The economic situation caused by the Russian invasion of Ukraine will have far-reaching effects on the Cypriot market, the Fiscal Council notes in a first assessment in relation to the war in Ukraine.
& # 8220; It has already become clear stressed that the shock suffered by both aggregate demand and the supply chain, leading to generalized price increases, resulting in high inflation but reduced growth & # 8221 ;, is emphasized.
& # 8220; The current economic climate & # 8221 ;, states, & # 8220; will increase inequality and shift wealth from traditional sectors to other, new, industries. There is already intense interest from companies based in Ukraine, mainly high-tech, for their installation in Cyprus. The efforts of the Ministry of Finance continue and promise to make a significant contribution to supporting aggregate demand in the economy. However, even this possibility implies an increase in structural unemployment in Cyprus. Unemployment should be expected to increase in some sectors, such as tourism, despite the use of foreign labor, while demand for labor will increase in sectors where there is insufficient supply. In addition, price levels will continue to rise. These effects are inevitable in the short term, but they can be mitigated, and this mitigation can be done in a way that creates prospects for the future of the place & # 8221 ;.
Stagnant inflation
The Fiscal Council reports that stagnant inflationary pressures are creating dangerous circumstances, which may be further exacerbated by poor policy choices. On the one hand, there is a willingness on the part of monetary authorities to raise interest rates in an effort to curb inflation. based and without overall planning, with the provision of hasty implementation of proposals and suggestions made by individual interest groups & # 8221 ;.
