29.09.2022
Cypriot Finance Minister Konstantinos Petrides stressed on Wednesday evening the need to be “even more careful” with fiscal discipline in a challenging new era, while Central Bank Governor Konstantinos Herodotou mentioned the risk of new problem loans due to difficult economic conditions.
“We will need these buffers that we have built, so despite social pressures, we should not waste them in the short term, as requested by most political parties around the world,” Petrides said, speaking at a conference organized by Delloite Cyprus. titled “Better Future: Better Future: A Sustainable Economy for Cyprus”. The Minister expressed the hope that “we will stop playing with the economy” not only in Cyprus, but in all European countries.
He added that the coming year will be quite difficult for the economy, noting the challenge of inflation caused by a number of factors and mistakes, such as income support policies during the pandemic, the expansionary monetary and fiscal policies of the EU with negative consequences. interest rates, but also the green transition, for which, he said, the EU was not ready.
The Minister also talked about the coming new interesting and challenging era, which will be marked by de-globalization, severe geopolitical tensions, big changes needed for a green transition and high energy prices.
Speaking about the Cypriot economy, he said he was quite pleased with its state: the growth rate for the first half of the year exceeds forecasts by more than 6%, as well as other indicators indicating the potential and stability of the economy. However, he stressed that next year will be difficult.
Inflation and high interest rates may hinder the solvency of the borrower, said the head of the Central Bank.
Governor of the Central Bank of Cyprus Konstantinos Herodotou said that next year will be difficult.
“A key current challenge for the ECB, as well as other major central banks, is to raise interest rates to fight inflation, while the risk of a recession is high,” he said, adding, however, that the longer inflation remains high, the more harm it will hurt the economy of individuals and companies.
While monetary policy will act decisively to restore inflation to official targets, fiscal policy must be targeted so as not to counteract monetary policy but at the same time protect the incomes of the most vulnerable, he said. .
Speaking about the impact of the war in Ukraine on Cyprus, he said that a disruption in trade in services and an increase in commodity prices are expected, as well as an indirect impact on business and consumer confidence. He added that the most significant impact of Cyprus on Russia is the export of services related to financial and other business services and, to a lesser extent, tourism and transport.
Regarding the banking sector, he said that the current situation is encouraging, but there should be no complacency. Even though the banking sector has seen a significant reduction in non-performing loans, progress in the banking system has not been uniform, with the smallest banks lagging behind, he said. He added that the risk of new defaults is increasing in the current economic outlook. Higher inflation, coupled with higher interest rates, is expected to reduce household net income, which could make it difficult for borrowers to pay.
On behalf of Minister of Energy, Trade and Industry Natasa Pilides, Director of the Ministry’s Consumer Protection Service Konstantinos Karagiorgis said that Cyprus was concerned about the impact of the energy market in many areas of the economy, especially electricity, manufacturing, transport and heating.
He also said that another major concern is the impact of the war, especially on exports, services and the supply chain, coupled with higher-than-expected commodity prices that affect vital sectors of the economy such as construction and industry.
He added that to support the energy modernization of businesses, the ministry is implementing a series of schemes with a budget of 350 million euros and ensuring that consumers and businesses remain at the center of the reconstruction process for a sustainable recovery.
Deputy Minister of Tourism Savvas Perdios, speaking during a panel discussion, said that the main decision they made in 2019 with a horizon of 2030 was to make Cyprus a year-round, high quality, digital and more inclusive destination, as well as a destination where all residents can benefit from tourism. “So everything we do is driven by that vision,” he said.
