Cyprus outlines reforms to boost capital markets & investor trust

Cyprus is striving to position itself as a credible, stable, and forward-looking economic partner within the region and the European Union, government officials affirmed at Bloomberg’s ‘Future of Markets’ forum in Limassol.

The event, hosted by Bloomberg’s European Director Constantin Cotzias, brought together government officials, regulators, investors, and economists to examine Cyprus’ economic outlook and the critical role of capital markets.

Opening the conference, Deputy Minister to the President Irene Piki said Cyprus is entering “a new era of transparency, credibility, and strategic reform.”

Piki highlighted strong macroeconomic indicators for the country, including GDP growth of 3.4 per cent in 2024 and 3 per cent in the first quarter of 2025, unemployment below 5 per cent, and a fiscal surplus of over 4 per cent in 2024, expected to reach 3.5 per cent in 2025.

She said “prudent fiscal policy” has helped reduce public debt to below 65 per cent of GDP, with a target of under 60 per cent by next year.

“These fundamentals have strengthened investor confidence and brought renewed recognition,” she said, noting that all major credit rating agencies had upgraded Cyprus to the A category.

Furthermore, Piki laid out five reform pillars shaping Cyprus’ economic transformation. These include modernising governance, tax reform, business facilitation, unlocking capital for SMEs, and boosting Cyprus’ international profile.

She said that Cyprus is proceeding with the privatisation of the Cyprus Stock Exchange, with legislation already tabled in Parliament and a strategic investor to be selected through an international tender.

The deputy minister said the government is also finalising legislation for limited partnerships and a Funds Administrators Law, while a National Development Organisation is being established to support SMEs and green and digital investments.

Piki said that Cyprus’ “Minds in Cyprus” campaign is aimed at encouraging skilled Cypriots abroad to return home, while president Christodoulides’ recent roadshow in the US served to present Cyprus as an emerging tech and innovation hub.

Irene Piki, Deputy Minister to the President, speaking at the event

She further stated that “Cyprus is changing” and invited the international community to be part of its long-term economic strategy.

Foreign Minister Constantinos Kombos also addressed the forum, stressing that Cyprus can act as “a bridge between the EU and the neighbouring region.”

He pointed to the country’s political stability, common law system, and vibrant services and maritime sectors as strategic advantages.

“Cyprus is a regional voice of reason in a neighbourhood full of angry voices,” he said.

He also struck a note of pragmatism, saying that diplomacy entails “no friendships, only interests“.

“We must project common benefits,” he said, while highlighting the link between foreign direct investment and political stability.

Kombos also cited Cyprus’ geopolitical resilience, saying that evacuation plans had been activated four times recently due to regional crises, calling this “a proof of concept”, in the context of the country’s ability to play a vital role in such matters.

He said Cyprus had preserved a credible diplomatic position on Syria, and underlined the close relations cultivated with countries such as Israel, Egypt, the UAE, the US, and India.

On the European front, he referenced Cyprus’ involvement in the India-Middle East-Europe Economic Corridor (IMEC), efforts to shape the EU’s Capital Markets Union, and pending free trade agreements with Gulf countries and India at EU level.

On his part, CySEC chairman George Theocharides provided a regulatory perspective, citing the steady evolution of Cyprus’ financial ecosystem.

He said “we collaborate closely with ESMA,” the EU financial markets regulator, and highlighted his personal involvement.

Theocharides identified several key risks, including investor protection, climate change, and financial stability in the context of crypto-assets.

What is more, he emphasised that “European savings should be used to finance Europe’s agenda” rather than lying idle or flowing to US markets.

Theocharides also underlined that crypto regulation in Europe, through the MiCA framework, is a step in the right direction, despite challenges in implementation.

“We have been preparing for the past few years,” he said, referencing the regulatory registry and the broader implications for financial stability beyond anti-money laundering.

On the subject of Cyprus’ ambitions to become a financial centre, Theocharides said “we have a thriving online trading and brokerage sector, and we want to continue building on this”.

The event also featured a panel discussion moderated by Bloomberg’s Viktoria Dendrinou. It brought together Fiona Mullen, Director of Sapienta Economics, Alex Kantarovich, Head of Research at Roemer Capital, and Ioannis Petri, Founder of Athlos Capital.

Mullen said Cyprus had demonstrated economic resilience but mentioned that her own GDP growth estimates were slightly more conservative than the government’s own evaluations.

She added “Cyprus benefits in the short term from regional turmoil,” due to its position as a transit point or relocation destination, but said energy and education infrastructure needed improvements.

She called for more boarding schools and emphasised the importance of the Cyprus-Greece-Israel interconnector project to secure energy reliability.

Mullen also explained that Cyprus’ reputation is hard to reshape, despite robust efforts to improve its anti-money laundering framework.

Petri commented on sovereign bonds, saying “Cyprus is trading flat to Austria,” while “Greece is trading flat to France,” signalling that both countries are no longer considered risky outliers in the eurozone.

He said Cyprus’ sovereign bonds will always reflect some geopolitical risk due to geography, but added “if we continue on the macro side doing well, we should be on a good trajectory.”

Petri also identified the EU’s proposed Savings and Investment Union as a key opportunity for Cyprus, especially in connecting savings to productive investments across Europe.

Kantarovich highlighted barriers to entry in capital markets and said Cyprus should take steps to lower them.

He welcomed the move to privatise the Cyprus Stock Exchange but suggested that involving more than one strategic investor would yield better results.

“Having just one strategic investor would be a bit limiting,” he explained.

Finally, Mullen mentioned that the real estate, ICT, and energy sectors remain key areas of investor interest, though progress in natural gas exploration has been slower than expected.