Bringing public debt down remains key objective, Finance Minister says

Finance Minister Constantinos Petrides on Tuesday said that the performance of the Cypriot economy is a testament to its resilience and positive momentum, while also stressing the importance of reducing public debt.

Petrides’ comments were a response to a report by the Cyprus Statistical Service (Cystat) released on the same day, estimating GDP growth for the fourth quarter of 2021 to be 6 per cent higher than the corresponding quarter of 2020.

Moreover, GDP growth for the entirety of 2021 is estimated to be 5.7 per cent, which is close to the initial prediction made by the Ministry of Finance.

Public debt in 2021 fell by €0.6 billion, dropping to €24.3 billion from its previous figure of €24.9 billion in 2020.

In addition, Cyprus’ debt-to-GDP ratio fell by 10.6 percentage points, dropping from 115.3 per cent at the end of December 2020 to 104.7 per cent of GDP in 2021.

“This growth rate shows that the Cypriot economy is one of the relatively few economies in the EU which has recovered from the losses of the 2020 health crisis,” Petrides said.

“The recovery of the economic environment is also supported by the improved performance in the labour market, where the unemployment rate for the fourth quarter of 2021 is estimated at close to 6 per cent, with the number of registered unemployed steadily declining,” he added, explaining that there is an expectation that unemployment levels in 2022 will be lower than before the pandemic.

The Finance Minister said that the good performance of the economy, combined with a prudent fiscal policy, led to an improvement in public finances.

“This has resulted in the budget deficit of 2021 being smaller than originally expected, showing a significant improvement when compared to the deficit of 5.7 per cent last year,” the minister said.

When asked whether there will be early debt repayments to further reduce public debt, Petrides said that there is a programme until the end of the year, with an effort to reduce public debt to approximately 95 per cent.

“From the start of the health crisis we decided to be prudent with public finances,” Petrides said.

“We chose to provide liquidity and to borrow cheaply at the right time and the correctness of our policies is being proven now that bond yields have risen, based on expectations of higher interest rates in the future,” he added.

Regarding future plans, the Finance Minister noted that the government will stick with its current course of action, with the debt percentage expected to be further reduced by another 5-6 points by the end of 2022.