Set back by a country-wide banking crisis and negative headlines, Cyprus appears to be on track for a turnaround. The country lifted its capital controls in April, in an effort to promote confidence among foreign investors. “The complete lifting of capital controls highlights the stabilisation of the Cyprus economy and the banking system, and signals to foreign investors the return to normality for Cyprus as a member of the eurozone. This should enhance investors’ confidence in seeking opportunities and, as a result, have a positive impact on the country as an investment destination and as a business hub,” said Mr Evgenios Evgeniou, CEO of consultancy PricewaterhouseCoopers in Cyprus.

Charis Papacharalambous, director-general of Invest Cyprus, said that the wholesale removal of the capital controls imposed on Cyprus after the bailout in 2013 is a sign of just how far the national economy and the banking sector have come in the past two years. “Firmly on the road to recovery, it is very much back to business for Cyprus,” he said. 

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“For the banking sector the challenge is to set the non-performing loans on a declining trend, while for the country it is key to return to sustainable growth and this is interlinked with the structural reforms underway to improve competitiveness and the ease of doing business,” said Mr Evgeniou.

Cyprus’ banking system collapsed in 2013 as a result of its exposure to the Greek financial crisis. Cyprus had to close down Laiki Bank – also known as the Cyprus Popular Bank, the second-largest banking group in the country – and seize deposits in the Bank of Cyprus, and it became the first country in eurozone to enforce capital controls.

However, Cyprus has constantly exceeded the expectations set by its lenders, said Mr Papacharalambous. “Ever since the memorandum of understanding was signed two years ago, Cyprus has continually outperformed the market’s expectations, which has actively helped in re-establishing trust and restoring the image of country as a whole.”

The lift of capital controls has been a vote of confidence in the Cypriot banking system, according to the country’s president, Nicos Anastasiades. Foreign investors seem to share the same confidence, eyeing FDI projects in tourism, energy and real estate sector.

“Recent FDI inflows to Cyprus are a sign that trust is returning to the national economy and that the country has the potential to offer decent returns for foreign investors in the long term,” said Mr Papacharalambous. He mentioned different FDI projects, such as investments totalling €1bn in three key banks by US investors, the multi-million-euro marina in Limassol opened at the end of 2014, and other hotel developments and renewable energy projects currently being pursued by foreign investors. The geographic location of Cyprus has been one of its biggest competitive advantages as more and more companies are setting up regional offices there.

“I think that this reflects the feeling that Cyprus is a true business centre and it can be used as an excellent hub to do business not only on the island, but in the whole eastern Mediterranean and Middle East and beyond. When looking at the energy map, as well as the political situation in Middle East and the eastern Mediterranean, Cyprus, as a member of the EU since 2004, is well placed as a stable and secure commercial entry point to the region,” said Mr Papacharalabous.