Growth rate expected to be ‘close to 3% in next two years’

The growth rate of the Cyprus economy will be slightly less, but close to 3%, Finance Minister Harris Georgiades said, adding that this growth on the back of a 2.8% rate in 2016, is more sustainable than ever before, as it is not fuelled by public spending or irrational credit expansion.

In his speech at the 7th Nicosia Economic Forum, sponsored by Alpha Bank, Georgiades said that the government is “determined not to allow the repetition of the mistakes of the past,” adding that “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 and other reforms that will 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 the banking sector, to wipe out fiscal deficits and to promote structural reforms.

However, a senior European Commission official praised the pace of reforms in Cyprus and the return to robust growth following the crisis, but cautioned against fiscal complacency.

Jean Eric Paquet, Deputy Secretary General of the European Commission attended the congress in order to give a presentation on how foreign institutions view Cyprus and its status as an international business destination.

He said Cyprus should address its macroeconomic imbalances such as its high stock of non-performing loans (NPLs), the high percentage of public private debt and maintain a balanced fiscal position.

“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 representative Vincenzo Guzzo said the growth of the 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 at the Central Bank of Cyprus said that he expects a more rapid pace of loan restructurings given the high economic growth rate.

Syrichas said loan restructuring was selected as the main solution to tackle the sector’s high NPLs as “Cyprus is a small economy, 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,” Syrichas said, adding that loan sales have not yet materialised due to lack of information on loans that reduces prices.

Other speakers included Health Minister George Pamboridis, Mehran Eftekhar, Director of the World Trade Center Cyprus, Johny Abuaitah, CEO of Windsor Brokers and Stavros Caramondanis, CEO of M.M Makronisos Marina Ltd., operator of the Ayia Napa Marina.