Economic policy remains unchanged despite COVID

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Despite COVID-19 obstacles, Cyprus’ economic priorities remain to achieve macroeconomic stability and establish a competitive, business-friendly regulatory environment, said Finance Minister Constantinos Petrides.

“Despite the pandemic setback, our policy priorities remain the same, that is achieving macroeconomic stability, implementing prudent fiscal policies, ensuring financial stability and establishing a competitive, business-friendly regulatory environment of high standards,” Petrides to the 7th International Funds Summit.

He said the Cypriot economy shrank by 5.1% of GDP during the Covid crisis of 2020, with the downturn contained due to financial support measures assisting company operational costs and the labour market.

“I am pleased to note that government measures have been highly effective as shown by statistical data.

“The magnitude of the recession in 2020 was less than the EU average and much less than other countries that are also somewhat dependent on the tourist sector, while these measures have also helped to contain the increase in the unemployment rate to a significant extent.”

Petrides said with the gradual reopening of the economy, the baseline scenario shows it will enter into a recovery trajectory from 2021 onwards with “real GDP growth forecast at 5.5% in 2021, thus fully recovering the lost ground.”

Concerning Cyprus’ public debt, Petrides said it rose to 119.1% of GDP compared to 94% in 2019.

“A rise mainly attributed to a decisive increase in cash buffers as a precautionary action, due to the uncertainty caused by the pandemic, but also the comprehensive fiscal support measures.

“As of 2021, debt to GDP is expected to decline to about 107% and remain on a declining path over the medium term.

“It is imperative to ensure that during this recovery and growth process, we take full advantage of the opportunities the EU’s Recovery and Resilience Facility offers to the maximum benefit of our economies.

“In fact, we view the national Recovery and Resilience Plan as key for the overhaul of the Cyprus economy.”

Petrides said the government has consistently supported the development of the Funds’ industry.

It is identified as a sector in which Cyprus has a competitive advantage stemming from its skilled human capital, comparatively low running and set up costs, and access to the European and regional markets.

He added that the Funds Industry in Cyprus had exhibited steady growth with assets under management increasing by more than 200% from €2.7 bln in 2016 to €8.5 bln in 2020.

“A significant equity finance gap still prevails, and the difficulty in accessing financing in Cyprus remains and is well documented.

“The ecosystem has reached a maturity point where the existing financing sources need to be further complemented by private capital.

“It is encouraging that in a series of contacts with the market, we have identified the increased interest and appetite by local and international investors and fund managers to scale up their investments in the Cyprus economy and take full advantage of the market potential.”