Government’s political priorities remain the same despite the adverse effects of the coronavirus pandemic, according to the Minister of Finance Constantinos Perides said Monday at the 7th International Fund Summit.
“Despite the downside of the pandemic, our political priorities remain the same, namely to achieve macroeconomic stability, to implement prudent fiscal policies, to ensure financial stability and to establish a competitive regulatory environment that is favorable to companies of high standards”, said Petrides.
The minister explained that with the deployment of the vaccination program and the resulting reopening of the International economy, the Cypriot economy is going through a “phase of growth and resilience”.
The summit was organized by the Cyprus Association of Investment Funds (CIFA) and Invest Cyprus and addressed a range of topics including the economic outlook for Cyprus, the investment vehicles and asset classes that currently dominate the market, cross-border distribution, sustainable investments, as well as asset management, among others .
Petrides added that part of the plan designed to facilitate the goals listed above is the introduction of the Business Facilitation Unit.
Scheduled for launch in early 2022, the Business Facilitation Unit will provide services for new business creation, VAT and income tax registration, and social insurance registration. The unit will also provide advice on the permits needed to settle in Cyprus and expedite work and residence permits.
Regarding the Cypriot economy, Petrides said the government’s baseline scenario is that real GDP growth will reach 5.5% in 2021, marking a recovery from “lost ground”.
However, the finance minister said the extraordinary measures put in place to support the economy have had a negative effect on public finances.
“The general government balance recorded a deficit of 5.7% of GDP in 2020, after the good performance of the last four years, while it is expected to register a deficit of around 5.0% in 2021,” said Petrides.
“The fiscal situation is expected to improve considerably from 2022, reaching a surplus by 2024,” he added.
Public debt also increased during this period, with the debt-to-GDP ratio rising from 94% in 2019 to 119.1% in 2020.
Petrides explained that in 2021, the debt-to-GDP ratio is expected to drop to around 107% and remain on a downtrend over the medium term.
Regarding the tourism industry in Cyprus, Petrides said estimates place next year’s figures at pre-pandemic levels, indicating no lasting effects from the pandemic.
“With regard to the tourism sector which is one of the main growth engines of the Cypriot economy, we do not expect any scare effects,” said Petrides.
In the labor market, the minister said temporary income support programs were keeping the unemployment rate from skyrocketing.
“The unemployment rate has increased only slightly, from 7.1% in 2019 to 7.6% in 2020 and is expected to drop to around 7.5% in 2021,” noted Petrides.
The Minister of Finance reiterated the importance of making full use of the EU’s recovery and resilience facility in order to fully strengthen the country’s economic prospects.
“We see the national Recovery and resilience plan as the key to overhauling the Cypriot economy, ”said Petrides.
“We want Cyprus to be among the pioneers of the green and digital transition, [to be] a country with a resilient health system, a welfare state with a strong protection network for those in need, ”added the Minister.
Petrides also reiterated the government’s commitment to support the funds sector in Cyprus, noting that the country’s assets under management (AuM) increased by more than 200% between 2016 and 2020.
The overall figure for outstandings rose from 2.7 billion euros in 2016 to 8.5 billion euros in 2020.
“It is particularly important that 25% of funds under management in 2020 were invested in Cyprus, directly financing the economy,” said Petrides.
The minister also praised the sector’s ability to create jobs, as well as its ability to deliver specialization and value across the financial services industry.