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Rising Motor Vehicle Costs and Wholesale Trade Growth in Cyprus

The automotive sector in Cyprus is witnessing a marked increase in both sales and service costs, according to recent data. This trend reflects broader economic shifts impacting the country, as well as a resurgence in wholesale trade, driven by changing consumer demand and global economic conditions.

Sales of motor vehicles have continued to climb throughout 2024, with higher demand leading to increased prices for both new and used cars. Several factors contribute to this surge, including persistent inflation, rising production costs, and global supply chain disruptions. These challenges, compounded by the limited availability of certain vehicle models, have resulted in higher prices, putting pressure on consumers.

Vehicle servicing costs have also seen a notable uptick, further burdening car owners. The rise in maintenance expenses can be attributed to the increasing cost of spare parts, many of which are imported and affected by supply chain issues. Additionally, the global shortage of semiconductors—vital components in modern vehicles—has significantly driven up repair costs for electronic systems, which now play a critical role in most automobiles. This has made routine services, as well as more complex repairs, more expensive than in previous years.

The automotive industry’s inflationary pressures are not limited to Cyprus; these trends mirror global challenges, where many countries are facing similar cost increases. The international market volatility, exacerbated by the ongoing war in Ukraine, has led to fluctuations in fuel prices, further impacting vehicle ownership and operational costs.

In parallel, Cyprus is also seeing a rise in wholesale trade activity, which has recorded significant growth in recent months. The wholesale trade sector, benefiting from an increase in consumer demand across various industries, is playing a crucial role in supporting the country’s economic recovery. The expansion of wholesale trade is closely linked to sectors like retail, construction, and agriculture, which are seeing renewed investment and growth. As supply chain disruptions gradually ease and inventories stabilise, businesses are looking to wholesale traders to provide the necessary goods to meet rising consumer needs.

The strengthening of the wholesale trade sector suggests a broader positive trajectory for the Cypriot economy. However, challenges remain, particularly for industries that rely heavily on imports, as they continue to face higher input costs. Businesses are increasingly having to navigate these rising costs while trying to keep prices competitive, a delicate balancing act that requires strategic planning and efficiency improvements.

Cyprus Tech Sector Propels Economic Growth and Reshapes Talent Landscape

Robust Economic Expansion

At the recent TechIsland Summit, Christophoros Anayiotos, Head of Deal Advisory at KPMG Cyprus, delivered a compelling assessment of the island’s burgeoning tech ecosystem. The 2024 report highlights that the technology sector now contributes 16% of Cyprus’ total Gross Value Added (GVA), up from 12.6% in the previous year. Overall, the sector’s economic impact is estimated at €8.5 billion, with direct contributions of €4.7 billion and an additional €3.8 billion generated indirectly.

Sectoral Contributions and Productivity

Using the Leontief Input-Output Model, the study covers key areas including ICT, professional scientific and technical activities, as well as tech-driven financial and insurance services. Notably, the ICT segment itself delivers €3.4 billion in direct GVA, while professional services and financial operations contribute €840 million and €505 million respectively. This horizontal spread of technological influence underscores the industry’s pivotal role in driving multifaceted business growth.

Resilience During Economic Downturns

Even amid challenging economic conditions, the tech sector has demonstrated remarkable resilience. In the pandemic-stricken year of 2020, while the broader Cypriot economy contracted by 3%, the ICT sector experienced a robust growth rate of 21%. This momentum accelerated further to a striking 38% growth in 2021, reinforcing technology’s role as a stabilizing economic force.

Divergent Trends in Employment

Anayiotos’ analysis reveals that the tech sector now sustains over 62,000 full-time equivalent jobs in Cyprus, with 45,900 direct and 16,300 indirect roles. For every €1 million in increased sector revenue, approximately 13 jobs are generated. Despite the overall employment surge, there has been a significant shift in workforce composition. In 2015, Cypriot nationals comprised 88% of ICT employees; by 2024, this figure dropped to 50%, with non-EU nationals accounting for 42% and other EU citizens 8% of the workforce.

Cyprus as an EU Leader in ICT

Cyprus now holds a prominent place in the EU, ranking second in the EU27 for ICT’s share of national GVA at 11.4%, a notable rise from 9.4% in 2023. Furthermore, the island leads the bloc in ICT GVA growth, posting a remarkable 347% increase between 2015 and 2024. With a top-five ranking in GVA per ICT employee—whereby each contributes approximately €130,000, compared to the EU average of €116,000—the country’s technology workforce has expanded at an annual growth rate of 12.1%, from 9,300 in 2015 to 26,000 in 2024.

Strategic Imperatives for Future Growth

Anayiotos emphasizes the need for strategic enhancements to sustain this expansion. Key recommendations include improving air connectivity, joining the Schengen Area to boost mobility, and attracting more international banking institutions. Additionally, introducing tax incentives designed to favor stock options is considered crucial in luring and retaining skilled talent. Addressing the limited capacity in private education is also vital to accommodating professionals relocating with families.

Investing in Talent and Digital Transformation

Looking forward, investments in education and digital upskilling remain paramount. There is a clear call for a national initiative aimed at promoting STEM careers, elevating the digital skills of both students and educators, and accelerating the digital transformation of public services. Moreover, streamlining legal procedures will be critical to improving the overall business climate and competitiveness.

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