The question above, which this article wishes to address, reflects the chasm between opinions, as to the nature of Cyprus’ economic growth today and, ultimately, the relationship (should one exist) between economic growth and levels of financial inequality amongst the population. One point of view is that Cyprus has entered a revolutionary era of elite development, clearly witnessed by a blind eye staring at Limassol in its rapidly growing real estate landscape, especially during the last 10 years. The other side of the story being that many locals living in Cyprus (especially Limassol) are now feeling higher costs of living to the bone, struggling to get by at this moment more than ever before in their lives. The Battle between David and Goliath unfolds in an everyday reality.
The answer, however, to the dilemma may just be lying in a simple explanation. Today’s landscape suggests that one concept (economic growth) may exactly be causing the other (growing inequality), through a very distinct and specific relationship in the case of Cyprus. It is particularly interesting to review the following opinion extract, taken from an article published in the Cyprus Mail in February 2023:
“In Cyprus, economic inequality compares favourably in a European context, but presents a concerning widening trend. It mainly relates to new entrants in the labour market and retirees and has, in part, been boosted by the marked immigration of high-income strata from abroad. These trends should be seriously considered and addressed with targeted social measures, which do not create distortions in terms of economic development.” (Charalambous & Pissarides, 2023)
In other words, when compared to Europe as a whole, our country is performing well in keeping lower levels of economic/financial inequality vs the outside world. However, when it comes to the breakdown of citizens’ profiles domestically, it is at this point when a particular form of inequality reveals itself, as a growing gap between wealth levels handled by locals vs high-income / asset-owning individuals (many of whom are immigrants), which has gradually developed. Recent bursts in real-estate development and inflationary booms can be accredited, to a great extent, to the late increase of foreign inflows. In 2023, 44.3% of total property sales contracts comprised of overseas buyers. Nevertheless, in order to be in position to anticipate the future effects and possible duration of this problem, we need to investigate the bigger picture and trends, starting from the issues arising in Europe in recent years.
The Problem appears in European Markets in general:
As demonstrated in the diagram below, Cyprus recorded a 3.2% increase in property prices between 2nd quarter 2022 and 2nd quarter 2023, although it is not found in the top segment of this list (there are more countries). But the problem in recent years is not limited to Cyprus. Sources and statistics from the passing Year 2023 suggest a phenomenon of stagnation in prices across European immovable property and real-estate markets, with consistently high property prices in a number of countries not necessarily matched with the corresponding Economic Growth levels to support them (causing signs of stagflation*). Rental prices have recorded an even more rapid increase. The limited access of populations to financing due to the consistently high levels of interest rates by the ECB (high cost of money) in the Eurozone, as well as increased bureaucracy and strict criteria in banking procedures, provide additional obstacles to the equation, which consequently burden the living standards of populations. This challenge is different in nature than the problems faced during the 2008 global financial crisis, where liquidity issues in economies were the greatest drawback (Idealista, 2023).
*Signs of Stagflation: the economic state when, despite the inflation rate being high or increasing, the economic growth rate slows down.
Percentage change on previous year of residential property prices in the EU-27 countries (between 2nd quarter 2022 and 2nd quarter 2023 (Source: Statista))
Outlook for Cyprus – 2024:
The good news is that, as inflation in the Eurozone is now moving closer to the 2% target of the ECB (currently at 2.8%), there should be some response from stakeholders for a gradual cut in interest rates, at least some time soon within the year or the near future, easing the cost of money for the people. At the moment, however, key interest rates on main refinancing operations and the marginal lending and deposit facilities remain unchanged at 4.50%, 4.75% and 4.00% respectively (European Central Bank, 2024). In addition, following the rapid real-estate developments in Cyprus and the economic growth levels recorded in previous years, the start of 2024 has found the country experiencing a deceleration in economic growth, according to a report by the University of Cyprus’ Economic Research Centre (CypERC) (Nicolaou, 2024). Additionally, the European Commission presents a deceleration of economic growth levels from 5.8% (2022) to 2.4% in 2023. The data suggests that the overall property market in Cyprus has reached a high but stable pricing threshold, although a potential future cut in interest rates may kickstart the upward trend once again. The European Commission forecast for economic growth in Cyprus in 2024 is 2.8%.
Moreover, one of the anticipated changes in 2024 is an increase in the supply of properties, fuelled by the general demand and a large portion of projects referring to work in progress from previous years. This increase in supply of properties may assist in stabilising prices further, or even future price drops in a self-applied move by the market to “correct” itself.
