Cyprus emerged from the COVID-19 lockdown in June 2020 largely intact. The total number of COVID-19 deaths were only 19; total infections were under 1,000.
Yet the financial impact of the lockdown is massive, while the COVID Pandemic continues to rage outside Cyprus’ borders. As we write this article:
Second-wave hospitalisations in Israel reached over 1,000, prompting an imminent health crisis and second lockdown;
The number of cases in Russia continues to fall, but is still over 6,000 new cases per day. There is no sign of when the Russian borders may open, but it is doubtful that this will happen before mid-August;
A strong second wave of coronavirus infections in Melbourne, Australia and Dubai, UAE has indicated how pervasive this virus is to defeat;
Greece announced the arrival of tourists from the UK on July 15th; it is likely that Cyprus will follow.
Our forecast for this summer and fall 2020 points to an increasing number of risks.
1. We believe there will be a strong second wave of COVID-19 cases in mainland Europe once the winter flu season begins. It is too early for a vaccine.
2. In Cyprus, we believe that tourism arrivals will be less than 30% of 2019 arrivals this year, while tourism expenditure will be even lower. The continued closure of Russia and the delayed opening of the UK are drivers of this situation. This will cause major damage to the economy, public support notwithstanding.
3. Absent the approval of the € 750 billion European support package, we see Cyprus suffering rising unemployment (once the moratorium on staff firings is lifted) and rising debt defaults (once the debt payment moratorium is lifted).
4. Consumer spending is being maintained at present thanks to public support, the moratoria on debt payments and firing, and the summer holidays. It cannot continue without real economic growth. We see the impacts on tourism and the economy to last at least into 2022.
5. We assess the chances of a global economic crash this fall as being greater than 50%, given the continued problems in so many G8 economies. We also believe there is an increasing risk of a geopolitical incident. The US elections in November 2020 only increases the risks of a limited-scale event spiraling out of control.
The COVID-19 crisis brings risks and opportunities in Cyprus. In order to support our clients, we are renewing focus on consultancy services that help companies prepare for the Second Wave and the events this fall. These include:
1. Detailed Financial Analysis: We depart from statutory accouting and develop a profit-centre approach to your business. This is modelled using MS Excel and provides a real picture of your value chain profitability and major sources of financial profit and loss.
2. Turn-around Planning: Developing the strategies and decisions needed to transform your company from loss-making to break-even, and from break-even to profitability. These involve tangible, quantitative decisions based on financial, strategic and operational analysis: they are not simply “consultant opinion.”
3. Customer Sales Initiatives: Take this opportunity to segment and evaluate your true customer profitability. Develop initiatives to get closer to key accounts and convert new customer categories, including lost accounts.
4. Cost-Cutting Programmes: We support you develop and implement strategic cost-cutting programmes, based on your value chain and based on areas you can cut without affecting the core survival capability of your company.
5. Scenario Planning and Strategic Forecasting: We define the key events, drivers and barriers that affect your company and your operating environment. This helps your management team understand how to classify emerging situations and threats, and how to react to them. This includes risk analysis and mitigation.
6. Digital Transformation: This is an excellent time to consider digital transformation initiatives that increase your digital footprint, improve your social media and advertising capabilities, and improve work efficiency and focus.
Our work is designed to support all companies, from small to large, with effective and tangible results. Projects can be implemented in as quickly as one week. The possibility of public support is also available.
Please contact us for a confidential assessment of your development needs.
Philip Ammerman
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