Anastasiades hails a ‘new dynamic’ for the economy
President Nicos Anastasiades chose the annual meeting of the Cyprus Chamber of Commerce and Industry (KEVE) on Tuesday to drive home the message that the economy has been recovering on his watch and that growth prospects were among the best in the EU.
He referred to “a new dynamic that our economy is developing. The present growth rates are nearing 4%, the second highest in Europe,” the President said, with just sixty days to go to the next elections he is anxious to win.
Anastasiades that government bonds are enjoying their best performance in the last 15 years, something which, in combination with the successive upgrades by rating agencies, shows the credibility that the economy has regained.
“We are just one grade below investment grade, with positive prospects and markets considering us, in effect, as a credible investment nation,” he said.
However, the president earlier came under harsh criticism from opposition parties and presidential hopefuls that highlighted Moody’s report on Monday that said Cyprus was “highly susceptible to event risk, reflecting the significant risks that remain in the banking sector,” driven the high level of non-performing loans.
Cyprus remains three upgrades away from Moody’s investment grade since last July when the rating agency upgraded the Cypriot economy by one notch, to Ba3 from B1, maintaining a ‘positive’ outlook.
“However, the stability of the country’s financial sector and bank balance sheets has been bolstered through increased capital buffers, the sale of non-core activities overseas and improvements in bank funding profiles,” the rating agency said.
Moody’s said it has raised its real GDP growth forecast for 2017 to 3.5% (from 2.7%), and for 2018 to 3.2% (from 2.5%), and expects a gradual moderation in growth.
Deputy government spokesman Victoras Papadopoulos was quick to lash back at the opposition parties saying that the communist AKEL party in particular and its candidate Stavros Malas represented the administration and failed ideology that brought the economy to the verge of bankruptcy during its 2008-2013 term in office.
He added that AKEL conscientiously ignored the rest of the Moody’s report that recognises the improvement in the economy with a growth rate of 3.9% for the first three quarters of the year, after a 3% growth in 2016. He said that according to Moody’s, growth came from consumer and internal consumption, while unemployment has also been reduced and that the government has significantly reduced its public sector debt for the first time since 2008. In Moody’s central scenario, public debt will decline to around 92% of GDP by 2019. However, it said that Cyprus’s debt metrics still remain vulnerable to a negative growth, fiscal or a combined shock scenario.
In his speech at the KEVE meeting, Anastasiades said that expensive public sector debt has been replaced by cheaper borrowing, while the fourth ‘balanced budget’ submitted to parliament will see a surplus of EUR 665 mln.
He told Chamber members that his government has proceed with tax cuts in 15 sectors of the economy, including exemptions for capital gains tax and reduced VAT in the property sector, worth about EUR 250 mln in 2017 alone.
On the issue of competitiveness, Anastasiades repeated recent statements by his Interior Minister regarding the establishment of a ‘one-stop-shop’ for large developments, by appointing a project coordinator and simplified licensing procedures. He also said that the Registrar of Companies was on the verge of being fully digitised. Both policies were nothing new, as they have been in place for some years, but have never materialised. He even turned around the failure, due to trade union pressure, to liberalise the electricity sector by saying that consumers and businesses will benefit from the new regime in July 2019, two years behind initial pledges.
Anastasiades took credit for promoting the use of renewable sources of energy, a smart electricity network and the electricity interconnection between Asia, Africa and Europe, while adding that Cyprus will have its own infrastructure to process natural gas, from own gasfields or from other sources, by 2020.
He concluded that the government is becoming more efficient through “hundreds of reforms”, including the creation of three junior ministries for shipping, development and tourism, but avoided joining the heated debate in parliament where deputies want debate on the framework for the three offices postponed till after the elections, effectively delaying their setup even further.