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Next The dual challenge for the European and Cypriot economy HOME • INSIDER • CYPRUS • The dual challenge for the European and Cypriot economy
& nbsp & nbspInsider/ΚΥΠΕ & nbsp; & nbsp; The European and Cypriot economies are facing the “double problem”, rising prices and inflation and high uncertainty due to the crisis in Ukraine, as mentioned at a conference organized by the Commercial and Industrial Nicosia Chamber of Commerce (EBEL) and the European Investment Bank (EIB).
Speaking at an online conference, both the EIB Vice President and the Minister of Finance and the Governor of the Central Bank referred to the great challenge of rising prices that erodes the incomes of both businesses and households. However, the need to promote investment in the green transition, which will reduce dependence on fossil fuels by strengthening the resilience of the Cypriot economy in the long run.
Liliana Pavlova, EIB Vice President, said that after the coronavirus pandemic, a new shock arose from the war in Ukraine and the sanctions against Russia and the energy security concerns, through which the Cypriot economy is called to move. “War really threatens the EU economy with the dual problem of continuing and dramatic rise in energy prices and enormous uncertainty,” he said.
He assured that the EIB has a strong investment program in Cyprus and stressed that during the transition to the new environment, a lot will depend on investments.
In his own speech, Konstantinos Petridis recalled that during his speech in Parliament on the state budget for 2021 he had stated that conditions were favorable for the recovery of the economy, which had recovered the lost ground from the Covid-19 pandemic, but added that we must be ready for the next crisis.
“And indeed (the crisis) came earlier than we expected with the Russian invasion and sanctions,” he said, adding that it was difficult to quantify the impact as the extent of sanctions and the duration of the crisis could not be determined. Mr. Petridis appeared optimistic, especially regarding the consequences for tourism, since, as he said, the impact from the absence of Russian tourists, which correspond to 20% of the country's tourism product, will be mitigated due to the introduction of alternative tourist destinations.
He stressed that bookings have already reached 75% of the corresponding bookings in 2019.
“What is a source of more concern is inflation,” he said, adding that energy prices in many countries are similar to oil prices. 1973 crisis.
“We are close to seeing double-digit inflation rates due to rising energy prices in most European countries, and this will certainly affect the demand and supply of products and services,” he added. is my main concern “.
However, Mr. Petridis stressed that investments in the green transition can have a beneficial effect on the Cypriot economy, while reducing dependence on fossil fuels.
As he said, in the medium-term fiscal framework 2022-2204, expenditures of € 717 million have been included, which “will significantly contribute to the resilience of the Cypriot economy”.
He noted that the National Recovery and Sustainability Plan with total expenditures € 1.2 billion can act “as a catalyst and as a tool to leverage private investment”.
Mr. Petridis pointed out that the green transition will not happen overnight, stressing that We work together, the public sector, the private sector and banking institutions to use these funds as quickly as possible. “
“We need political will and we must convince everyone, Parliament, the political parties to work together to adopt the necessary reforms,” he said. CBC Governor: Inflation at 6.7%
In his speech, Konstantinos Herodotou said that the price increase and the sanctions against Russia will burden the economic activity in Cyprus and reminded that the CBC has revised downwards the prospects of the Cypriot GDP to 2.3% for 2022 from the forecast of 3.6% in December 2021.
The impact on the Cypriot GDP, he said, is related to the rising prices of oil and other goods, as well as the & nbsp; disruption in the export of goods and services to Russia, including tourism, which accounted for an average of 16% of the country's exports.
He also said that inflation for 2022 has risen significantly to 6.7% from the initial forecast of 2.5%, an increase associated with rising prices for oil and other commodities. Herodotou noted, however, that the medium-term outlook for the Cypriot economy remains positive, supported by the disbursements of the Recovery and Sustainability Plan.
At the same time, the Governor of the CBC said that the Cypriot banking system entered this crisis with a tangible improvement in its fundamental size. As he said, at the end of 2021 non-performing loans have decreased by 89% compared to the end of 2014, while the ability to absorb losses of Cypriot banks has been strengthened with the holdings of category 1 major shares (CET1) at 17.6 %.
CCCI: Pressure for loans with state guarantees
The President of CCCI Christodoulos Agastiniotis, said that the Chamber is pushing strongly for the presentation of a business support plan by providing loans with state guarantees.
He described as disappointing the findings of the EIB & nbsp; Investment Survey in Cyprus in 2021, noting that they concerned the pre-war era in Ukraine.
is how to overcome liquidity problems and ensure its survival “, he said.
Mr. Agastiniotis also stressed that the funds of the Recovery and Sustainability Plan are accelerate the transition to a new, more modern era with improved resilience “.
In addition, in his greeting at the conference, the President of EVEL Michalis Mousiouttas said that & nbsp; crisis in Ukraine came as “we were trying to get out of the first big shock of the pandemic that brought a big setback to our economies”.
“The war in Ukraine has further aggravated the situation, creating additional problems for the business sector “which is experiencing extremely high energy costs, price increases, supply disruptions,” he said.