COVID19: Cyprus economy must plan for virus impact to endure

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Cyprus Central Bank Governor Constantinos Herodotou warned that in managing the economy’s resources planning should go beyond the short-term, as the COVID-19 pandemic will have consequences well into 2021.

“We must think more medium-term…resources available today must be managed with an outlook until the first or second quarter of 2021, under a basic recovery scenario…Under an unfavourable scenario, consequences may continue until 2022.”

Herodotou, addressing the online Cyprus Economic Summit Covid-19, assured the Central Bank will monitor the situation and make any adjustments necessary.

“We are vigilant, we are preparing our own scenarios to help in any way we can.” ,

“Our economy’s growth depends almost entirely on the banking system and the banking system depends almost entirely on the economy.”

Herodotou said the steps already taken aimed to ease the great cost on Cyprus’ economy from the pandemic, as will future measures.

He said, “in taking those measures, we must not forget the next day.”

Herodotou said: “We must be careful that any measures we take today, will not become the reason for any other future crisis.”

He added: “There is a need to be prudent and for provisions to be made so that we can manage properly the sources we have at our disposal today.”

In order to do that, he said, Cyprus needs to take into account how the economy’s recovery is likely to take place.

Referring to the so-called “tick shaped” recovery, he said that measures and consequences related to coronavirus will certainly be present even in 2021.

Herodotou said it was logical to assume that some measures may be in place until a vaccine is found.

“We need to consider that there will also be financial consequences until that time.”

“We know that due to the crisis of 2013 we have certain limitations fiscally and in our banking…while banks are lucky to have great liquidity, they still have non-performing loans on their books from 2013.”

The bank governor said fiscal strength must be maintained until the beginning of 2021.

He said measures should focus on making the best possible use of public funds while ensuring that measures taken today will keep the banking sector healthy and robust so they can help businesses and households recover after the pandemic.

Herodotou said the way forward required “prudence, moderation, planning”.