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Cyprus to Lose 2% of Its GDP Due to Travel Sanctions Imposed on Russia

Rating agency DBRS Morningstar has revealed that 1.5 to 2 percent of Cyprus’ GDP could rise in smoke in 2022 if the Mediterranean island remains closed to Russian tourists for the rest of the year.

According to the agency, the sanctions imposed by Cyprus on Russia after its invasion of Ukraine affected the country’s tourism industry and, therefore, could cause a loss of nearly 2 percent of GDP, provided that tourism makes up 13.8 percent. of Cypriot GDP in 2019, reports.

DBRS Morningstar estimates that Cyprus could lose 1.5 percent to 2 percent of GDP in 2022 if the airspace is kept closed all year. The agency said the impact would be much less if restrictions were lifted before the summer season or if Russian tourists found alternative routes to Cyprus.

On top of this situation, Cyprus’ tourism sector has been suffering as it emerged from two years of travel restrictions, which made it difficult for the country to welcome tourists amid the pandemic. Moreover, Cypriot tourism could suffer another loss of 20 to 25 percent in tourist arrivals as the Russian market constitutes the second largest in Cyprus.

>> Cyprus to neutralize the impact of the ban on flights from Russia by opening up to other markets

However, the agency notes that this loss can be mostly compensated for, stressing that tourists from other markets have shown increased interest in the island, especially from the United Kingdom.

It is clear that the tourism industry may face short-term pressure due to the setback in Russia; However, the comparative advantage of Cyprus, in terms of its attractiveness to tourists, will remain positive this year, as stated in the report.

However, the agency believes that the COVID-19 improvement of the situation in the European Union and the stimulus measures provided by the 27-nation bloc will support the economic recovery in Cyprus.

The DBRS also notes that “the European Commission’s forecast of 4.1 percent growth in 2022 now appears optimistic.” The World Travel and Tourism Council (WTTC) previously revealed that the tourism sector represented 13.8 percent of Cyprus’ GDP in 2019.

Financial services exports from Cyprus to Russia have surged in recent years, summing up about seven percent of Cyprus’ GDP in 2020.

>> Travel to Cyprus in March: COVID-19 rules explained

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