THE CYPRUS ECONOMY CHARTBOOK June Bank of Cyprus Economic Research

Transcription

1 THE CYPRUS ECONOMY CHARTBOOK June 2018 Bank of Cyprus Economic Research

2 Table of contents Economic activity 3 GDP by expenditures 4 Consumer prices 5 Labour market 6 Industry 7 Construction 8 Tourism 9 Property prices 10 Retail sales and car registrations 11 Public finances 12 Banking sector: funding 13 Banking sector: non-performing exposures 14 Current account 15 2

3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1 15Q2 15Q3 15Q4 16Q1 16Q2 16Q3 16Q4 17Q1 17Q2 17Q3 17Q4 18Q1 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1 15Q2 15Q3 15Q4 16Q1 16Q2 16Q3 16Q4 17Q1 17Q2 17Q3 17Q4 18Q1 Economic activity continued to rise strongly in Q , ,0 Real GDP increased by 4% y-o-y seasonally adjusted in Q1 2018, following a yearly increase of 3,9% in 2017 Real GDP growth quarterly and annualised 3,4 3,6 3,9 3,9 On an annualised basis, real GDP in Q was almost at the same level as at the peak before the crisis ,0 96, ,0 10 Real GDP Index annualised: 2011Q2=100 (RHS) 89,7 90,3 91,5 92,9 94,6 96,4 99,3 98,3-9,0 86,0 Real GDP annualised % change y-o-y Real GDP Quarterly % change y-o-y 8 In terms of the supply side the drivers to growth in Q were construction and services 4,4 3,9 3,4 2,9 2,4 1,9 1,4 0,9 0,4 3,40 1,50 1,10 0,38 3,87 1,07 1,24 1,11 4,23 1,57 1,41 0,82 0,46 0,43 0, Y 2017Y 2018Q1 Sources: Cyprus Statistical Service; Bank of Cyprus Economic Research 1,0 Contribution to real GVA by economic sector Other services Tour, trade, transp. Construction Industry Agriculture Total GVA... mainly tourism, trade and transport ; professional services and public, education and health. 3,3 2,8 2,3 1,8 1,3 0,8 0,3-0,3 2,60 0,17 0,44 0,44 0,60 0,40 0,10 0,17 0,40 0,11 1,10 2,31 8 1,24 2,98 0,19 0,50 0,55 0,33 8 1,41-0, Y 2017Y 2018Q1 2,8 1,8 0,8-0,2-1,2-2,2 Contribution to real GVA by the services sectors Arts and other services Public, edu. & health Professional & admin. Real estate Financial Information Tourism, trade, transp. Total services 3

4 On the expenditure side real GDP growth was driven by exports, private consumption and fixed investment excluding transport, in Q On the unadjusted figures net exports made a significant growth contribution which was mostly due to transport equipment (ships and aircraft) registering outflows Conttibution to growth of real GDP by category of expenditure 3,9 3, Contribution to real GDP growth by category of expenditure excluding transportation equipment from fixed investment and imports 3,4 3, ,4 2,5 2,2 0,5-1,3-2,7-2,6 1 2,2 2,6 3,7 4,9 5,1 1,7 0,4 0,7 1,8 2,3 2,9 2,6-0,2 - -4,6-4,4-6,7-11, , ,4 2,5 2,2 0,5-1,1-4,2 1 2,2 3,7 0,1 4,1 2,6 1,6 0,9 0,4 1,8 2,3 2,9 2,6-0,2 - -3,7-5, ,0-1 -8, ,9-8,0-1 -2, Q1 Priv. consumption Gov. consumption Fixed investment Inventories Exports Imports GDP % change (RHS) Q1 Priv. consumption Gov. consumption Fixed investment Inventories Exports Imports GDP % ch. (RHS) -1 Sources: Cyprus Statistical Service; Bank of Cyprus Economic Research 4

