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As of December 2023, Cyprus' economy is navigating a complex financial landscape, with total assets in financial instruments reaching €869 billion. However, the country also faces a notable financial shortfall, with liabilities exceeding assets by about €29 billion.
The total assets of the economy include various financial instruments, with 51.5% made up of stocks and shares, 16.1% in cash and deposits, and 20.4% in loans. Conversely, total liabilities amount to approximately €898 billion, where most are also linked to equities and loans.
For households in Cyprus, financial assets totaled around €57.4 billion at the end of December. Notably, over half of these assets (55.4%) consist of cash and deposits, reflecting a preference for savings. The debt-to-GDP ratio for households stands at 64%, which indicates a manageable level of debt compared to the country’s overall economic output.
Advantages for Citizens:
1. Stable Savings: The high percentage of cash and deposits means many families prioritize saving, which can provide a safety net during economic downturns.
2. Investment Opportunities: With a significant portion in equities, there are opportunities for households to grow their wealth through investments.
Disadvantages for Citizens:
1. High Debt Levels: While manageable, the debt-to-GDP ratio shows that households are still carrying a notable amount of debt, which could be a concern if economic conditions worsen.
2. Limited Returns: A large portion in cash may lead to lower returns compared to potential gains from investments in stocks or other financial instruments.
Business Sector Snapshot
For non-financial corporations, total assets amounted to €72 billion, with 42.6% in equities and 32% in other financial instruments. The debt-to-GDP ratio for this sector is higher at 134.3%, indicating that companies are more leveraged than households.
Advantages for Businesses:
1. Equity Investment: A significant share of assets in equities could mean businesses are well-positioned for growth and investment returns.
2. Access to Loans: Businesses are actively utilizing loans, which can fuel expansion and operational improvements.
Disadvantages for Businesses:
1. High Leverage: The high debt-to-GDP ratio may pose risks for businesses, especially if economic conditions change or interest rates rise.
2. Financial Vulnerability: Companies relying heavily on loans could face challenges in managing debt, particularly during downturns.
Consequently, while the financial landscape in Cyprus shows a robust asset base, the significant liabilities and varying debt levels across households and businesses suggest a cautious approach to financial planning may be prudent for citizens in the year ahead.
[With information from CNA]
