
• Inbound tourism flows from Russia will be severely affected this year.
• The overall impact will remain contingent on the duration and depth of the crisis.
“Russia's invasion of Ukraine has increased the downside risks to otherwise strong medium term economic prospects for Cyprus,” said Javier Rouillet, Vice President at DBRS Morningstar. “While Cyprus stands to lose important revenues as long as the airspace closure remains in place, the Cypriot recovery will continue to benefit from an improving pandemic situation in Europe and the stimulus provided by EU funds, helping to mitigate the impact.”
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