5 2008M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M Consumer inflation remains tepid Consumer prices started to rise in 2017 but dropped again in the early months of ,0 6,0 1, Consumer Price Index: % changes year-on-year with a spike in May driven by prices in the food, housing and transport categories 1, ,4 3,3 2,4-0,4-1,4 CPI % change y-o-y -2,1-1,4 0,5-0,7-0,3-0,5 1,3 Monthly Index 3-month moving averages 12-month moving averages 0,9 0,4-0,6-1,1-1,6 In the period Jan-May on average, inflation was driven higher mainly by transport costs, in turn driven by energy prices Contribution to consumer inflation by ctegory (percentage points) 0,4 0,3-0,6-0,3 0,1 0,2 0,2 0,7 0,6 0,2-0,2 0,1 0,1-0,6-0,7-0,8-1,2-0,2-0,2-0,7-0,2-0,3-0,8 8,00 6, In the Eurozone Cyprus harmonised inflation remains low amongst a peer group HICP Index monthly: % change y-o-y -2, Jan-May '18 Food & Alcohol Housing Furnishings Transport Education & health Other Sources: Cyprus Statistical Service; Eurostat; Bank of Cyprus Economic Research EA-19 Greece Spain Italy Cyprus Portugal 5

6 In the labour market the unemployment rate continued to drop in 2017 and early 2018 amidst rising employment and participation rates The unemployment rate dropped to 10,3% in Q seasonally adjusted, and rose to 10,7% in Q not seasonally adjusted 2 18,0 16, ,0 6,0 Unemployment rate (%): Seasonally adjusted Vs not-seasonally adjusted 16,5 17,7 10,3 10, This increase in the unemployment rate was mainly due to the faster increase in the labour force relative to employment 4,7 17,0 7,5 17,6 17,4 12,3 10,5-1 4,6-20,1 0,7-2,3-4,5-2,8-1,7 Changes in 000s -6,8-11, ,1 11,4 7,4 6,8 3,5-0,5 1,3-7,8-7,9-8,0-18,0 Unemployment rate NSA (%) Unemployment rate SA (%) Q1 Employed Unemployed Labour force -28,0 The long term unemployment rate dropped sharply and the unemployment rate of the less than 6 months increased sharply 18,00 16, ,00 6, Unemployment rates by duration 5,36 6,26 1,28 0,56 1,05 1,39 3,76 3,60 7,86 1,63 1,73 4,49 11,80 3,55 2,70 5,55 15,87 16,09 6,07 3,45 6,35 2,92 2,68 5,50 5,43 5,10 4,97 Sources: Cyprus Statistical Service; Eurostat; Bank of Cyprus Economic Research 7,67 14,91 6, ,74 2,17 11,04 10,74 4,47 3, Q1 Less 6mo 6-11 months 12mo & over Total Unemployment rate 1,60 1,46 6,08 18,00 16, ,00 6, Employment is increasing along with the employment rate and the labour force participation rate 7 0,400 4 quarter mov. averages 0, ,2 63,8 0, ,3 61,7 0, ,358 0,360 55,3 5 52,9 0,340 5 Employed NSA, million persons Labour force participation rate % 0,320 Employment rate % 6

7 In industry the long recession from 2008 ended in early 2014 growth turned positive in 2015 and continues positive through to date The industrial production index increased by 8,7% in 2016 and continued to increase in Industrial Production Index and % changes y-o-y 64,9 5, , ,2 85 Total Industry 100=Oct 2008 of 12MMA (RHS) % ch. (Monthly) % ch. (12MMA) driven mainly by manufacturing activity and to a lesser extent by the water supply sector ,6 10,5 Manufacturing 2,3-6,4 Electricity supply Industrial production indices by main sector 4,2 3,1 3,1 2,3 2,8-7,8 Water Water supply Materials recovery Jan-Mar 9,7 6,2 General Index In manufacturing, activity was broadly distributed with few exceptions like paper products 5 Manufacturing index and subsectors 47,0 4 32,5 3 27,1 22,6 23,1 20,7 19,7 2 18,4 2 14,8 12,6 13,2 13,7 10,5 7,8 8,0 9,1 1 6,3 3,9 7,2 3,9-0,9-2, The various sectors of industrial activity had variable performances but all bottomed in early 2014 Index of Industrial production and main sub-sectors Total Industry Manufacture Electricity Water 2017 (yearly average) % change 2018 Jan-Mar % change Sources: Cyprus Statistical Service; Bank of Cyprus Economic Research 7

