CFA Society Cyprus: Implications but also opportunities from Brexit

144877 Brexit

The impact of the UK exit from the EU (Brexit) on the Cypriot economy is expected to be marginally negative but manageable, according to Theodoros Alepis, Vice President of the Cyprus Association of Financial Analysts (CFA Society Cyprus) and member of the Brexit steering committee Cyprus Banking Association.

In his statements, Mr. Alepis notes that this conclusion emerges both from the flexibility shown by the tourism sector over the years and the gradual reduction of its dependence on the UK market, as well as from the partial compensation of the impact from reducing exports of services to the United Kingdom and reducing the cost of imports of goods and services.

He even points out that Brexit could also present opportunities for Cyprus, given our country's full participation in the EU and the eurozone, the Cypriot legal system based on English law, the low tax environment, the geographical location of Cyprus and The high quality of human capital can attract companies wishing to maintain access to the European Economic Area.

Saying that in the coming months a framework is expected to be formed for the further development of the negotiations, Mr. Aleppo adds that "it is necessary in this period for Cyprus to take advantage of the close ties and competitive advantages listed above, in order to achieve a lucrative transnational agreement with the United Kingdom in the post-Brexit era. "

However, Mr. Alepis notes that at European level, the Brexit effect is expected to create further volatility in the markets.
On the one hand, explains Mr. Alepis, we observe the slowdown in the GDP growth of the United Kingdom, which on average is estimated to be 1,6% for the coming years (Bank of England estimates), while from On the other hand, we see the development of many EU countries benefiting from the increased liquidity provided by the ECB as well as the relocation of some services from the UK to EU member states due to Brexit.

"However," he added, "the long - term economic consequences for all EU Member States will depend on the future context of trade relations."

According to him, all possible negotiation models between the UK and the EU (bilateral agreements, Norway-type trade agreement, EU-Canada standards agreement, interim agreement, etc.) will make trade between the UK and the EU more costly, which is detrimental to the potential economic growth of both partners.

However, according to the Vice President of the CFA Society Cyprus, the structure of the Member States of the European Union and their financial size will largely determine the further development of the talks. It is estimated that only 2.6% of the European Union's GDP is exported to the United Kingdom (ECB data June 2016).

Especially if the EU largely maintains free trade in goods with the United Kingdom, where it has a surplus and at the same time reduces barriers in the financial sector, where there is a deficit (where most financial companies are based in London), it is estimated that the EU will have a much lower economic impact than the United Kingdom.