THE performance of the economy appears to have surpassed all expectations. On Tuesday, the Statistical Service said that the provisional estimate of growth for the third quarter was 3.9 per cent. This was attributed mainly to hotels and restaurants, retail and wholesale trade, construction and manufacturing sectors, record tourist arrivals playing a significant part.
With elections just two months away, the news that the rate of growth could reach 4 per cent could not have come at a better time for President Anastasiades. Finance minister Harris Georgiades was quick to point out that the news “confirmed the strong recovery of the Cyprus economy and the fact that we are now covering the lost ground at rapid rates,” and that this was “the second highest growth rate in the Eurozone.” More importantly, this growth was “not supported by reckless public spending, but on the contrary we have a surplus budget.”
None of Anastasiades’ rival candidates could fault him on the economy. He had been handed an economy deep in recession, a bankrupt state and banks in desperate need of capital and he has turned it round during his five-year term. Banks have been stabilised, though still faced with large numbers of NPLs, there is healthy growth and a budget surplus. The only danger to the economy is government complacency, which has reared its ugly head recently as the government embarked on an election spending spree.
Every week, more expenditure is announced – Christmas bonuses for welfare recipients and pensioners, a fund for haircut victims, pensions for widowers, etc.
It is a great pity, because Anastasiades did not have to resort to reckless populist spending, even if public finances are in good health and the target of a balanced budget would still be met. He could have used the extra cash collected by the state to reduce the public debt, and would have gained a bigger election advantage, as he would have reinforced the view that the economy was safe in his hands and the prudence that took us out of the recession would continue. Instead, as soon as some money became available, he started to spend it like another Christofias, in the belief it would win him votes.
It is a bad miscalculation, because he will lose the biggest advantage he has over rival candidates – a proven record of prudently managing the economy. It is also a great shame because he was in a position to show that an election campaign could be fought without wasting the taxpayer’s money.