Saving the economy takes bold moves

1 min read

Despite the Central Bank’s optimistic view of an increase in the Cyprus economy’s GDP growth, from 2.6% this year to 3.1% by 2025, the employers’ federation and the main Opposition party are on the same page for once, warning the current path is unsustainable.

The central bank’s bulletin for June said that GDP will be boosted mainly by consumer demand and, to a lesser degree, from exports due to the expansion of foreign companies to the island.

It added that tourism revenue was at healthy pre-Covid levels during the first quarter, while public sector investment in the digital economy, green development, incentives for renewables and energy efficiency will also contribute to local output.

However, the employers’ federation OEB warned that the trend in the wider economy is “worrying” and that businesses constantly see their operations shrink.

It added that high wage costs in the private sector are unsustainable, and due to a labour shortage, mainly driven by seasonal jobs in the tourist industry, flexible terms should be introduced to hire foreign workers.

At the same time, the state payroll has ballooned by €161 mln in a year with no indication of any mid- to long-term containment.

It also said the cost of energy is “unacceptably high”, just as the Christodoulides administration said that it has no plans to reinstate measures to keep electricity prices low, nor the reduced tax on fuels, rolled over to motorists, which will cause an increase, again, on the cost of consumer goods.

The energy regulator admitted that electricity bills have more than doubled in three years, while the government has no plans to tell the state-owned utility EAC to dig into its profits and return that to consumers.

Opposition party AKEL, meanwhile, reiterated its three-point plan for the government: return of the electricity subsidy and lower fuel taxes, subsidising housing loans for low- and mid-income households, and taxing the banks on their super-profits to pay for compensatory measures.

The employers consider it “absolutely possible” to maintain and improve the country’s productivity and development results.

Still, quick reflexes and courageous decisions are required, which [the federation] will support with all its strength.

Six months into this government, continuing the conservative approach of the previous 10-year administration does not bode well for “courageous decisions”.

Perhaps President Christodoulides needs to tell his Cabinet to pull their socks up and come up with effective policies and solutions.

We don’t need quick fixes but long-term investments in infrastructure and a productive, sustainable economy that will not put all its eggs in one basket.