It is clear that the improvement in the course of the economy, with the gradual return to normalcy, the strengthening of family incomes and the continuous downward trend in the unemployment rates, strengthens the domestic demand and consumption. Of course, the negative impact is the strengthening of inflationary trends, a global phenomenon (we saw last week that Central Banks announced increases in interest rates to contain them).
The increase in inflation, in addition to the increased demand, is a consequence of the problems faced by the supply chain and the increases in raw materials and goods. Despite the estimates that high inflation was a temporary phenomenon, it is found that it will remain high in 2022.
It is noted that the course of consumption is an important indicator of the soundness of an economy and at the same time demonstrates the moods of consumers / citizens. Boosting domestic demand contributes significantly to corporate turnover and boosts public finances through tax collection.
It is emphasized that the retail sector has been significantly restructured, with new “players” entering the market, or existing ones to increase their turnover and implement technologically upgraded services and home delivery in response to restrictive measures (services that will of course be maintained later). ).
In addition, there is a change in the mindset of consumers, who are more careful about their markets and spending and conduct market research before proceeding. In addition, there is an increase in the ads of the companies in the sector and the funds spent for promotion and promotion purposes.
Consumption, in addition to the mood of consumers, is also affected by the liquidity in the market and the disposable income of households, as well as the willingness of citizens to save. With deposit rates in nadir and high interest tax (something that is expected to decrease after the announcement of the Minister of Finance), the disposition for savings is limited.
Every citizen, like every business, always rational, forms the family / business budget to ensure for each person, over the years, a minimum standard of living for himself and his family, while for businesses the sustainability and their development.
In this context, income is assessed, the amount required for daily needs (it should be emphasized that consumers are gradually becoming more attentive and easily adapt to market changes), to save and possibly secure funds for difficult times and for retirement, for investment in real estate, or for securing “passive income” or for own use and in securities. The equation always takes into account the possibility and the amount of borrowing. Of course, the strategy for each family depends on the assets it has, current and future incomes and its disposition regarding the issue of risk.
The gradual recovery of tourism is also expected to boost consumption. “Imported” consumption is another element of strengthening the commercial and business activity of the country. Attracting high-income tourists, as well as permanent residents (this is the aim of the government's new incentive plan for 2022 concerning attracting and establishing companies in our country), directly and indirectly strengthens the economy, if in addition to hotels and other businesses, such as clothing stores and restaurants can be favored.
In view of the above, it would be prudent to analyze in combination the course of the Cypriot economy with the course of inflation and the possibility of taking such measures and incentives that will limit domestic demand, not to the detriment of economic growth, but in a rational planning framework. .
Promoting infrastructure, improving the business environment, and promoting sectors of the economy that will attract high-paying professionals are some of the measures that can help create real investment value.
A positive trend in consumption strengthens the economy, but any excesses must be properly managed. The retail sector and consumer habits have changed since the 2013 crisis, with small and medium-sized enterprises finding virtually no room for reactivation at pre-crisis levels.
Many companies have been and are forced to restrict their activities due to the spread of the virus. The government, through the sponsorship plans, maintained the production units of the place, while gradually coming to normalcy, the market forces will be allowed to act with those who can not adapt to the new data that are being formed and are facing survival problems.
As in all sectors, in retail trade the correct evaluation of the course of a company is very important, in order to ensure its viability. This necessity becomes even more acute when the economy is trying to find a way out of a crisis that has essentially paralyzed important sectors.
