* Cyprus economic outlook tempered by Russia
* Latest data shows Russian arrivals down 25 pct
* Some off-shore Russian businesses relocated
By Michele Kambas
NICOSIA, Jan 14 Economic woes in Russia are
tempering prospects of bailed-out Cyprus returning to growth in
2015 and mean the island nation risks a fifth year of recession,
As the rouble takes a tumble on the back of weak oil prices
and Western-led sanctions, Moscow's troubles are seeping into
the Mediterranean island, where Russian-related business is
thought to make up about 10 percent of the Cypriot economy.
"I am not forecasting growth this year, largely due to the
Russian crisis and the decline in tourism arrivals," said Fiona
Mullen, director at Sapienta Economics, a financial consultancy.
Cyprus has been in recession since mid-2011, and required a
10 billion euro financial lifeline from the European Union and
the IMF in 2013 to stave off bankruptcy. Authorities and
international lenders had expected tepid growth of 0.4 to 0.5
percent this year after an estimated 2.8 percent slump in 2014.
"My forecast is for a contraction of 0.7 percent this year,"
The most obvious impact of the Russian crisis has been a
sharp fall in Russian visitors, who made up roughly 25 percent
of all the island's tourists in 2013 -- the second largest
national grouping after sun-starved Britons.
But with the rouble falling by more than 40 percent against
the dollar last year, and already down some 10 percent this
year, many Russians have had to drop plans to travel abroad.
Arrivals from Russia plunged 25 percent year-on-year in
November, according to the latest available data. "Under the
best case scenario, I would expect a 15 to 20 percent drop in
arrivals from Russia this year," said Victor Mantovani, former
head of the island's travel agents association ACTA.
Tourism accounts for about 11 percent of Cyprus's 18 billion
euro economy, and the Russians are vital to its well-being.
"They represent 30 percent of total revenue. They spend
more," said Phidias Pilides, president of the Cyprus Chamber of
Commerce and Industry. They are starting to spend less.
According to official data, a Russian visitor in Oct. 2014
spent on average 95.2 euros ($112) a day, compared to 122 euros
a year earlier. That is still more than the average Britons, who
spent just 75.7 euros daily.
BRINGING ASSETS HOME
Cyprus and Russia have had close ties since before the
collapse of communism. Low taxes, cultural ties through Orthodox
Christianity and the weather proved highly attractive to newly
rich oligarchs looking to park cash and businesses.
When Cyprus faced its own financial woes in 2013, analysts
estimated that more than a third of all Cyprus bank deposits
might have had Russian origin and numerous Russian companies are
registered on the island.
Looking to tame the economic turmoil at home, President
Vladimir Putin has told Russian businessmen to 'de-offshore'
their assets and authorities have introduced amendments which
subjects offshore income to taxation.
Russia's richest man Alisher Usmanov swiftly complied,
announcing last month that he had transferred his holdings in
mobile operator Megafon and iron ore producer Metalloinvest to
Russian entities from Cyprus..
"Russia's presence in the economy has been a huge supporting
factor. Its footprint is everywhere from tourism to real estate,
so it is worth monitoring the impact," said Michael
Florentiades, chief economist and head of investment research at
XM.com, an online financial services company in Limassol.
He predicted the local economy would contract one percent
this year. "The impact on the international business services
sector because of the deteriorating situation in Russia is also
important to watch," he said.
($1 = 0.8465 euros)
(Reporting by Michele Kambas; Editing by Crispian Balmer)