8 Q4 2007Q2 2007Q4 2008Q2 2008Q4 2009Q2 2009Q4 2010Q2 2010Q4 2011Q2 2011Q4 2012Q2 2012Q4 2013Q2 2013Q4 2014Q2 2014Q4 2015Q2 2015Q4 2016Q2 2016Q4 2017Q2 2017Q4 In the construction sector economic activity recovered robustly in 2017 The Production index in construction rose sharply in 2017 the index dropped to a low in Q on a 4Q moving average basis ,9 10 Production index in construction , ,2 50,5 4 36, Driven by steep increases in building activity in 2017 Construction sector production indicators (% changes y-o-y) 25,6 21,9 13,7 14,2 9,0 8,3 0,2-4,6-7,0-18,9-21,1-19,2-17,8-21,6-24,2-23,5-25,8-26, Production Index (2008Q3=100 of 4QMA) Production Index 4QMA (% change y-o-y) Production Index Building Index Civil engineering Output prices started to rise for building activity The volume of building permits is also rising steeply 8,0 6, ,0-8,0-1 7,0 Construction sector output prices (% changes y-o-y) 3,1 0,6 0,8-0,6-0,6-0,8-0,3-0,3-1,4-1,3-2,3-2,4-2,3-2,6-3,1-5,7-7, Building permits volume (area in squared metres) Index 100=2004M12 (12M Sums) (RHS) % change 12M sums (y-o-y) Output prices Building prices Civil enginnering % change monthly (y-o-y) Sources: Cyprus Statistical Service; Bank of Cyprus Economic Research 8

9 In Tourism, economic activity continued to expand sharply in Tourist arrivals continued to increase in 2018 up 14,5% in Jan-May. Receipts increased by 19,6% in Jan-Mar Tourist arrivals and receipts (% change year-on-year) 19,8 1 6,6 8,7-2,4 8,0 The distribution of arrivals has been shifting 6,2 9,2 9,6 12,5 11,7 24,8 22,4 20,6 5,8 5,2 19,7 24,5 22,6 17,1 4,2 1,5-2,8 8,9 20,8 23,6 3,9 5,2 6,0 42,7 39,2 36,3 34,3 34, Jan-May 4,4 4,6 14,6 14,5 11,9 11, Jan-May (Receipts Jan- Total arrivals (% change) Total receipts (% change) Mar) 6,7 19,6 Tourist arrivals in the period increased from all sources except from Russia where a small drop was recorded 2,5 1,5 1,0 0, Total receipts increased to 2,4 bn by 2016 or 13% of GDP...and to 2,7 billion in 2017 Estimate (14,2% of GDP) 8,0 1,5 9,9 1,9 52,2 14,6 15,6 14,5 15,3 11,0 8,3 9,6 5,5 5,9 11,5 11,5 11,9 2,1 2,1 Tourist arrivals by country: % change y-o-y 49,1 1 2,4-4,4 13,7 2,6 18, Jan-May 40,4 0,2 17,4 14,1 Total UK Germany Russia Greece Other Europe Total Europe NonEurope ,0 9,0 7,0 UK Germany Russia Greece Other Europe Non-Europe Tourist receipts in billion euro % of GDP (RHS) Sources: Cyprus Statistical Service; Eurostat; Bank of Cyprus Economic Research 9

10 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 Residential property prices bottomed in the first half of 2016 and have been rising in 2017 CBC Residential property prices declined by a cumulative 32% from peak to trough, and have risen steadily through ,8 73,2 1,4 1,5 1, , Residential property prices are positively correlated with real GDP as recovery continues prices can be expected to rise 6, ,0-8, Residential property prices and real GDP in 4Q moving averages Index 2010Q1=100 Residential Property Index % change y-o-y Residential property prices % change Real GDP % changes Whole country average RICS valuations entered positive territory in 2016 and accelerated into RICS Valuations whole country averages: % change year-on-year Country-wide RICS valuations bottomed in 2015 and have been rising through 2016 and ,0 109,0 107, ,0 Country-wide RICS valuations averages as at end 2017Q2 (2015Q4=100) 107,8 105,3 106,4 113,4 Apartments Houses Retail Warehouse Office Apartments Houses Retail Warehouse Office Sources: Cyprus Statistical Service; RICS; Bank of Cyprus Economic Research 10

