The government does not intend to raise taxes, but will rather pursue a policy of stimulating growth and attracting new investment in response to the coming economic slump, Finance Minister Constantinos Petrides said on Tuesday.
He was speaking on the sidelines of a conference in Limassol titled Europe in Crisis: Dynamics and Implications for the Cyprus Economy.
Cyprus’ economy czar also responded to reports that Cyprus would be hit hard by the fallout from the Ukraine war and the sanctions.
“There is no study out there that shows how far each country has been impacted,” Petrides said.
Specifically he was commenting on a recent report by the Financial Times, which stated: “Cyprus stands to be among the EU nations hardest hit by the sanctions. Russians account for more than 20 per cent of visitors, and tourism this year had been expected to benefit from direct flights from Russian cities. Much of that will disappear.”
The FT also mentioned the recent winddown of RCB Bank, a lender created as a subsidiary of Russia’s VTB Bank.
“What I do know,” Petrides said, “is that our banking sector is not as dependent [on Russia] as some abroad might think it is, so there are no consequences on the banking industry.”
But he acknowledged that the sanctions will adversely impact tourist inflows.
“Certainly we will be affected somewhat in tourism and we have said this many times, although a great deal of effort is being made to add new destinations.”
On the economic situation in general, Petrides opined that this is an international crisis, and inflation “a European phenomenon that will persist.”
He went on: “The answer to inflation is, first and foremost, to safeguard the vulnerable groups in the population and to aim at more investments, which will create and increase incomes and shield people’s purchasing power in the short and medium terms.”
For this reason, Cyprus has devised “a new growth model, one that features more than 200 actions, and this is why we have planned to make Cyprus an international business hub.”
According to the minister, despite the difficult times several foreign companies have moved their headquarters to Cyprus.
“We shall try, through growth, to protect the economy without imposing, as other countries have done, additional taxes which are anti-growth.”
Cyprus does not espouse the philosophy of raising taxes to buttress state finances, he stressed.