Petrides concerned over energy, grain prices and stagflation

The rise in energy and grain price levels due to the war in Ukraine, but also the possibility of stagflation are his main concerns Finance Minister Constantinos Petrides said on Friday.

The minister said public finances would be affected and his ministry’s plans. However, he said that although “the job of the ministry of finance is always to worry, especially in times of such geopolitical developments”, he did not think Cyprus would enter recession.

Petrides said that next Monday he would attend the Eurogroup meeting and on Tuesday the meeting of EU finance ministers, Ecofin,  meeting “the impact in general on the European economies of what has happened so far will be discussed and we will have a more comprehensive picture.”
Regarding the support that the EU will offer member states, Petrides expressed the belief that there would be an extension of the framework concerning state aid. “There are some thoughts about creating a fund similar to SURE, which had supported employment, in order to somehow address energy poverty,” he said.

Asked whether he was concerned about the possibility of the Cypriot economy slipping into recession, Petrides said: “The economy growth rate will be affected, but I think it will [still] be positive”.

“We are starting to build on 80 per cent of the tourism flow and this will bring in revenues which we did not have even last year when the flow was at 50 per cent.”
The main concern for the economy was inflation, Petrides added, which he said was already high enough as a result of the pandemic and the measures taken to deal with it, as well as due to gas supply disruptions.

“There are no easy solutions and it is for this reason that also at the global level, alternative sources of gas and fossil fuel supply need to be found or some decarbonisation measures need to be taken more quickly so that this issue is somewhat mitigated.” 
He added, however, that due to the EU`s heavy dependence on Russian gas and oil, “this will not be without consequences”. “There are also divergent views at European level on how things should proceed.”
Asked whether Russian companies were leaving Cyprus, Petrides said they were not. “There has been an interest for many years, especially for high-tech companies, and several have already come to the country.”
“This is why we created the investment attraction programme with tax and other benefits,” he said. “Because of this programme and the current situation there seems to be increased interest which will have a positive impact on the Cypriot economy.”