Fiscal Council: Economy is resilient but advises a vigilant approach

Cyprus Fiscal Council has said that the economy is strong and resilient, however it advises everyone to be vigilant as international challenges persist.

The Council issued a press release Wednesday with its observations and recommendations ahead of the finalisation of the state’s 2023 budget and the Medium-Term Fiscal Framework 2024-2025.

According to CY Fiscal Council the economy continues to show strength and resilience in light of the continuing difficulties recorded in 2022, even though these have followed two already difficult years of reduced growth.

Both the real rate of growth and employment continue to move in satisfactory levels and the economy performs very well compared to other MS in the Eurozone and the EU, the Council notes. It says that there is credibility and stability, but notes that this picture could be temporary as the international economy has shown serious warnings that the coming years will bring about even greater challenges.

The Council also says that apart from the ongoing inflation and the challenges ECB is faced with, the international trade is also an area of concern as we observe a decrease in exports from China. It underlines, in addition, that the situation in Europe in terms of securing natural gas reserves is also difficult.

The Council also says that in Cyprus inflation rates are inherently lower in services than in industrial and manufactured goods. Therefore, it adds, while our main services exports, including tourism, will continue to become competitive, profit margins will erode, partially offsetting any benefits from a potential increase in volumes.

The Council notes that in light of all the above, it is clear that the approach to the state budget must be governed by caution and prudence and that it would be wiser to avoid overly optimistic estimates, including theoretical increases in state revenues.

The Council finally points out that the horizontal measures taken are socially unjust, conflicting to the objectives of the Green Transition and ineffective, adding that the taxpayers are paying to service a socially and environmentally unjust policy.