11 On the demand side of the economy, volumes of retail trade continued to increase and vehicle registrations are up steeply The volume index of retail trade peaked in 2008 on a 12 month basis and dropped 21,8% by early 2014, rising thence Total Retail Sales except motor vehicles 79,3 Index 2008=100 % change y-o-y 12MMA % change y-o-y monthly In Jan-Mar 2018 retail sales in volume excluding vehicles were up 9,3% and were broadly driven except for a decline in fuel 16, ,0 6, ,0 Retail sales by category: % change year-on-year 12,4 11,2 11,0 10,3 9,3 6,0 6,4 Retail Sales total except motor vehicles Total except autom. Fuel 5,7 Food products 7,3 Non-Food exc. Autom. Fuel 4,5 Clothing & Footwear Jan-Mar 14,2 1 Electrical & Furniture 8,2 12,6 Computer eq. 2,8-3,2 Automotive fuel Regarding vehicle registration, after a 73% drop from their peak in late 2008 to early 2014, they started to rebound sharply Total car registrations: % change year-on-year 28,5 Index 100=Oct.2008 of 12 M M.A. (RHS) 3M M.A. 12M M.A. Sources: Cyprus Statistical Service; Bank of Cyprus Economic Research , rising 31% in 2016 and 29% in Registrations were up 21% in Jan-May 2018 y-o-y Vehicle registrations: % change y-o-y Total vehicles Total new Total used Private saloons Private new Private used Jan-May

12 In public finances the budget surplus increased sharply driven by increases in revenues The budget rose to a surplus of 1,8% of GDP in 2017 driven by a sizeable primary surplus at 5% of GDP 1 8,0 6, ,0 0,9 2,6 3,5 2,3-3,1-2,8-5,4-4,7 Budget balance in % of GDP -3,6 2,9-2,7-5,7-5,6 3,8-1,3-5,1 3,4-0,4-0,3 3,8 3,3 3,5 3, Primary Interest Budget 0,3 1,8 3,2 1, ,0-7, There was a sizable budget surplus in the first quarter of 2018 Budget balance year-to-date (million euro) Expenditures dropped by 15,8% and revenues only by 3,6% between 2011Q4 and 2015Q4 and revenues are up sharply since Government expenditures and revenues index: 100=2011Q4 of 4 Q moving sums 96,4 84,2 108,3 88,1 As a result total Gross Debt may have peaked at the end of 2015 relative to GDP and started to drop in Gross debt as the end of the period 18,6 18,9 19,1 19,4 18, ,5 107,5 107, ,6 102,6 1 97, , ,6 79, , ,3 53, , Gov. Expenditure index Gov. Revenue index Sources: Cyprus Statistical Service; Bank of Cyprus Economic Research Gross debt as % of GDP Gross debt in billion euro RHS) 12

13 In the banking sector funding conditions continue to improve driven by stable to rising deposits and by loan deleveraging Total deposits remained continued to rise in 2018 while loans dropped further to May 72,7 70,7 59, , ,9 47, ,4 49, ,5 48, Total deposits increased 2,2% in the year to April, while loans dropped by 5,4% as deleveraging continues -0,9 11,5 1,2 5,8-12,2 Total loans and deposits: % changes year-to-data -1,8-3,3-0,3 6,6-11,8 0,8-7,1 2,2-5, Gross loans/deposits ratio % (RHS) Total Loans (bil. Euro) Total deposits (bil. Euro) Apr Deposits Loans The increase in total deposits were attributable to an increase in government deposits related with the Cyprus Cooperative Bank 5 Total deposits by category in billion euro at end period 4 9,2 8,4 7,9 3 11,9 10,4 3,2 3,2 3,2 1,0 1,1 3,3 0,5 2,7 0,5 2 23,1 23,6 23,3 22,3 22,4 Loan deleveraging is broad affecting every category of lending 7 6 8,8 8,1 5 3,1 3,5 10,2 9,9 4 11,7 11,7 3 4,7 6,8 2 7,3 2,7 6,1 2,2 9,3 8,7 11,5 11,1 Loans by category in billion euro 5,8 2,2 8,2 10,8 3,4 3,6 3, ,1 22,1 20,2 18,9 17,6-5,3 6,2 7,4 8,3 8,2 4,2 3,8 5,1 4,8 4, April Financial cos Non-financial Households Government Other EA Non-res. RoW April Non-financial cos Financial cos Housing Other Household Govrnment Other EA Non-res RoW Sources: Central Bank of Cyprus; Bank of Cyprus Economic Research 13

