1.5 to two per cent of Cyprus’ Gross Domestic Production (GDP) can go up in smoke in 2022 if the Mediterranean island remains closed to Russian tourists for the rest of the year, rating agency DBRS Morningstar has revealed.
According to the agency, sanctions that Cyprus has imposed on Russia after its invasion of Ukraine have impacted the country’s tourism industry, thus, can cause almost two per cent of the GDP to be lost, provided the fact that tourism made up for 13.8 per cent of Cypriot GDP in 2019, SchengenVisaInfo.com reports.
“DBRS Morningstar estimates that Cyprus could lose 1.5 per cent to two per cent of GDP in 2022 if the airspace closure is maintained for the whole year. The impact will be much smaller if the restrictions are lifted before the summer season or if Russian tourists find alternative routes to Cyprus,” the agency explained.
On top of this situation, the tourism sector in Cyprus was struggling as it came out of two years of travel restrictions, making it difficult for the country to welcome tourists amid the pandemic. Furthermore, Cypriot tourism can experience another 20 to 25 per cent loss in tourist arrivals as the Russian market makes up for the second largest in Cyprus.
However, the agency points out that this loss can be recovered for the most part of it, emphasizing that tourists from other markets have shown enhanced interest in the island, especially those from the United Kingdom.
“It is clear that the tourism industry may face short-term pressures due to the setback in Russia; however, the comparative advantage of Cyprus, in terms of its attractiveness of tourists, will remain positive this year,” the report reads.
However, the agency believes that COVID-19 improving the situation in the EU and stimulating measures provided by the 27-nation-bloc will support the economic recovery in Cyprus.
DBRS also points out that “the European Commission’s forecast for a growth rate of 4.1 per cent in 2022 now looks optimistic.” The World Travel & Tourism Council (WTTC) previously revealed that the tourism sector accounted for 13.8 per cent of Cypriot GDP in 2019.
Exports of financial services from Cyprus to Russia have surged in recent years, summing up to about seven per cent of Cypriot GDP in 2020.