The Levant: Rising To The Challenge of Crisis

Exceptionally Bright Spots

For those who say the Levant is nothing but bad news, two countries are proving otherwise—with both also set to benefit substantially from the development of the Levantine basin’s energy reserves.

Israel has long stood apart from its regional neighbors in the political terms, but its economy is also very much in a category of its own. Buoyed by large-scale foreign direct investment from such countries as the US, Israel has investment inflow close to the 20-year high, and also a dynamic small and midsize enterprise sector. Science, technology and IT fields are the biggest magnets for investors and have driven its economy over the past few years: GDP this year is expected to grow some 3.5% to 4%, ahead of preliminary estimates.

Cyprus, too, is a special case. Just a few years after Cyprus’ financial sector virtually imploded and the IMF came in to stabilize the island country and help put public finances back in order, things are on the up, buoyed by a resurgence in the key tourism sector. Cyprus exited the IMF program in July and expects growth of 2.7% this year, after S&P and Moody’s upgraded their outlooks from stable to positive. Big problems remain, of course. Bank nonperforming loans are some 60%—an amount equivalent to 150% of GDP. Public debt is also alarming, at more than 100% of GDP. Yet there is lots to look forward to, including maybe even a solution to the decades-old Cyprus problem: Talks between the north and south have been continuing with both sides making optimistic noises. And next year is expected to see a wave of privatizations to lure back foreign investors.

“One of the big attractions for investors here is our membership of the EU and the eurozone, with companies also recognizing this is the best place to access markets across the Levant,” says Natasa Pilides, head of the Cyprus Investment Promotion Agency.