17.10.2022
The Cyprus Economics and Competitiveness Council released a report on Monday showing that a sustained and pronounced rise in consumer prices and inflation has been assessed by experts from both the public and private sectors as the most serious impact on the Cypriot economy.
“Significant and sustained increases in prices and inflation have a risk index of 93 percent and are regarded as a source of danger with a probability of occurrence of 90 percent, and the severity of its consequences is estimated at 96 percent, and should take place within the next two years,” the council said.
“This is followed by worsening climatic conditions with a risk index of 82%, probability of occurrence of 78% and severity of consequences of 85%,” the council added, noting, however, that this is not considered an immediate risk in terms of its time scale, but is expected , will occur within the next 5-10 years.
The results of the study, as well as indicators designed to assess risks, were presented on Monday at a press conference in the Ministry of Finance.
The press conference was moderated by board members Charalambos Papageorgiou and Evangelos Tryfonos, and Panagiotis Panayiotou, director of Pulse Market Research, who conducted the data analysis.
The first data entry took place between April and June 2022 and involved 25 economic leaders who were tasked with providing their own assessments of the 17 most likely risks to the Cypriot economy.
According to the survey, the risk of “tension in the eastern Mediterranean with the possibility of a tense episode with Turkey” ranks third with a risk index of 78%.
The percentages above take into account a 62 percent chance that this will happen, combined with a 93 percent chance that any consequences will be of very high severity.
This is followed by a “massive immigrant influx” with a risk index of 75%, a 70% probability of occurrence, and 80% of participants reporting high severity.
The risk of “cyber attacks” is in fifth place with a risk index of 75%, a probability of occurrence of 65% and a high severity of consequences of 85%.
In sixth place is the risk of “failure of digital transformation” with a risk index of 74%, a probability of occurrence of 60% and a high severity of consequences of 87%.
This is followed by a “deterioration in the state of public finances and a significant increase in public debt” with a risk index of 73%, a probability of occurrence of 64% and a high severity of consequences of 82%. Subsequent risks include a “significant drop in the number of tourists” by 73%, as well as a “financial collapse of the general health care system” by the same percentage.
The Council stated that the purpose of using its own tool to monitor and evaluate potential risks to the Cypriot economy is to register and prioritize the most important risks by interviewing selected representatives of the private and wider public sector from various sectors of the economy, as well as the academic community.
In addition, the council also stated that the careful management and minimization of the country’s risks, economic or otherwise, is of paramount importance, therefore it is important to identify and measure these risks in advance.
Council board member Evangelos Tryfonos said the council first recognized the need for such a tool in February 2021. “While the council has documented various risks and shortcomings in the past, the need to have a scientific tool to help manage risk properly and effectively was also emphasized,” Tryfonos said.
“The fact that the Cypriot economy is small, open and therefore more vulnerable makes this need all the more urgent,” he added, noting that “political crises and economic shocks have and will continue to have an impact on the economy and should be assessed as such manner” so that they can be treated appropriately.”
