High 5.7% GDP growth confirms economy’s resilience

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The continued high GDP rate in the fourth quarter of 2021 confirms the resilience and dynamism showed by the Cypriot economy, boosting expectations for further growth in 2022, Finance Minister Constantinos Petrides said.

According to a flash estimate by the Statistical Service (Cystat), the economy grew by 6% GDP seasonally adjusted in Q4 2021 and by 5.7% year on year.

“Compared with other member-states, this estimate of Cyprus’ growth rate is considerably better, both for the euro area as well as the EU,” Petrides said.

Noting the 5.7% GDP growth rate for 2021 was very close to the ministry’s initial estimate, Petrides said: “It shows the Cypriot economy is one of the relatively few EU economies to recover the losses of the 2020 health crisis.”

He said the improved economic environment and regaining confidence are supported by the improved performance in the labour market, with the unemployment rate for Q4 estimated close to 6%.

And the registered unemployed is showing a steady decline, implying that unemployment in 2022 will be lower than the pre-COVID levels.

“The good economic performance and the prudent fiscal policy also lead to improved public finances with the 2021 fiscal deficit considerably smaller than initially estimated, marking significant improvement compared with the deficit of 5.7% of GDP the previous year.

“The aim is sustainable growth which can be attained only with prudent fiscal policy, driven by investments, promoting the necessary reforms through the implementation of the National Recovery and Resilience Plan.”

Petrides said the government would continue the downward trajectory of the public debt, which in 2021 declined to €24.4 bln from €24.9 bln while the debt to GDP index marked a reduction of 10.6 percentage points to 14.7% of GDP from 115.3% the year before.

“We will continue debt redemptions this year, and by the end of 2022, we will reduce the debt index by 5 to 6 percentage points.”

Petrides said the aim for 2022 is to reduce the debt to GDP ratio to 95%

Since the pandemic outbreak, he said that the government opted to borrow at cheap rates and build the necessary cash buffers.

“Soundness of our policies is proven now that bond yields have risen based on the expectations over rate hikes in the future.”