Economy to contract 5.5% GDP in revised forecast

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Cyprus Finance Minister Constantinos Petrides predicts the economy will perform better than expected post-COVID shrinking by less than 5.5% GDP instead of the previously forecast of -7%.

“We have succeeded in our policy response to the pandemic crisis,” Petrides told an online conference sponsored by The Economist Events on Tuesday.

“As a result, we are able to revise our forecast for the Cyprus economy’s performance in 2020. The economy is forecast to experience a contraction of real GDP of less than 5.5% during 2020 with services and tourism being the most affected.

Our baseline macroeconomic scenario for 2021 suggests a significant rebound of the economy of about 4.5%,” the minister announced.

He further added that the Ministry has revised unemployment projections downwards, now expecting unemployment to reach 8% compared to the previous forecast of 9%.

The Finance Minister was speaking at the online conference titled The New York-East Med Summit, where speakers offered a fairly optimistic view of developments in Eastern Mediterranean economies.

“Cyprus has made containing the virus the cornerstone of our policy response,” Petrides said.

He said there was a conscious policy decision to mitigate the medium- and long-term economic effects of the crisis “with frontloaded economic measures, a generous fiscal stimulus package that provided short-term income support”.

Petrides argued that as the Cyprus government understands it, its response measures constituted the most comprehensive package in the EU with a total of 85 measures.

He said the forecast is now 4.5-5 per cent growth for 2021 because support measures are paying off.

“The government is fully exploring the opportunities created by the European Recovery Plan and is working on the reforms required for it.”

He told the conference that Cyprus has a number of structural reforms currently underway including fast-tracking procedures for businesses plus administrative, local authority, and judicial reform.

Petrides said attracting foreign investment remains a priority for Cyprus.

“Our sound fiscal policies maintained for the past seven to eight years, along with our stable tax system and a balanced budget will do much to attract such investment”.