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Interest Rate Drops Ignite New Loan Demand in Cyprus

Recent cuts in interest rates by the European Central Bank have spurred interest from borrowers in Cyprus, driving new loan demands to an impressive €1.24 billion in the first quarter of 2025. This surge is reflected in both consumer and business loans, largely orchestrated by the Bank of Cyprus and Hellenic Bank, which dominate 67% of the market.

Despite the dip in interest rates, depositor activity remains robust, indicating a strong trust in the banking sector.

Insights from the Bank of Cyprus

The latest Bank of Cyprus reports show a 16% quarter-on-quarter and 25% year-on-year increase in new loans. This growth is primarily fueled by large corporates, mortgages, and international business loans.

Understanding Hellenic Bank’s Performance

Hellenic Bank reveals a significant uptick in new loans, reaching €404 million in the first quarter of 2025. Notably, 19% of this pertains to green loans, marking a forward-thinking trend.

Liquidity and Deposits: A Growing Trust

Both banks reflect substantial liquidity accumulation, with their market shares at 72.8%. Bank of Cyprus led with €20.70 billion in deposits, showcasing a strategic balance in terms, savings and current accounts. Hellenic Bank captured €15.9 billion in deposits, underscoring a 1% growth.

Outlook for 2025

Bank executives maintain optimism for 2025, buoyed by economic strength and liquidity. Leaders like Panikos Nikolaou and Michalis Louis reiterate their commitment to supporting domestic economic needs while maximizing shareholder returns.

Middle East Tensions Cast Uncertainty Over Cyprus Tourism Sector

Cyprus’ tourism sector is entering a period of heightened uncertainty as regional tensions in the Middle East begin to affect travel sentiment. Although the country is not directly involved in the conflict, industry stakeholders report growing caution among travelers, tour operators and hospitality businesses.

Heightened Concern Across The Sector

Tourism officials and industry representatives are closely monitoring developments. While maintaining a measured public stance, they remain in contact with international partners and travel operators to assess potential changes in travel programs. Despite the uncertainty, many industry figures believe that once tensions ease, targeted marketing campaigns and competitive pricing could help restore Cyprus’ position as a preferred Mediterranean destination.

Operational Adaptations And Labour Considerations

According to reports by Philenews, hotel operators recently met with representatives of the Deputy Ministry of Tourism to discuss the operational challenges emerging from the situation. Labour issues were a central focus of the discussions. Many hotel businesses had originally planned to reopen in March to align with travel agents’ seasonal programs and extend the tourism season. Other establishments had scheduled openings in early April to capitalize on the Easter holiday period for both Catholic and Orthodox travelers.

Revised Timelines Amid Uncertainty

These plans are now being reassessed. Some hotel operators have proposed extending the full suspension of staff employment for up to two additional months, potentially until the end of April, while awaiting clearer developments in the region.

Such a decision would prolong the current period of unemployment for many tourism workers, highlighting the economic impact the crisis could have on the sector. An alternative proposal involves partial reopening, allowing hotels to operate with only essential personnel based on confirmed bookings. Industry representatives also discussed the possibility of requesting financial assistance from the European Union to offset potential losses.

Mixed Signals For The Summer Season

Despite the uncertainty, travel agents have so far maintained their scheduled flight programs to Cyprus for the summer period, including charter flights between May and October. This suggests that confidence in the destination remains relatively stable among some market segments.

At the same time, hotel operators report cancellations not only for the March–April period but also for certain summer bookings, while demand for new reservations has slowed. Industry stakeholders nevertheless remain hopeful that an easing of regional tensions would quickly restore traveler confidence.

Air Connectivity Gradually Restored

Air connectivity with key markets is also beginning to stabilize. Hermes Airports recently confirmed that several routes between Cyprus and European destinations have resumed. Emirates has restarted flights to Larnaca, strengthening connections with international markets. Haris Papacharalambous, president of the Association of Cyprus Travel and Tourism Agents (ACTTA), noted that the return of routes from the United Kingdom and airlines within the Lufthansa Group is gradually restoring Cyprus’ connectivity with major tourism markets.

While the tourism industry braces for continued volatility, the consensus remains that a swift end to the hostilities in the Middle East is essential for Cyprus to regain its historical vibrancy as a top tourist destination.

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