14 Non-Performing Exposures remain on a declining path following an IFRS9 related uptick in Jan-Feb 2018 NPEs peaked in Feb at 28,9 bn euro and dropped by 22,5% to 21,5 bn euro in Dec 2017 the rise in Jan-Feb is IFRS9 related ,0 26, ,9 NPEs peaked in Feb and dropped 22,2% to June ,4 27,3 24,7 78,8 22,8 74,2 21, , , Total NPE ratio to gross loans was 44,1% in Feb 2018 and the ratio of past due 90 days plus was 34,6% 44,1 Non-Performing Exposures: selected ratios as at ,6 2 40,1 54,3 69, NPEs in billion euro NPE Index 100=2015Feb The NPEs of Non-Financial Companies (NFCs) account for the bulk of the decline in total NPEs 3 28,9 27, ,2 0,8 24,2 2 0,6 21,8 22, ,5 0,5 2 12, ,3 11, ,3 4,7 1,6 1,4 1,0 1 9,4 9,2 1 8,6 9, SMEs Other NFCs HHs Other Total Sources: Central Bank of Cyprus; Bank of Cyprus Economic Research Ratio of NPEs to gross loans Ratio of exposures past due 90 days to gross loans Ratio of total restructured facilities to gross loans Ratio of restructured facilities NPEs, to total NPEs Ratio of total impairment to total NPEs Deleveraging and restructuring are main drivers and as NPEs decline provisions provide for a bigger buffer. 6 28,9 60,2 27,3 52,4 24,2 49,2 50,7 50,8 21,8 22,5 22,4 14 Ratio of total impairment to exposures past due 90 days In billion euro 9,9 9,6 10,910,5 9,910,1 1 12,2 8,6 9,9 9,0 9, Gross Loans NPEs of which: restructured Provisions

15 In the current account there has been significant improvement when Special Purpose Entities are excluded The current account deficit excluding Special Purpose Entities (SPEs), narrowed to 1,5% of GDP in 2017 from 5,8% in ,7-5,8-4,9-4,3-8,0-7,0-6, Current account bal. excl. SPEs (% of GDP) -1,5-1,5-0,2 Current account balance (% of GDP) The current account deficit widened in 2017 compared with 2016 due to a sharp deterioration of the goods balance Excl. SPEs Composition of the current account balance in % of GDP 1 15,9 18,7 19,5-17,0-15,8-16,0-17,8-5,8-3,7-1,1-2,8-0,2-3, Goods Services Income Current account -1, ,0-7,0 The services balance was heavily influenced by the travel account The services balance is also influenced by SPEs Services balance by category including SPEs 1,3 3,6 4,3 8,6 7,9 7,1 7, The influence of SPEs on the services balance 20,4 18,0 18,7 17,5 15,9 1 21,6 19, ,5 7,2 7,8 8,5 5,3 4,8 4,5 4,1-2,5-2,4-1,3-1,7-1,3-1,2 - -0, Transport Travel 2015 Financial Telecoms 2016 Other business 2017 Other 1 1,6 1,8 2, Total services bal. (% GDP) Net services bal. (% GDP) SPEs (% GDP) Sources: Central Bank of Cyprus; Bank of Cyprus Economic Research 15

16 THE CYPRUS ECONOMY CHARTBOOK June 2018 Bank of Cyprus Economic Research General Disclaimer This Cyprus Economic Chartbook ( Chartbook ) is made available to BOC s customers and prospective customers without any cost. Its content is in its nature illustrative and makes neither explicitly nor implicitly an offer of any sort. Thus, this Chartbook does not contain or cannot result in any contractual or non-contractual obligation or liability of or legal advice by BOC, any of its branches or affiliates or employees or representatives. It is understood that in no event will BOC be liable for any loss or damage including, without limitation, indirect loss or damage, or any loss or damage whatsoever arising from loss of data or profits arising out of, or in connection with, the use or inability to use this Chartbook or its content. Note that this Chartbook is for information purposes only and its content may be subject to change at any time without prior notice. BOC makes no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability or suitability with respect to the information included in this Chartbook or the related graphics/charts and expressly disclaims liability with respect hereto. Any reliance you place on such information is therefore strictly at your own risk. Before making any decision of a financial nature, BOC highly recommends you to seek independent professional advice. All copyright, trademarks and all other intellectual property rights in this Chartbook and its content are owned by BOC. No information contained therein may be reproduced, transmitted, displayed, distributed, published or otherwise used for commercial purposes without the prior written consent of BOC.