Cyprus sets stage for tourism recovery as airports reopen

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Tourist numbers to Cyprus are expected to fall by up to 70 percent this year due to the coronavirus pandemic. (AFP)
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A mask-clad passenger queues at Larnaca International Airport. (AFP)
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Updated 07 June 2020

Cyprus sets stage for tourism recovery as airports reopen

  • Mediterranean holiday island tempts visitors with bold hospitality package that includes medical care

NICOSIA: Cyprus will reopen for international tourism on Tuesday, with airports welcoming visitors after an almost three-month shutdown, and a bold plan to cover health-care costs for visitors.

But with arrivals expected to be down by 70 percent this year due to the chaos brought by the COVID-19 pandemic, it’s a leap of faith for the small Mediterranean holiday island.

“Nobody here is expecting to make any money this year,” Deputy Tourism Minister Savvas Perdios said. “We are setting the stage for the beginning of our recovery in 2021.”

The divided island’s tourism sector normally accounts for around 15 percent of gross domestic product, but has dried up in past months amid global measures to combat the spread of the novel coronavirus.

Cyprus saw a record 3.97 million arrivals in 2019, with more than half its market made up of British and Russian visitors.

But even if the island’s airports in Larnaca and Paphos open up to arrivals on Tuesday, with the first flight due to arrive from Athens around noon, neither Britain or Russia are among the 19 countries allowed to land there.

The list of permitted countries, which also include Bulgaria, Germany and Malta, have been chosen based on epidemiological data and split into two categories.

Initially all travellers will need to show proof of a negative COVID-19 test undertaken within 72 hours of travel, but from June 20, only those arriving from six countries in the second category, such as Poland and Romania, will need to do so.

The government says the lists will be revised weekly and more countries can be added.

Cyprus will also cover accommodation, dining and medical care for any tourists who fall ill with the COVID-19 illness during their stay, as well as accommodation and meals for their families and close contacts.

“What we offer and what we sell is not the sun and the sea, it’s hospitality, and this is an extension of our hospitality,” Perdios said.

The government has designated a 100-bed COVID-19 hospital for tourists that Perdios said would be located in the Larnaca region, while 112 ICU units have been allocated for visitors.

Perdios said several four-star hotels would provide 500 quarantine rooms for close contacts of those who fall ill.

A raft of other health measures, including disinfection protocols and temperature checks at border controls, aim to protect travellers and locals alike.

“We’ve gone to big lengths to think ahead of things that could go wrong and try to devise plan Bs and Cs”, Perdios said.

The Republic of Cyprus, in the south of the island, has registered 960 novel coronavirus cases and 17 deaths.

Perdios expressed hope that British tourists could be welcomed “sometime after mid-July”, with Russia “slightly later, maybe by a couple of weeks.”

A recently announced deal with Hungarian low-cost carrier Wizz Air to open a base in Cyprus from July was also an important step towards expanding and diversifying the island’s tourist markets, he said.

While no date has been set to allow international tourists to visit the breakaway Turkish Republic of Northern Cyprus, only recognised by Ankara, the health-care commitment would still apply to those visiting the north during their stay once the crossings are reopened.

“I am very confident that not only will we be able to continue providing our citizens with protection, but also caring for everybody who comes to the island on holiday”, he said.

“If we are coming out with a scheme like this, it’s because we can afford it, but most importantly, because we feel that it’s the right thing to do.”


Gold rush at Turkish bazaar a test of trust for lowly lira

Updated 15 August 2020

Gold rush at Turkish bazaar a test of trust for lowly lira

  • As precious metal prices soar, Turks rush to buy amid economic uncertainty and a volatile currency

ISTANBUL: Hasan Ayhan followed his wife’s instructions last week and took their savings to buy gold at Istanbul’s Grand Bazaar as Turks scooped up bullion worth $7 billion in a just a fortnight.

With memories of a currency crisis which rocked Turkey’s economy only two years ago fresh in his mind, the retired police officer was among those playing it safe as he queued in the city’s sprawling market, where a screen showed the gold price rise by one Turkish lira ($0.1366) in just 10 minutes.

