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COVID19: Cyprus economy faces collapse if shutdown endures

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Finance Minister Constantinos Petrides said it is vital the Cyprus economy gradually gets back to business as usual, otherwise bankruptcy will not be far behind.

In an interview with state broadcaster CyBC on Wednesday, Petrides said: “The important thing is for the economy to start producing because otherwise, the risk of bankruptcy is visible”.

Petrides spoke of a global economic shock, emphasizing that all states are facing a deep recession, with the main characteristic being a serious crisis in demand.

He argued if the economy goes bust, the country’s healthcare system will collapse, which will, in turn, cost more lives.

He said that the longer the economy is put on the ice, the higher the risk that businesses will not be able to reopen.

“The economy will gradually begin to function, possibly with measures which may hinder productivity to prevent the virus from spreading”.

Petrides said the Finance Ministry has already reviewed its fiscal targets as Nicosia braces itself for a bigger than expected GDP shrink.

In the early stages of the outbreak, Finance Petrides said that he expected the country’s GDP to shrink between 5-9.7% depending on the duration of the economic shutdown.

Cyprus’ Finance Ministry is now preparing for the worst as the economy is expected to take a much bigger hit from the coronavirus crisis than the initially anticipated ceiling of 9.7% GDP.

According to reports, the Finance Ministry is now recalculating scenarios which envisage a greater impact.

Apparently, one scenario sees the economy shrinking by 10.6% of GDP while the worst-case scenario predicts a whopping 13% retraction.

The Finance Minister said that decisions taken will consider, among other things, the number of companies in each sector, the number of employees employed, the contribution of each sector to GDP, as well as the ability of some companies to offer online service.

He said that, by April 29, when the cabinet is to give the final go-ahead for the roadmap to reopening the economy, a list of priority sectors will be drawn up.

Open for business from May

The first businesses on the list will be able to open in early May with more coming online in the months leading to September.

Meanwhile, President Nicos Anastasiades met with members of the epidemiological committee on Wednesday to get their advice on drawing up the strategy to reopen the economy.

It is understood the government and the committee have a roadmap in mind which will be set in motion from early May with a number of businesses reopening and the night curfew being lifted.

People are also expected to be allowed out of their homes for more than once a day.

Construction sites will be one of the first to get the green light, followed by companies that either employ few staff or can operate by appointment, such as barbershops, hairdressers, beauty salons, car showrooms.

In the second phase, restaurants, cafes, and restaurants will operate again, also with restrictions.

The reopening of cinemas and theatres will be evaluated at a later stage.

Clothing, footwear, toy stores and shopping malls are expected to open at the beginning of the summer, with restrictions on the number of customers allowed in at a time.

Churchgoers will be allowed to congregate sometime in mid-June, again with restrictions on numbers allowed in.

The reopening of airports will be the last item on the roadmap to be evaluated, while Cyprus is expected to only reopen its borders to those with a similar or even lower spread of the virus.