CEOs in Cyprus optimistic about growth, Greece remains top trade partner

CEOs in Cyprus are, like their global counterparts, optimistic about global economic growth and their firms' prospects over the next year. Their renewed optimism contrasts with the economic uncertainty and CEO pessimism of past years.

After being economically devastated by the Eurozone crisis and being bailed out by the EU and IMF to the tune of €10 billion, Cyprus has significantly strengthened its economy since and returned to growth. Positive data from credit rating agencies is confirming that Cyprus is once again on a path to prosperity. Amid the resurgence of the Cypriot economy, CEOs from the country are now optimistic about the economic growth of their organisations, as well as global growth prospects.

In the seventh annual survey of Cyprus CEOs (and the 21st global survey) by PwC, the professional services firm reports that 52% of Cyprus CEOs responded that global economic growth will improve over the next 12 months. Though their optimism is slightly more guarded than that of wider Eurozone respondents (57%) and the global average (63%), the figure reflects a much more optimistic outlook than last year. In 2017, only 36% of Cyprus CEOs were optimistic about global growth, mirroring wider pessimism in the wider pool of respondents. 2018’s optimism is also a stark contrast to 2013, when the Eurozone crisis and the lingering effects of the US financial crisis had created a dour economic environment and outlook: in 2013, no CEO group had more than 18% expecting global economic growth over the following year.

CEO optimism is even stronger in regards to their own company’s fortunes. The surveyed company leaders are very confident about their firm's prospects for growth over the next 12 months, with 85% of Cypriot respondents saying that they are very or somewhat confident about their firm's prospects for revenue growth over the next year. Eurozone and global respondents were slightly more optimistic, at 86% and 88%, respectively. The three groups of CEOs showed similar levels of company optimism in 2017 and 2016, with figures all over 80%.

Cyprus’s Chief Executive Officers were pessimistic in 2013, caught as they were in the environment of bank bailouts and the economic crisis. The 2013 figure of 40% crashed lower to 32% in 2014, before rising to 63% in 2015 as the effects of the crisis began to fade and the period of economic recovery started. CEO outlook, be it pessimistic or optimistic, will generally be linked to wider domestic and international economic forecasts, though their opinion can nonetheless be affected by their own firm-specific dysfunctions or strengths. In any case, booming capital markets and forecasts of GDP increases have caused CEOs to be generally optimistic about the coming year.“The global economy is finally beginning to look healthy, ten years after the start of the last financial crisis that we suffered,” remarked Hermes Airports CEO Eleni Kaloyirou. “This year, for the first time, we are seeing that all economies, both emerging and developing, are forecasted to grow. Of course, some will grow faster than others.”

Organic growth is regarded as the main driver of corporate growth, followed by the formation of strategic alliances / partnerships and cost reduction. Interestingly, Cypriot executives indicate M&A as a means for expansion is low on their agenda, at 18%, compared to 42% globally.

Growing confidence in global growth means that many CEOs are looking to foreign markets as a source of skills and consumers, and as places to expand their firms and drive short-term growth. For Cyprus’s CEOs, Greece remains the most important country for their overall growth prospects. The CEOs do not appear to be too worried about Brexit, as the UK came in a close second at 52% – a significant increase over last year’s figure of 19%. Russia came in third with 34% of respondents, followed by Germany with 21%. Cyprus’s top partners, as such, are linked strongly to countries with which it has long-standing historical and economic ties.

While the US and China are the top picks for global CEOs in terms of importance to their firm’s growth prospects, they are less important in Cyprus, where only 10% of CEOs picked them. Cypriot CEOs have cooled on China in the past three years, with the percentage of CEOs highlighting the destination down from 20% in 2016 to 12% in 2017. Meanwhile, Chinese businesses have been increasing investment in Cyprus over the past years, investing heavily in the tourist and hotel industries of the island nation.

CEO concerns

In terms of what economic, policy, social, and environmental threats worry CEOs in Cyprus, the most important threat reported is the future of the Eurozone, with 79% reporting that they see it as a threat to their organisation’s growth – 10% higher than the overall rate of concern for Eurozone CEOs (69%). Tied for second are the threats of geopolitical uncertainty and over-regulation, at 78%, while tax burden is reported as a threat to organisational growth by 70% of Cyprus CEOs. Terrorism, a top-five concern globally at 77%, is slightly less worrisome to Cyprus CEOs, ranking sixth at 67%.

In regards to business threats, CEOs seem most worried about the rapid pace of technological innovation and how it may leave their organisations behind. Specifically, 67% of Cyprus CEOs are concerned that the speed of technological change is a threat to their firm’s growth prospects. Close behind in second place are cyber threats, at 66%, while the availability of key skills rounds out the top three with 64%. In comparison, 80% of global CEOs see the availability of key skills and cyber threats as the two most important threats, with speed of technological change coming in second at 76%.

In a similar study by PwC’s Hungarian division, the Big Four firm found that despite major challenges such as labour shortage and over-regulation, Hungarian CEOs are expecting growth, with optimism markedly higher than the dour outlook from the year previous.

Related: Investors and CEOs upbeat about growth but anxious about cyber threats (PwC’s Global CEO Survey 2018).