FinMin: Concerns over energy and grain prices rise and stagflation

The rise of energy and grain price levels due to the war in Ukraine, but also the possibility of stagflation are his main concerns said Finance Minister Constantinos Petrides, stressing that public finances will be affected and the plans of the Ministry of Finance will be affected, excluding, however, the possibility that the Cypriot economy will slip into recession.

Asked on the sidelines of the presentation of the work of the State Aid Control Supervisor Office at the Ministry of Finance whether public finances are affected by the continuation of the war in Ukraine, Petrides replied in the affirmative and noted that next Monday he will attend the Eurogroup meeting and on Tuesday to the ECOFIN meeting where "the impact in general on the European economies of what has happened so far will be discussed and we will have a more comprehensive picture."

Regarding the support that the EU will offer to Member States, Petrides expressed the belief that "there will be an extension of the framework concerning state aids, which will depend on our own strengths", while he announced that "there are some thoughts about creating a fund, similar to SURE, which had supported employment, in order to somehow address energy poverty."
 
Asked whether he was concerned about the possibility of the Cypriot economy slipping into recession, Petrides said that "the job of the Ministry of Finance is always to worry, especially in times of such geopolitical developments," stressing that he did not believe that the Cypriot economy would enter a recession phase.
 
"The economy growth rate will be affected, but I think it will be positive," he said, adding that "we are starting to build on 80 per cent of the tourism flow and this will bring in revenues which we did not have even last year when the flow was at 50 per cent."
 
"The main concern about how the economy is inflation, which is already high enough as a result of the pandemic and the measures taken to deal with it, as well as due to gas supply disruptions," he stressed, noting that "there are no easy solutions and it is for this reason that also at the global level, alternative sources of gas and fossil fuel supply need to be found or some decarbonisation measures need to be taken more quickly so that this issue is somewhat mitigated." 
 
He added, however, that due to the EU`s heavy dependence on Russian gas and oil, "this will not be without consequences" and noted  that "there are also divergent views at European level on how things should proceed."
 
Asked whether Russian companies are leaving Cyprus, the Finance Minister replied in the negative, saying that "there has been an interest for many years, especially for high-tech companies, and several have already come to the country."
 
"This is why we created the investment attraction programme with tax and other benefits," he said, adding that "because of this programme and the current situation there seems to be increased interest which will have a positive impact on the Cypriot economy."