COVID19: Cyprus public finances hit by pandemic

Finance Minister Constantinos Petrides told his eurozone counterparts the coronavirus outbreak has taken its toll on the Cyprus economy, putting pressure on public finances.

Talking with his counterparts during a teleconference, Petrides informed the Eurogroup of the government’s short-term projections for the Cypriot economy.

Laying out the government’s projections, following the coronavirus outbreak, Petrides referred to measures taken to revive the economy.

Petrides stressed that Cyprus’ economy is expected to be seriously affected by the pandemic as is the case with all European economies.

He said that while Cyprus has taken very strict measures to contain the virus to protect its citizens and the public health system, the government has adopted a fiscal support and liquidity package equivalent to 15% of GDP.

The Eurogroup was told the Cypriot economy is expected to shrink significantly in 2020 with projections for an upswing in 2021, mainly supported by local demand.

In general, the government’s macroeconomic scenario is in line with the Commission’s spring forecast for 2020, suggesting an increase of real GDP of 6% in 2021.

Referring to the country’s public debt, Petrides said it is estimated to increase to 116.8% of GDP in 2020, compared to 95.5% of GDP in 2019.

He noted that public debt will follow a downward trend from 2021 onward.

“The main goal of Cyprus’ policy remains to safeguard its macroeconomic stability in order to facilitate growth and the creation of jobs,” said the Minister.

“Cyprus plans, when economic conditions allow, to return to a fiscal policy oriented towards positive primary surpluses, to facilitate the rapid reduction of public debt at a satisfactory rate”.