The Fiscal Council has cautioned that Cyprus’s economy could face a significant setback should Ukrainian businesses, which relocated to the island following the Russian invasion, choose to leave.
The Council urged the Government to avoid complacency and instead develop a comprehensive policy to address the situation.
In its interim report, the Fiscal Council highlighted, “the complacency observed on this issue, guided by the fact that real estate purchases have been made, and school units have been built to serve Ukrainian refugees. However, we believe that these data are not sufficiently convincing to justify complacency.”
The Council voiced strong concerns, saying “It is not possible to develop policies and incentives in the absence of a comprehensive picture of the family, demographic, business, and other characteristics of the Ukrainian presence in Cyprus since the start of the war.”
The Ukrainian presence in Cyprus, which has expanded since the Russian invasion, has provided various economic benefits. An estimated 24,000 Ukrainians remain in Cyprus, with 7,000 holding tourist status. This influx has notably influenced sectors such as government revenues, real estate, education, and technology services.
Fear of a mass exodus
The report expressed concerns about the economy, noting that “data on travel and visits to Ukraine by Ukrainian citizens, consumer behaviours, in combination with VAT revenue trends, and the presence of start-up companies, justify the estimation that the Ukrainian presence is likely to be macroeconomically significant, even without tangible or comprehensive quantification of this presence. At the same time, there are extensive indications that an overall and intense Western policy after the end of hostilities will be the development of a ‘cordon sanitaire’ to contain any (real or not) expansionist tendencies that Russia may pursue subsequently.”
Furthermore, the report highlighted that “the characteristics of Ukrainians in Cyprus – income, demographic, business and consumer behaviour, as well as views and needs – must be recorded through administrative data, which will be able to support the development of policies to avoid a mass exodus, in which up to 40-50% of Ukrainians may potentially leave Cyprus within a few months.”
The Fiscal Council called on the Government to manage the potential return of Ukrainian-interest companies to Ukraine, alongside the interest of Western companies. “At this moment, we note that over the last 10 months, a series of large-scale international Western companies have decided and announced an increase in their presence in Ukraine, despite the fact that security issues for their personnel remain serious. Additionally, other multinationals are gradually announcing their intention to operate or expand their activities in Ukraine once conditions permit.”
The Council warned of a possible reversal of inflows to Cyprus, stating that “to the extent that the efforts of Western states prove successful, there will be a return of Ukrainians and Ukrainian companies to their country of origin. Such a development will have significant implications for the Cypriot economy, for which advance preparation should be made by developing incentives and other policies that encourage Ukrainian interests to remain in Cyprus and even expand towards Ukraine.”
In conclusion, the report noted that “information and publications stemming from technocrats of the European Commission support that they are in dialogue with Ukraine to review the EU’s migration policies after the end of the war, with the aim of ‘encouraging’ the repatriation of Ukrainian refugees to their country. Thus, once again, a policy of repatriation, both of individuals and businesses, is confirmed.”
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