Finance Minister presented budget to House committee

Amid conditions of greater stability than 2020 and with Cyprus moving from a stall in economic activity to recovery and development, the state budget was submitted at the House of Representatives, said Finance Minister, Constantinos Petrides, presenting the budget at the house Finance Committee.

Referring to the budget’s aims, he said it is the protection of the health of the population and the development of businesses, with the transformation of Cyprus into a sustainable business center of the region, the social dimension and green development.

The budget, he said, will continue to be in deficit in 2022, however this will be much smaller than last year when it was close to 5% and will be around 1.1%.

He talked about encouraging development prospects and said the year will end with 5.5% growth after the 5.1% recession in 2020. The island’s growth rate will be 0.8% to 1% higher than the eurozone’s growth rate of 4.8%, according to estimates.

Regarding inflation, the Minister of Finance said uncertainty remains although the main view is that it is temporary and this will become evident later. If the official predictions are confirmed, he said, for 2% in 2021, then we will not be talking about an inflation crisis that will have a great influence on markets.

Cyprus, he added, is one of the few countries which still operates according to the Cost-of-Living Allowance (COLA) so that there will be a compensation to the consumer for the price hikes and at the same time, it feeds into inflation. He also said that due to the inflationary pressures, an increase in the interest rates is expected in the coming period.

The available tools to manage inflation, he said are the monetary policy, compensation to farmers, COLA and the use of EAC reserves.

The Finance Minister pointed out the declining trend that unemployment is following, adding that the aim is to create conditions of full employment in the near future and establishing the minimum wage. Unemployment, he added, is below the European average which is 8.4% in the EU, in Cyprus it is 7.5% while in other tourist countries unemployment is much higher. At the same time, he expressed concern over the shortage of labour in the hotel and food industries due to the benefits that are in place.

Petrides said that the fiscal deficit will be lower than that of 2020, noting that the public debt which rose to 119% during the crisis will go down to 107% this year and will be 100.9% in 2022 and 90.2% in 2024. The public debt, he said, is near the EU average, adding “we are heading towards sustainability despite the pandemic”.

He also said that the increase in Non-Performing Loans from 17.7% in April 2020 to 18% nowadays is not large.

As regards investments, he said in Cyprus there are 137 high-tech companies which are active and employ 13 thousand people.