Finance Ministry rubbishes claims economy unperforming

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The Finance Ministry fended off accusations fired by the opposition that government policy has taken its toll on the economy.

“The Cypriot economy continues its upward trend, and unlike other European countries which are entering a recession, Cyprus recorded during the first half of the year the second highest GDP growth rate in the Eurozone, after Spain,” the Ministry of Finance said.

Through the Finance Ministry statement, the government responded to criticism from the main opposition party DISY and former Finance Minister Constantinos Petrides, following a slowdown of the economy recorded in the second quarter.

Cyprus’ GDP grew by 2.1% compared to the same period last year. Initial forecasts by the ministry predicted 2.8% growth for 2023.

The ministry said it wanted to “restore the truth” following several publications.

According to the Finance Ministry, “the slowdown in the growth rate of the economy was predictable and had started from the first quarter of 2022.

“This is due to external factors such as the impact of continuous interest rate hikes by the ECB, high prices of consumer goods and the impact on the service sector of the Cypriot economy from the implementation of sanctions against Russian entities”.

It argued that slower growth for 2023 had been predicted and is reflected in the latest forecasts of the Ministry of Finance, where it is estimated that GDP will be limited to a little below 2.8%.

“In light of the above, the fiscal policy framework as drawn up and approved takes into account the developments in the Cypriot economy and, in particular, its predicted slowdown”.

The ministry argued that the slowdown of the economy in the first half of the year compares favourably with the results of 2022 since no deterioration of the state’s fiscal position is observed.

“On the contrary, for all months without exception, the fiscal performance of 2023 is better than that of 2022,” it added.

Earlier in the week, former Finance Minister Petrides took to social platform ‘X’ to fire at the government’s fiscal policies.

“Cyprus is one of the few countries experiencing a contraction in GDP compared to the previous quarter (the 3rd worst performance).

“This records a negative trend that cannot be ignored.

“Therefore, the trend cannot be attributed either to the international environment or to the more restrained monetary policy of the EU, the results of which come with a delay,” argued Petrides.

He argued that even countries with a negative growth rate compared to the corresponding quarter of the previous year exhibited a positive growth rate compared to the previous quarter and are on a path to recovery.

“This negative trend, for those who seek accurate conclusions (government and parties ought to), must be analysed alongside other indicators of macroeconomic imbalances.

“These indicators, in combination, create an explosive environment for economic and social stability,” said Petrides.

He attributed the trend to the government’s fiscal policies noting that “public finances, which due to populist policies, have deteriorated rapidly in recent months”.