The growth boosting the Cypriot economy in the years following the economic crisis is more sustainable than ever as it not fuelled by public spending or irrational credit expansion, Finance Minister Harris Georgiades.
Addressing the 7th Nicosia Economic Forum, Georgiades said following growth of 2.8% in 2016, he expects Cypriot output to be close to 3% in the next two years.
He noted however that perhaps the growth rate would be slightly less than 3% but in any case it would be very satisfactory but higher than the EU average.
Whats more important is the fact that this growth is more sustainable than ever, he said recalling that growth in the years before the crisis of 2013 which led the country into calling for an EU-IMF bailout was led by increased public spending and irrational credit expansion.
Stressing the government is determined not to allow the repetition of the mistakes of the past, Georgiades pointed out the right mix of fiscal consolidation and encouraging economic and investor activity with tax and other incentives is the most important element that led to economic recovery and the highest growth rates in the euro area.
On his part, Undersecretary to the President Constantinos Petrides said that structural reforms and reforms that would boost business activity and entrepreneurship is the only way forward for the transition to sustainable economic growth as opposed to a bubble-led growth.
Recalling that after the crisis the government followed a three-pillar approach, that is to consolidate public the banking sector, to wipe out fiscal deficits and to promote structural reforms.
The third reform pillar is now the catalyst for the future transformation of the economy of Cyprus, he said, adding, the only successful strategy is to have a policy driven by a reason instead of populism or demagogy a curse for which the country has paid a huge price both in the economy and not only the economy.
We have achieved a lot but we acknowledge that we still have way to go especially in the structural reform agenda. We are determined to continue the effort as it is bearing results, he concluded.
Commission warns against fiscal relaxation
However, a European Commission official praised Cyprus reform and the return to robust growth following the crisis, but cautioned against fiscal relaxation.
Jean Eric Piquet, the European Commission Deputy Secretary-General said Cyprus should address its macroeconomic imbalances such as its high stock of non-performing loans, the high percentage of public private debt and maintain a balanced fiscal position observe in the last years.
Despite the solid fiscal performance of the last two years it is important that the country remains committed to ensuring long-term sustainability of the public finances. The economic recovery has fuelled demands for fiscal relaxation in a number of areas. These pressures risked reducing the fiscal space needed to put public debt on a firm downward path and expand public investments, he said.
IMF: Cyprus at a crossroad
IMF local representative, Vincenzo Guzzo said the growth of the Cypriot economy is cyclical and pointed out that the authorities have to proceed with the necessary reforms, maintain fiscal discipline and pursue a privatisation programme in order to transform this cyclical growth in to a sustainable one.
Think of the Cyprus economy at a crossroad. One answer is how to translate good circumstances into more durable and sustainable growth with jobs and prosperity and the other, no taking a step bank taking not sol resolute approach to reform and this would leave the current cyclical upswing to what it is just a business cycle, it would not turn it into a long opportunity, he said and added after what has been done it would be missed opportunity for the future Cypriots.
George Syrichas, executive board member of the Central Bank of Cyprus said on his part that he expect a more rapid pace of loan restructurings given the high economic growth rate.
He said loan restructuring was selected as the main solution to tackle the sectors high NPLs as Cyprus is small economy and we cannot flood the market with property and we cannot afford going in that direction.
We need to work through restructurings but all the other solutions need to be on the table to complement that major solution, he said.
However although NPLs restructuring has picked up pace he expected a faster speed due to economic growth that facilitates debt restructuring.
Possibly the pace is not tantamount to the growth of the economy. We expect to see faster resolution of NPLs and is not happening, he said, adding that loan sales have not yet materialised due to lack of information on loans that reduces prices.
Source: Cyprus News Agency