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The Minister of Finance Makis Keravnos on the progress of the Cypriot economy, interest rates and measures…

As an EU member state, Cyprus should meet its obligations in terms of the Maastricht criteria, noted the Minister of Finance

Finance Minister Makis Keravnos spoke to Politis 107.6 & 97.6 about the progress of the Cypriot economy, interest rates and household support measures.

The Minister of Finance was asked to comment on the course of the Cypriot economy today. “It is generally accepted by everyone”, he answered, “that there is a concern about the course of the economy at the global level and especially the European economy and the Eurozone which is very close to recession and is growing at 0.8%. We are a small and open economy and are affected by these developments directly. Despite this fact, the Cypriot economy appears resilient, with a growth rate of 2.6% and estimates for this year say it will hover around 2.5%.

Subsequently, Mr. Keravnos said that inflation in Cyprus has decreased to 3% and forecasts indicate that there will continue to be a positive fiscal balance and a positive growth rate which is three times higher compared to the Eurozone.

The dangers

Asked about the risks facing the Cypriot economy today, the finance minister said that these are first of all the ongoing war in the heart of Europe due to Russia’s invasion of Ukraine which is causing very serious problems in terms of energy costs and the supply chain raw materials and other materials and foodstuffs. “This,” he added, “is reflected in the Cypriot economy, inflation and accuracy.”

Public debt

As an EU member state, Cyprus should meet its obligations in terms of the Maastricht criteria, noted the finance minister, “that is, to reduce the public debt to 60% and the budget deficit to 3% by the end of 2025”. Mr. Keravnos stated that the public debt today is at 80%, from the 90% it was at the end of the previous year. “This,” he added, “shows that today our economy is on a good path amid very difficult conditions for the middle classes, middle households and small businesses.”

Budget 2024

Mr. Keravnos stated that the 2024 budget will have a strong development element as foreseen by the integrated Resilience and Recovery Plan which contains many development actions aimed at helping the process of transition to the green and digital economy. “At the same time”, he continued, “it will be in surplus to be able to maintain the so-called cushions which are necessary in the effort to reduce the public debt and the budget deficit so that at the end of 2025 it is in accordance with the Maastricht criteria, otherwise our economy will be put under surveillance and others will decide for us.”

Interest rates

Asked about the course of interest rates, Mr. Keravnos said that “the banking system has already been integrated into the European banking system and Cypriot banks are controlled and supervised by the European Central Bank. Consequently, in no eurozone country can the Ministry of Finance intervene in the banking system and determine interest rates. What we are doing is to be in a dialogue and exercise we indicate to the banks that they should take up their corporate social responsibility. We hope to see a stabilization in the coming months in terms of the increase in lending rates and a narrowing of the gap between lending and deposit rates.”

Banking centralization

Asked to answer whether the Ministry of Finance is concerned about centralization in the banking system of Cyprus, Mr. Keravnos replied that they are monitoring all developments. “It is a fact”, he said, “that of the 27 banks that existed in Cyprus we reached a much smaller number. But there are still a number of banks where competitiveness can work. Nevertheless, a report by the European Commission on this matter is something that has also worried.”

Fuel and electricity subsidy

Asked if fuel and electricity subsidy measures will be reinstated, the Finance Minister said that all developments are being monitored. “The indications”, he noted, “of the European Commission, the mechanisms of the EU and the IMF which have lent us 6.5 billion euros and which we must start paying from 2025, that the horizontal measures must be stopped and focus only on targeted. Nevertheless, we have in progress a horizontal support measure for households, which is the zero VAT rate for many products of daily use.

Listen to the intervention of the Minister of Finance Makis Keravnos in the “Morning Review” broadcast by Politis 107.6 & 97.6:

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