It is clear that there will be a significant impact on the Cypriot economy as a whole. The fact that a number of businesses have been arbitrarily shut down in order to limit the spread of the virus, has drastically reduced commercial activity and will likely lead to short-term spike in unemployment. Moreover, as businesses look to regulate their cashflows, credit terms will not be met, payments will be delayed, which will further exacerbate the issues at hand. Obviously, as one of the main sectors of the economy, tourism and HORECA will have many challenges to overcome, as the fear and uncertainty of the situation may prolong its road to recovery. However, there are other sectors that will be affected such as real estate, transportation including air travel and shipping, and the energy sector. In real estate, we expect to see many discounted assets flooding the market; the fledgling Cypriot airlines will need to find new sources of investment if no targeted government assistance is forthcoming; locally-based ship management companies and shipping service providers have continued to provide their services unabated to keep the local and global economy going with no guaranteed returns on their services; and there can be no second guessing as to what impact the significant drop in the price of oil, allied with COVID-19, will have on oil majors’ plans in exploration and development campaigns in the Eastern Mediterranean.
Worldwide, a lot of relief measures aimed at addressing the economic consequences of the outbreak on individuals, households and businesses have been taken, such as relief from taxes (tax holidays, deferrals or other relief), state coverage of sick pay or wages of employees not able to work, moratoria on repayment of loans, overdraft facilities and mortgages, measures to ensure the continued flow of credit to business, through guaranteed or subsidised loans or central bank asset purchase programmes.
In Cyprus, the initiative of cheap loans was one of the first measures taken with the aim of relieving cashflow pressures. On 25 March, EBA issued a statement clarifying that generalized payment delays due to legislative initiatives to address the adverse systemic economic impact of the coronavirus do not lead to any automatic classification in default, forborne or unlikeness to pay.
Therefore, a number of other measures will be unveiled in Cyprus to bring support to individuals and businesses, such as the suspension of the repayment of loans and interest for 9 months. Challenges will arise in implementing these measures. In this respect, EBA also stated that institutions are expected to use a certain degree of judgement and distinguish between borrowers whose credit standing would not be significantly affected by the current situation in the long run, and those who would be unlikely to restore their creditworthiness. And the line is very fine and there will be a lot of subjectivism in assessing these situations.
However, at this moment, flexibility, good faith, proactive measures and global co-operation should be the operative words.
No one is or was prepared for such a crisis, however it is important to adapt and make all relevant changes. For example, Spain has started the process and in this respect the Spanish Council of Ministers has agreed at the beginning of this week to request the urgent opinion of the Permanent Commission of the State Advisory Council regarding the project of the Spanish Insolvency Law Recast. The Council of Ministers in spare is aware of the relevance of having a duly updated Insolvency Act in these difficult times of crisis caused by the pandemic.
In the current context it is important to rethink and revisit Cyprus’ insolvency framework improving it based on the challenges the economy is facing and make relevant tweaks so modern insolvency and restructuring tools and methods can be more efficient and effective.
By definition insolvency practitioners are crisis managers and with a few changes in the current legislation they can become a very effective tool in the recovery process.
The expertise and specialization of insolvency practitioners in addition to the modernization of the insolvency legislation will be the definitive factor for the rehabilitation of the system, to ensure sustainable recovery.
CITR is a specialized insolvency company that supports the reintegration of distressed businesses into the economic circle and crisis management is part of our expertise. Through our customized solutions, we facilitate restructuring, help give businesses a second chance and improve the efficiency of restructuring, insolvency and debt discharge procedures.
We address our services to both companies and creditors in distress, with the aim to find the best solution for all stakeholders involved. Our teams of professionals cover a large area of businesses with a focus on formal insolvency appointments including receiverships, compulsory liquidations and schemes of arrangement. CITR is able to act in respect of examinerships as well.
Our mission is to leverage our expertise to contribute in the long-term recovery of the local economy and the growth of the business environment.
Source website: Sunday Mail