News: Cyprus economy stable and 'growing'

Wed, 23 May 07

The Cypriot Central Bank has kept interest rates low by announcing it is holding the base rate at 4.5 per cent...

Like Britain, the Cypriot central bank has its interest rate policy decided by a monetary policy committee (MPC), which has decided to maintain the 75 point differential between the
Cyprus pound and key Euro refinancing rates, the Financial Mirror reports.

The MPC has been able to take such a decision because the economy is doing well - better, in terms of the balance of growth and inflation - than Britain.

The paper notes that the economy is growing well, inflation is down to 1.77 per cent from 2.96 per cent in April last year and the level of convergence with Eurozone countries is high, ahead of the locking of the Cyprus pound with the Euro in July.

Stabililty offers investors ‘freedom’

All of this should encourage investors in property in the country. The stability of the country in economic terms offers investors freedom from the fear of volatile conditions leading to interest rate surges or sudden collapses in markets.

Above all, economic growth indicates that jobs and money are in good supply, a necessary catalyst to the growth of buy-to-let in both the domestic and tourist markets as the locals get wealthier and more immigrants are attracted from overseas, not least the growing number of ex-pat Britons.

A key point of interest for long-term investors is the economic stability anticipated by membership of the Eurozone. Like its fellow Mediterranean island Malta, Cyprus is due to join on January 1st 2008. From then interest rates will be set in Frankfurt rather than Nicosia.

Hurdles still to clear

Both island nations took a major step towards confirming this step last week when both the European Commission and European Central Bank accepted their proposals to join the existing 13 Eurozone countries. The only hurdles left to clear are approval by the Council of Ministers and Council of Finance Ministers.

Eurozone membership should not just confirm Cyprus as a country in the European mainstream, notwithstanding the ongoing issues over the Greek /Turkish divisions. It should also underpin the stability the country enjoys, enabling investors to make decisions securely in the expectation that the benign and favourable economic conditions the country currently enjoys will continue.

Just this week Homesgofast reported that foreign exchange company Moneycorp announced that it was setting up a new office in Cyprus. Homesgofast had no hesitation in describing this as a clear vote of confidence in a growing market. One might add that there could be more confidence still when currencies are being changed into Euros in that office

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