“I think it is the best investment right now so I converted my dollars to buy gold,” the 57-year-old said. “I might withdraw my lira and buy gold with it too, but I am scared to go to the bank right now because of coronavirus.”

The day after Ayhan bought his gold on Aug. 6, the lira hit a historic low and remains skittish, laying bare concerns that Turkey’s reserves have been badly depleted by market interventions, which are showing signs of fizzling out.

Turks traditionally use gold for savings and there may be 5,000 tons of it “under mattresses,” with more added after the recent buying spree, Mehmet Ali Yildirimturk, deputy head of an Istanbul gold shops association, said.

Although bullion has never been more expensive, vendors at the Grand Bazaar said almost no one was selling their gold jewelry. There are only buyers.

HIGHLIGHTS

  • Currency touched record lows in three volatile weeks.
  • Local holdings of hard currencies at all-time high.
  • All are buyers at Grand Bazaar, despite expensive gold.

“I’ve been chatting with hundreds of people who are thinking about selling their cars or houses to invest in gold,” vendor Gunay Gunes said.

In the last three weeks, as selling gripped the lira, local holdings of hard assets such as dollars and gold jumped $15 billion to a record of nearly $220 billion.

There is no evidence suggesting people are about to pull savings from banks, and this week the lira has hovered around 7.3 versus the dollar, although it remains among the worst emerging-market performers this year.

Demand has eased since Turks withdrew some $2 billion in hard foreign cash from their banks during a March-May period in which a lockdown was imposed and the lira hit its last low. Analysts say that if Ankara cannot boost confidence in the currency, which has fallen almost 20 percent this year, import-heavy Turkey risks inflation and even a balance of payments crisis that will worsen fallout from the coronavirus crisis.

Given foreign investors now have only a small stake in Turkish assets, they say the key for President Recep Tayyip Erdogan’s government is convincing Turks to stop turning to the perceived stability of dollars and gold.

The central bank and treasury did not immediately comment on the dollarization trend or any policy response.

Finance Minister Berat Albayrak, Erdogan’s son-in-law, said on Wednesday the lira’s competitiveness was more important than exchange rate volatility.

The central bank has effectively borrowed on local dollar liquidity to fuel foreign exchange market interventions, which are meant to stabilize the lira.

Through Turkish state banks, which together are “short” foreign exchange by $12 billion, the central bank has sold over $110 billion since last year. In turn, the bank’s gross FX buffer has fallen by nearly half this year to below $47 billion, its lowest in years.

The central bank has said its reserves naturally fluctuate in stressful periods, and the treasury says the bank intervenes at times to stabilize the currency.

But ratings agencies say Ankara should take decisive steps, such as an interest rate hike, to rebuild reserves and restore confidence. Otherwise, rising current account deficits and possible debt defaults could tarnish a solid reputation for meeting foreign obligations.

“Locals don’t want to keep Turkish lira, they’ve been dollarizing and buying gold. Turks have hardly ever done that,” said Shamaila Khan, New York-based head of EM debt strategy at AllianceBernstein, which manages $600 billion. “That is why you need proactive policies because if you get to that stage where locals are unwilling to keep their money in the bank then you’re heading to a balance of payments crisis. That’s when the alarm bells will start ringing.” 

Some banks imposed fees on withdrawals this week, while the central bank has curbed cheap credit channels it opened to ease the coronavirus fallout. Yet while lira deposits now earn more than the 8.25 percent policy rate, their real return is negative with inflation at 11.8 percent.

Traders say such backdoor tightening needs to reach 11.25 percent to stabilize the lira, which has nearly halved in value since early 2018.

Market expectations have risen for a formal rate hike that economists say would reinforce central bank independence, even while it could slow economic recovery.

Politics may stand in the way.Erdogan, whose popularity has dipped this year, holds the view that high rates cause inflation, and sacked the last central bank governor for disobedience.

He said on Monday he hoped market rates would fall further.

But firms such as System Denim, which imports materials and makes clothes for companies like Zara and Diesel, are feeling the pinch from rising costs. Owner Seref Fayat said he converted his 4 percent euro-denominated loans to lira at 10 percent. “No need to take on additional FX risk,” he said. “I pay a higher rate, but at least I can see ahead.”