middle east — The ongoing crisis in the Middle East is expected to squeeze Cyprus economically, impacting tourism, shipping, investment, energy, and household purchasing power. Economist Tassos Yiasemides shared his insights with the Cyprus News Agency (CNA) on Wednesday, emphasising that the severity of the impact hinges on the conflict’s intensity and duration.
Middle east: Rising Energy Prices and Inflation Concerns
Yiasemides highlights that energy prices for households and businesses could rise significantly, as Cyprus heavily relies on fossil fuels and imported energy supplies for electricity generation. He remarked, “The key issue is for the whole matter to be temporary,” reflecting on the past when fuel price hikes were manageable during a previous 12-day conflict.
Global Trade Disruptions and Import Costs
With the current situation involving multiple countries, Yiasemides cautioned that broader disruptions in global trade could lead to higher prices and delays in the delivery of goods. He noted, “Cyprus is an open economy with a strong dependence on imports of goods,” indicating that economic fluctuations abroad would directly affect the island’s market.
Potential Slowdown in Economic Growth
If the conflict extends beyond a few weeks or months, Yiasemides warned that Cyprus might experience slower economic growth and budgetary pressures. He stated that ongoing clashes in an energy-sensitive region could have negative consequences for both global and European economies, particularly concerning the production and transport of oil and natural gas.
Impact on Household Purchasing Power
The economist explained that prolonged periods of elevated oil and natural gas prices would likely lead to inflationary pressures. He asserted, “Whenever the cost of importing oil and natural gas rises, this is expected to burden production and transport costs within Cyprus.” As a result, households may face increased electricity prices, affecting overall purchasing power.
Shipping Sector and Geopolitical Risks
The shipping sector in Cyprus is also anticipated to be impacted, although the extent of this effect remains uncertain. Yiasemides mentioned an announcement from former President Donald Trump regarding political risk insurance for ships navigating the Persian Gulf, which could help mitigate some risks for shipping companies.
Tourism at Risk from Geopolitical Instability
Concerns are also mounting for Cyprus’s tourism sector. Recent incidents at British bases and subsequent flight cancellations could deter potential visitors. Yiasemides pointed out that geopolitical instability might reduce travellers’ confidence in visiting Cyprus, stating, “Tourism demand is sensitive to perceived safety,” warning that a negative image could harm bookings and revenues.
Investment Activity Under Pressure
Yiasemides concluded by noting that geopolitical uncertainty typically dampens business and investment activity on a global scale. He remarked that foreign investment flows into Cyprus are likely to be affected, as investors may opt for more stable markets until the situation improves.
