FinMin: National Recovery and Resilience plan concern us all

Minister of Finance Constantinos Petrides urged the political parties to support the government’s National plan to absorb the grants provided to Cyprus by the EU Recovery and Resilience Fund, noting that reforms are needed to unlock disbursements amounting to €1.09 billion.

“The fact that the Government has full ownership of the Plan is very important for the success of its implementation. However, this is not enough as the release of funds will depend on the implementation of reforms that will require the support of the political parties. In this context, it has to be understood that the national Recovery and Resilience Plan does not concern only the Government, it concerns the whole country,” Petrides told the 11th virtual Nicosia Economic Congress.

Petrides said that Cyprus’ Plan, “which will basically constitute the blueprint for our growth policies for the years to come, includes a combination of investments and reforms that will be undertaken for a period of 6 years.“

“It is an opportunity to build a broader consensus. But it is primarily a huge stake that we must all win together. This is why I have personally engaged in extensive discussions with the political parties regarding the reforms included in the Recovery and Resilience Plan, so that to ensure maximum support.

The Finance Minister also noted that it might be the case that Cyprus’ growth model, which has been based on services served us well in the past, however, this might not be sufficient in the future.

“We need to further develop our services and make them even more attractive. We also need to further diversify the economy and limit dependency on only a few sectors, by putting emphasis on sectors with high value added in terms of growth and sustainability”, he said that.

Stating that Cyprus Economy and Competitiveness Council is in the process of preparing a new growth strategy, the Finance Minister said “the national Recovery and Resilience Plan and the strategy prepared by the Competitiveness Council constitute communicating vessels, there are moving in the same direction and they are fully in line with each other.”

Concluding, Petrides said the Cypriot economy contracted by 5.1% amidst the Covid pandemic, significantly less than initially anticipated and is expected to grow by 3.5% this year adding that the Cyprus economy exhibited signs of resilience but there are, admittedly, weaknesses and vulnerabilities.

On his part, Constantinos Herodotou, Governor of the Central Bank of Cyprus stated that there are encouraging signs on new non-performing loans formation following the termination of a loan payment holiday in the end of 2020.

“The first sings are quite encouraging. The level of new NPLS is for the time being quite manageable but we cannot take comfort in that,” he said, pointing out that there is a time lag between economic contraction or economic restrictions and the formation of new NPLs.

Furthermore, he added that Cypriot banks have made progress since the 2013 financial crisis, with their consolidated CET1 ratio at 17.6% in end 2020 from 14% in end-2014, while their NPL coverage ratio amounted to 44% in the end of last year compared with 32% in end-2014.

However, he noted that the Cypriot banks face the same challenges as the Eurozone banks particularly low profitability in the context of the low interest rate environment, expected to continue in the near term.

In 2021, Herodotou said the economy is expected to recover but noted that support measures should be phased off gradually. “We need to make sure that to the extend these measures are affordable they are withdrawn gradually to avoid any cliff edge effects in the economy,” he added.

The EU in green transition

In video message, Virginius Sinkevicious, Commissioner for Environment, Oceans and Fisheries, said the EU’s course towards circular economy point to a higher GDP and levels of employment.

As he noted actions towards repair and reuse can mean local jobs at all skills level from engineering to technical experts and from recycling plant workers to urban designers.

“Circularity is all about change. Changing business models, building new partnerships and bringing new more sustainable products and services to the market, the commission will be there setting the framework, creating new opportunities and helping you bring those solutions to the people of Europe,” he said.

On her part, Clara del la Torre, Deputy Director General of the Commission’s Directorate General on Climate Action referred to the EU Green Deal aiming to carbon neutrality by 2050 as well as the interim phases namely the 2030 targets, which entails opportunities for new jobs and growth.

Furthermore, Takis Clerides, former Finance Minister and Chairman of the Ecompet Council referred to the Council’s work on drafting a long-term strategy.

He noted that the main sectors of the economy that will lead the way and be the drivers of growth are agritech, ICT, light manufacturing, professional services, solar energy, tertiary education, green economy, tourism and environmental sustainability and innovation of Research and Development.

“The new strategy will not focus on one or two sectors of the economy but on a number of business activities that Cyprus has or can develop a relative advantage taking into considerations the developments of the global economy in the next 10 or 15 years,” he said.

Noting that setting a target for future growth is difficult due to many variables and external factors, he said that a growth rate of 3.5% to 4% per annum is “healthy growth indicator.”

On his part Christodoulos Angastiniotis, President of the Cyprus Chamber of Commerce and Industry, said Cyprus is marked by “a lot of talk but very little action.”

“We first of all we need to put an end to populism and move ahead with determination without unnecessary delays and useless discussions that are many times based on political expediencies unrelated considerations and even hidden agendas,” he said, adding “politicians and decision makers need to understand that we will have elections every day and that they should swiftly proceed to bring about the necessary reforms so that our country moves to the next level with an efficient and resilient economy.”

Antonis Antoniou, President of the Employers and Industrialists Federation, on his part said that pandemic will continue its negative impact across the real economy here in Cyprus with knock on effects throughout our businesses probably well into the summer of 2022.

“In the coming two years we need to put much effort and support to sustain the key pillars of our economy as well extend support other economic activities. In parallel we need to fast track our economic transformation to a new and more sustainable model,” he said.

Demetris Vakis, Chairman of the Institute of Cyprus Certified Public Accountants of Cyprus said that Cyprus is at the cross roads we can either gain more than what is expected or lose ground.

“So I think it is very specific point in time we need to act quickly and I believe the platform should be technology and digitisation of everything we do,” he said.

Concluding, Vakis said that due to international efforts, Cyprus should be mindful that the tax advantage that Cyprus enjoys right now will be diminishing over time and should be confident to promote other areas and benefits that Cyprus enjoys.