Finance minister Constantinos Petrides submitted the last state budget of the Anastasiades administration to the council of ministers for approval on Friday. It continues the cautiously, prudent economic policies that had become a trademark of the Anastasiades administration which had inherited a mountain of problems when it took office and had to enter an assistance programme to put the economy back on track.
Mistakes were made in those days in March 2013 and some could argue that the bail-in of Bank of Cyprus depositors could have been avoided had President Anastasiades and the parties accepted Eurogroup’s first bailout proposal but this is history now. Keeping the Coop Bank afloat was another big mistake, as it only delayed the inevitable, burdening the state with billions of euros in extra debt in the process.
Otherwise, the economy was on a healthy growth path – nobody could say what contribution the golden passports to this – with the state living within its means and gradually reducing the public debt, until the pandemic struck and upset all fiscal plans.
Things picked up this year, despite Russia’s war in Ukraine, with tourist arrivals moving closer to 2019 levels, unemployment at 7 per cent and a forecasted growth rate of 5.7 per cent. Public debt is set to be reduced to 89.3 per cent of GDP, but the rate of inflation is forecasted to be at 7.7 per cent. It could be higher, but through no fault of the government.
Ratings agencies have also noted the strong performance of the economy. In August, Moody’s changed the outlook of the Cyprus government’s Ba1 ratings from stable to positive. This was because of the reduction of the public debt and the “stronger-than-expected” resilience to Russia’s invasion of Ukraine, the impressive growth rate in the first six months of the year – “among the strongest performances in the euro area” – and the ongoing strengthening of the banking sector among other things.
There is plenty to criticize the Anastasiades government about for its ten years in office, but it deserves praise for the running of the economy and it will leave it in much better shape than what it was in 2013 and with much better prospects. And this, despite constantly having to deal with the resistance of the opposition parties which regularly blocked legislation or undermined reform measures. Under these circumstances, the government did a commendable job as the economic figures, which do not lie, show.
If the next government is as competent, then we should not have to worry about the uncertain, inflationary period the economy has entered and could last well into next year, with unforeseeable consequences.