COVID19: Parliament approves €91.7 mln pandemic spending

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Parliament unanimously approved the 4th supplementary budget submitted by the government for financing measures to battle the pandemic.

The law provides for additional grants of €91.7 mln for expenditure to mitigate the effects of the COVID pandemic in Cyprus, for which there was no provision in the 2021 state budget.

They include a Support Plan for the wine sector, amounting to €900,000 and the continuation of special plans by the Ministry of Labour, Welfare and Social Insurance to support the economy in August, amounting to €5 mln.

It also includes the new Incentive Plan for Connectivity and Development of Air Transport, for January – June amounting to €6.3 mln.

Funds are also provided to continue emergency measures to protect public health until the end of 2021, such as hiring students/graduates to coordinate public health clinics, mobile units for rapid antigen tests and Covid-19 PCR tests. These costs amount to €38 mln.

The supplementary budget also includes increased expenditures of the Ministry of Tourism for extending the summer vacation subsidy program and the domestic tourism support plan until the end of the year, costing €11.5 mln.

The parliament approved an amendment requiring the government to inform and obtain written consent of the Parliamentary Committee on Finance and Budget before any money is spent.

State budget 2022

The 2022 state budget significantly reduces the fiscal deficits accumulated during the Covid pandemic as Cyprus moves from recovery to growth, Finance Minister Constantinos Petrides said Thursday.

He handed the state budget to Annita Demetriou, President of the House of Representatives.

Petrides said Cyprus forecasts a “significant fiscal correction” as the budget deficit declines to 1.5% of GDP from an estimated 5.1% in 2021 and 5% in 2020 due to increased public spending to support employment during Covid.

“This fiscal correction is needed, to protect public finances which during the time of the great crisis gave the opportunity and capacity to support the economy and the workers, averting a collapse during the pandemic.”

Following the outbreak, the EU has suspended its fiscal rules until 2022, invoking the Stability and Growth Pact’s escape clause for the first time.

Euro area Finance Ministers will begin a discussion about when the block’s fiscal rules will be reinstated.

“It was a deliberate decision; it’s not just what is allowed by the (EU) fiscal framework; we see it as a matter of political responsibility in managing the economy.”

According to ministry projections, GDP growth will exceed 5.5% in 2021 from a 5.1% contraction in 2020, while the 2022 growth rate is estimated at 4%, assuming full absorption of the €1.2 bln of Cyprus’ Recovery and Resilience Plan.

The 2022 state budget increases by 10% in development expenditure and contains mature projects such as the new archaeological museum, irrigation projects, road infrastructure, green growth, and digitisation.

“The budget includes the provisions of the Recovery Plan, which we believe fully complies with the new growth model for sustainable growth which we have designed and announced.”

Asked whether the budget debate will have the same problems when the parliament rejected the initial 2021 budget, Petrides said, “no one, neither the government nor the political parties want the repetition of last year’s phenomenon.”