The Fiscal Council on Wednesday said Cyprus’ economy is still facing internal and external dangers including too much bureaucracy, non-performing loans and Brexit.
According to the council’s head Demetris Georgiades, there is decreased competitiveness in the domestic economy, too much bureaucracy, a high-level of non-performing loans (NPLs), and issues with the national health scheme (Gesy) and Cyta.
Georgiades said the government needs to focus on reducing the high public debt and limit the citizenship-by-investment scheme.
The government should stop relying on the scheme because it is not a form of permanent economic development he said.
According to the council’s Autumn Report, no significant progress has been made in the areas of education, justice, title deed issuance and dealing with non-performing loans.
“Adding to this is the uncertainty of how health reform will evolve with the introduction of the Gesy,” he added.
On NPLs, he said that there had been no real progress.
“We should all take responsibility, and unless we show signs of progress, it is possible that tensions will begin to increase and we have seen in the past where they will lead,” he said.
He also said that the actuarial study for the Social Security Fund should be revised and the reserves of existing pension and welfare funds be accurately recorded and then a new long-term strategic framework immediately implemented to ensure adequate equity for all citizens.
Concerning external risks, Georgiades said Brexit was a major issue because of the uncertainty over whether there will be a deal or no-deal, how the sterling will react, and how tourism from the UK will be affected.
Another external risk is how the European Central Bank’s interest rates and monetary policy will be shaped by the pace of economic growth. Georgiades noted that a possible increase in interest rates would also affect the banking system due to the existence of non-performing loans.
He added that other external dangers are the trade war, the global economic slowdown, and political instability.