Other factors influencing the real-estate growth and ultimately economic growth levels on the island, include of course political stability, the outlook of the nearby war outbreaks in Israel and Ukraine, FDI (Foreign Direct Investment), and the overall strategic planning and performance of the Eurozone region.
Finally, large inflows of foreign working personnel in search for accommodation is another critical factor affecting real-estate prices. According to the Labour Minister, “a total of 110,000 third country nationals currently work legally on the island – and pay into social security, compared to 340,000 Greek Cypriots”. That is approximately one quarter of the country’s total working population (Damaskinos, 2023).
So, how does this general consensus affect inequality?
As demonstrated in the diagram on the following page, 33.5% of the country’s national income in 2022 was shared among the top 10% earners of the country’s population, while 19.9% of the country’s national income was shared among the lowest 50% earners. There were periods where income inequality seems to have been lower (mid 2000s) and periods where it seems to have been higher (early 2010s). It now looks as though income inequality has found a steady but fairly considerable level.
What is more worrying, however, is the fact that 50% of the population are sharing less than 20% of the country’s national income. The average salary in Cyprus today is approximately €2,160 per month, while the median salary is approximately €1,860, following from the above point (Time Doctor, 2024).
Cyprus is a small country and, therefore, not easily falls into a serious recession. At the same time, due to the size of its economy, it is sensitive to economic externalities and distortions. The definition of poverty is for one to be earning 60% or less of a country’s average salary (i.e., less than €1,300 per month for Cyprus). This is not the absolute, but a relative poverty line.
(Source: World Inequality Database)
Thus, specifically because of the status quo of growing income inequality levels, there is a significant section of the population that can now be classified as “poor”. This is a grey mark on the overall image of a country that claims to be proud of the standards of living it offers to its citizens, as well as its overall progress over the last decade.
As mentioned in the above extract, “In Cyprus, economic inequality compares favourably in a European context, but presents a concerning widening trend. It mainly relates to new entrants in the labour market and retirees and has, in part, been boosted by the marked immigration of high-income strata from abroad.” Therefore, the question which remains is, to what extent will any of the above changes and economic events that could take place in the near future cover for recent demographic trends and help contain inequality levels and relative poverty? Most importantly, which set of actions should all relevant stakeholders take towards this effect?
Bibliography:
Charalambous, A., & Pissarides, O. (2023, February). Income Inequality Widens as Crises Hit Poor and Favour the Wealthy. Retrieved from Cyprus Mail: https://cyprus-mail.com/2023/02/26/income-inequality-widens-as-crises-hit-poor-and-favour-the-wealthy/
Damaskinos, I. (2023, September). Cyprus Mail. Retrieved from Cyprus economy would collapse without migrants says minister: https://cyprus-mail.com/2023/09/04/cyprus-economy-would-collapse-without-migrants-says-minister/
European Central Bank. (2024, January). Retrieved from https://www.ecb.europa.eu/press/pr/date/2024/html/ecb.mp240125~f738889bde.en.html
Idealista. (2023, December). Retrieved from European real estate market: forecasts for 2024 sector by sector: https://www.idealista.com/en/news/property-for-sale-in-spain/2023/12/18/160420-european-real-estate-market-forecasts-for-2024-sector-by-sector
Nicolaou, K. (2024, February). Cyprus Mail. Retrieved from Cyprus economic growth slows down in January 2024: https://cyprus-mail.com/2024/02/26/cyprus-economic-growth-slows-down-in-january-2024/
Time Doctor. (2024, March). Retrieved from What is The Average Salary in Cyprus?: https://www.timedoctor.com/blog/average-salary-in-cyprus/
“THE REVITA TEAM”
Σημείωση: Τα άρθρα και τα δημοσιεύματα της εταιρείας μας, σκοπό έχουν να παραθέσουν στοιχεία για συγκεκριμένα θέματα καθώς και απόψεις που βασίζονται σε εμπειρία και γνώση που έχει αποκτηθεί. Απώτερος σκοπός μας είναι η επιμόρφωση των αναγνωστών στο σύνολο τους και όχι η παροχή συμβουλών για συγκεκριμένες περιπτώσεις. Για όλα τα προηγούμενα άρθρα της εταιρείας μας, μπορείτε να επισκεφτείτε την σελίδα μας στο Facebook, https://www.facebook.com/revitaconsult όπως και το blog στην ιστοσελίδα μας.
“Leadership”, the elusive quality that drives nations, inspires movements, and shapes destinies, has long been subject to debate. Is it an innate trait bestowed upon a select few at birth, or can it be cultivated through diligent effort and experience? The answer, it seems, lies in a delicate interplay between nature and nurture.
