COVID19: Cyprus extends financial support as debt grows

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Cyprus announced on Thursday that it has decided to extend until the end of October financial support schemes introduced to mitigate the effects of the lockdown and restrictive COVID measures imposed.

Talking at a press conference with Finance Minister Constantinos Petrides, Labour Minister Zeta Emilianidou said the government will be continuing measures worth €106 mln to support workers and businesses.

Measures in place include extended financial support to tourism establishments, such as the hotel industry which was hit hard by COVID travel restrictions.

There is also an incentive scheme for employers to recruit those who are registered as unemployed.

The government will also continue to support activities linked to tourism and other related businesses, such as entertainment establishments and night clubs, which have not yet been given the green light to open.

The schemes include a furlough programme which will see the government paying 60% of hotel staff wages provided the business has seen a reduction in turnover of over 40% and will not be laying off any workers until the end of the year.

Petrides said the government had implemented around 60 schemes in three phases to protected employee income, support vulnerable groups, the health sector, borrowers, and businesses.

“We are currently entering the seventh month of an unexpected, exogenous huge health crisis, which interrupted the growth dynamics of the Cyprus economy built over a six-year period, with high growth rates and declining unemployment,” said Petrides.

He said that the economy shrunk in the second quarter by 11.9% and 5.5% in the first half of 2020.

Taking into account the current data, the Ministry’s forecast of a 7% reduction in GDP remains unchanged despite the worst-case scenario unfolding in tourism.

The unemployment rate, Petrides said rose to 7.1% compared with 6.7% last year.

Petrides said that due to increased borrowing to improve state liquidity, public debt has already reached 120% of GDP, compared to 95.5% at the end of 2019.

“In view of the above, I would like to emphasize the fact that the amount of public debt is such that it is necessary to reverse the trend, ensuring Cyprus’ credibility abroad.”

“Ensuring a sound fiscal policy and shielding the economy is absolutely imperative so that the state budget or social and development policies implemented in the past years are not jeopardised in the near future.”