Finance Minister Konstantinos Petrides fears that the current energy crisis caused by the war in Ukraine will be difficult to tame by comparing it to the oil crisis of the 1970s.
Speaking at the 12th Economic Congress of Nicosia, Petrides expressed grave concern that inflation has reached levels that “the current generation has not seen before.
“High inflation is the most dangerous aspect of this crisis. This is reminiscent of the inflation rates recorded in the 1970s and 1980s.” He said that it would be difficult for Cyprus to cope with the unprecedented high rate of inflation.
Rising prices for gasoline, electricity, utility bills, fruits and vegetables led to an increase in inflation in March to a record 7.1%.
Inflation continues to rise for the twelfth consecutive month and is the highest since 1995.
The increase came after price inflation reached 6.6% in February.
The minister said the transition to a greener economy would also complicate matters, noting that prosperity in recent years has been based on the fact that energy has a low price.
“Right now, this is changing as the cost of energy increases, causing social impacts as we move away from fossil fuels. If this situation continues, the economic policies of many countries will certainly be adjusted. We need to take targeted measures to prevent energy poverty and protect the most vulnerable groups, as they suffer the most from inflation,” Petrides said. Touching on another aspect of the war in Ukraine, the minister said that the island’s tourism sector, which produces about 15% of the country’s GDP, will suffer due to the war and sanctions against Russia.
“Tourism from Russia brings 20% of the sector’s income. We are confident that some of this can be covered by the positive messages coming from alternative markets.”
He said tourism stakeholders have successfully added 35 new destinations to the island. Petrides cited government intervention aimed at lowering energy prices by lowering the VAT on electricity bills and lowering the tax on fuel consumption.
He said the government has provided more targeted benefits to people living in mountainous areas while supporting pastoralists. Petrides explained that these measures are short-term.
“They also clash with the government’s roadmap for the transition to a greener economy.”
About 150 million euros are included in this year’s budget for energy saving schemes available to households and vulnerable groups, such as installing photovoltaics.
The government has committed to continue supporting energy saving and renewable energy projects until Cyprus achieves its goal of becoming carbon neutral.