While some individuals appear to possess a natural aptitude for leadership from an early age, displaying charisma, decisiveness, and vision, it would be simplistic to conclude that leadership is solely a matter of genetics. Rather, it is a multifaceted attribute that can be honed and refined over time.
To become a good leader, one must cultivate those skills which will deem them capable of leading, influencing and positively impacting the people around them. That can of course be achieved through extensive work experience and training, since there really is no better educator than a real-life experience. For someone to become a leader, there is a diverse array of attributes they must possess, or work towards; some of those being effective communication, emotional intelligence, strategic thinking, decisiveness and listening. The key is to be bold. To involve oneself in leadership positions whether that is within their own smaller domain, or larger projects and initiatives.
Of course, a person who does not rise up in the face of difficulty, can simply not call themselves a leader, as they have not deservedly acquired that title. Facing challenges, overcoming obstacles, and navigating uncertainty are integral components of the leadership journey. It is through these trials that individuals discover their resilience, adaptability, and capacity for innovation – qualities that are indispensable for guiding others through tumultuous times.
Nevertheless, although with nurture follows hard work, dedication and resilience, there are some human characteristics that one can only be born with. While dedication and perseverance are crucial, they alone do not guarantee leadership success. There are every now and then born leaders among us, individuals for whom influencing people, to a great extent, comes naturally and instinctively. Consider Messi and Ronaldo in the realm of football. The meteoric rise of both footballers to legend status was propelled by their innate passion and exceptional natural abilities on the pitch. Though both very different in style of play, the journey of both Messi and Ronaldo has been characterized by equally relentless dedication, discipline and hard work, which would ultimately compliment and elevate their pure, natural talents. These two constitute modern football’s finest examples of the synergy between natural talent and persistence. Both faced numerous obstacles and invested considerable effort to reach the pinnacles of success they enjoyed in recent years, inspiring their teammates to follow standards they have set, both at club as well as international level, year after year. Therefore, to be a Leader comprises of both remarkable drive as a perfect complement to innate talent, as in the case of Messi and Ronaldo.
The final section of this article wishes to address the subject of whether a good leader is actually by de facto a good manager and vice versa. Are the qualities of Leadership and Management similar? The answer is Yes, and No. Management is a combination of charisma and (mostly) the result of continuous training and hard work in specific fields and environments. As mentioned above, Leadership still requires the same combination, though in different dosages. Leadership is something more distinct, which brings with it a magical aura unique in every individual who possesses it. They are the only ones who can improve and work on it alone.
Interestingly, Forbes states that “it is important for leaders to grasp the importance of Management, and know how to supervise. But that doesn’t mean they need to do it themselves.” For example, whereas Facebook have a Leader in Mark Zuckerberg, they only achieved disciplined Management by hiring Sheryl Sandberg as their COO to organise the perfect chaos. It is true that a Leader can also be a decent Manager. Certainly, though, one shall not imply the other. Management through the ages appears to have always been more of a technocratic issue and one for which a lot can be taught about, through higher educational courses and degrees, qualifications and diplomas. Leadership, on the contrary, cannot always be structured or moulded.
The path to leadership is not predetermined, but forged through a combination of innate talents, acquired skills and, of course, personal development. For the one who wishes to become a great Manager, even more so the case. It is not by coincidence that great Leaders and Managers often work together to achieve breakthroughs in various fields of business, such as the case of Facebook (now Meta). A Leader who cannot (or does not have the time) to manage, should possess a deep understanding of their strengths and weaknesses in order to address this issue. Therefore, whether one is born with a natural inclination for leadership, or cultivates it through deliberate practice, the essence of leadership itself lies not in one’s origins, but in the willingness to embrace the challenges and responsibilities inherent in guiding others towards a shared vision of a better future.
“THE REVITA TEAM”
Σημείωση: Τα άρθρα και τα δημοσιεύματα της εταιρείας μας, σκοπό έχουν να παραθέσουν στοιχεία για συγκεκριμένα θέματα καθώς και απόψεις που βασίζονται σε εμπειρία και γνώση που έχει αποκτηθεί. Απώτερος σκοπός μας είναι η επιμόρφωση των αναγνωστών στο σύνολο τους και όχι η παροχή συμβουλών για συγκεκριμένες περιπτώσεις. Για όλα τα προηγούμενα άρθρα της εταιρείας μας, μπορείτε να επισκεφτείτε την σελίδα μας στο Facebook, https://www.facebook.com/revitaconsult όπως και το blog στην ιστοσελίδα μας.
