The coronavirus crisis has elevated government importance to support local economies while highlighting the need for businesses to become more tech-savvy, economists told the Financial Mirror.
Government is on the frontlines of this crisis, having to increase spending on public health, transferring general revenue to buttress state hospitals while at the same time offering assistance to hard-hit business and workers.
States across the globe employed delays in tax payments, furlough schemes and grants to businesses to cushion the blow of lockdown on their citizens and the economy said University of Cyprus economics professor Sofronis Clerides.
“It is well accepted the private sector is the driving force behind the economy, taking on initiatives and boosting productivity.
“However, coronavirus has taught us that the state needs to be there to provide solutions for problems that the private sector will never be able to do.
“In Cyprus’ case, we got something right and somethings wrong. We witnessed the state education system not being able to handle the crisis as it was not ready to take to distance learning,” said Clerides.
He argued the economy would need to be guided towards a different organisational model as it can no longer rely on putting all its eggs in just one basket.
“Cyprus’ economy needs to be diversified, and not just relying on tourism and building towers and houses for foreign investors.”
He explained that Cyprus would need to find more productive sectors to invest in.
“At times, we have heard of Cyprus turning into a technological hub, a medical service centre, with more ideas being tabled.
“All this is good, but they will need a lot of work put into them.”
Unfortunately, as he added, Cypriots and state officials tend to go for the easy money.
“In the recent past, it was the passports scheme which developers are not leaving to die, as they are demanding that Cyprus offer ‘golden visas’.
“At the same time, they are lobbying for Cyprus to push to join the Schengen agreement, thus making the visas the passport for doing business in Europe.”
Clerides believes that Cyprus needs to develop a strategy to attract long-term foreign investments and stop relying on ephemeral dreams of development.
Dr Nicos Kousis, assistant Professor of Finance at Frederick University, said the private sector should do its part and invest in technological advancement as coronavirus has ensured that technology becomes an integrated part of our lives.
“Businesses have been forced to get on the digital train as they turned to online solutions to keep their business alive.”
Noting that Cyprus still has a lot to be desired when it comes to digitalising its economy, Kousis said that the business world and the government had transferred their transactions online.
“Many businesses and state services came online, increasing productivity tenfold.
“Cyprus has long been a traditional economy and will need to step out of this model by adopting brave policies pushing forward with digitalising its society and economy.
“The tradeoff of this development is that during a transitional period, a large number of jobs will be lost.
“That is where the state will have to step in to support people on the one hand and to educate future employees on the other.”
Cyprus’ economy shrunk by €1.28 bln in 2020, as its key sectors, tourism, commerce, and construction, suffered during the pandemic and lockdown measures to stop COVID-19 spreading.
According to data from the Statistical Service, Gross Domestic Product last year fell to €20.99 bln from €22.28 bln in 2019.
The economy suffered its biggest shock in the second quarter of 2020, with GDP shrinking to €4.86 bln, from €5.58 bln in the first quarter.