Finance Minister: Cyprus Maintains Growth Rates Above EU Average
Nicosia, July 17 - There is no easy and magical solution to address the problem of expensiveness, which appears in all countries, the Minister of Finance Charilaos Stavrakis has stated and pointed out that there is a need for short-term and medium-term measures in order to tackle structural weaknesses which increase inflation.
As he said, the best way to combat expensiveness in the short-term is by increasing the competitiveness of the economy, having healthy public finances and taking some targeted measures for the benefit of the poorer classes, to the extent that this is possible and within the endurance limits of the public finances.
Mr. Stavrakis mentioned that the vision of the Government as regards the economy, is the establishment of a modern and competitive state and the development of the services sector upon which the future of Cyprus lies. He added that the 2009 state budget due by the end of September - beginning of October, would be infused with this vision.
In addition, he announced that together with the Minister of Labour and Social Insurance, consideration is given to the possibility of depositing the amount of €1.5 billion out of the €5.3 billion of the Social Insurance Fund in banks and cooperative institutions, taking advantage of the high interest rates offered by the financial institutions in benefit of the Cypriot pensioner.
The Minister also said that in 2008 the harmonized inflation is expected to reach 5%, mainly due to Cyprus’ 100% dependence on oil as well as the fact that food on both index and shopping basket has more weight than the respective one in the European shopping basket. He noted that the loss of income in Cyprus because of the increase of oil is estimated at about 2.7% of GDP or €500 million transferred to the countries exporting oil.
Minister Stavrakis assured that the Government does not intend to impose new taxes or increase the existing ones with the exception of those decided and imposed by EU, and noted that the Government has not imposed VAT on real estate required by the EU yet because of correct handling of the issue.
Referring to the prospects and challenges the Cypriot economy is facing, he estimated that despite this year’s clear slowdown of the economy, particularly in the real estate sector, there would be a fiscal surplus of €20 to €100 million in 2008.
He added that in 2008 an excellent improvement has been recorded on the public debt as a GDP percentage. Public debt, he said, fell from 60% recorded at the end of 2007, to 48.5% by the end of 2008, with the EU average hovering around 65%.
Furthermore, he stressed that Cyprus’ growth rate is higher than the rest of the European Union, which in the first quarter of 2008 reached 4%, in relation to the EU average of 2.3%.It is estimated that for the entire 2008, the growth rate will reach 3.7% as opposed to 2% recorded in the rest of the EU.