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CYPRUS: Construction bubble denied as economy rumbles on

29 October, 2018

Finance Minister Harris Georgiades rejected claims the economy was overheating, spurred by a construction bubble in luxury properties.


In presenting his budget to a parliamentary committee on Monday, Georgiades said the economy “presented all the opposite features of an economic bubble” but noted that sales of high-value properties would need to be monitored.

“The sector of high – value properties, such as in Limassol, needs to be monitored. It does not present the characteristics of a conventional bubble, but I would agree that it needs to be monitored carefully,” said Georgiades.

He said the construction of luxury high-rise accommodation does not show the characteristics of a bubble as “no tower is built with loans but cash sales”.
Georgiades said that social housing is included in the government planning and would be promoted by the Interior Ministry.

Cyprus economy growth rate is expected to exceed 3% over the next three years, Georgiades told MPs of the House Committee on Financial and Budgetary Affairs.

He argued that the State from now on needs to focus on higher education, which as a contribution to the GDP approaches that of the shipping sector.

The much-neglected research and innovation sector is another areas the government will turn its attention to.

Presenting the 2019 State Budget to MPs, the Minister said it remains balanced and that any surpluses would be used to reduce public debt.

“This is the basic principle, this is our policy and we continue with that.”

He said the public debt is expected to increase to 104% of the GDP, despite estimations for 110%, as a result of Government moves to support the transaction for the sale of the Co-op bank, while in 2019 the public debt would fall to 97%.

Georgiades told the MPs that the government plans to continue its policy of no tax hikes.
He also said that the government plans to abolish the stamp duty, alter road tax, eliminate fuel tax and reduce tax imposed on interest paid as a special contribution for defence from 30% to 17%.

An economy that grows for the third consecutive year with a rate exceeding 4% of GDP should aim at encouraging savings, he noted.

Georgiades said that a public consultation would start very soon on making tax declarations obligatory irrespective of income, “to close any window of tax evasion”.

“This is a budget with no deficits, no exaggerations, without the mistakes of the past, for which we have paid, with a prudent increase in spending that allows us to fulfil our programme, our needs, new projects and policies,” said Georgiades.