Cypriot Finance Minister Makis Keravnos on Wednesday stated that the economy is on a solid path, with the government closely monitoring developments to ensure its sustained progress in the coming years.

The statement came in response to an article published by the local newspaper Politis, which cited a report from the Fiscal Council raising concerns about potential risks and the need for precautionary measures.

In its interim report released on Tuesday, Cyprus’ fiscal council highlighted notable delays in implementing commitments outlined in the Recovery and Resilience Plan (RRP).

The council underlined a lack of reform initiatives backed by political courage, describing this as a “significant omission” that requires immediate attention and a stronger display of political will from both the executive and legislative branches.

The council warned that failure to address this issue promptly poses medium-term risks, jeopardising public finances and limiting the country’s maximum growth potential.

However, despite ongoing uncertainties, the council emphasised that Cyprus’ economy continues to exhibit remarkable resilience, projecting a growth rate close to 2.5 per cent.

The council’s estimate stands at 2.4 per cent, while the central bank and ministry estimate it at 2.6 per cent and 2.8 per cent, respectively.

Continuing to comment on the report, Minister Keravnos underscored that “the fundamental principle of the Ministry of Finance is to generate primary surpluses that will safeguard this trajectory, meeting the Maastricht criteria by the end of 2026”.

While refraining from directly commenting on the newspaper’s headline, the Finance Minister addressed the statements made by the president of the Fiscal Council.

He noted that the overall assessment acknowledges the positive state of the economy, emphasising its stability and control.

Presenting key economic indicators, Minister Keravnos revealed that during the period from January to May 2023, the fiscal balance amounted to €344 million, compared to €140.8 million for the corresponding period in 2022.

Furthermore, he highlighted that the public debt as a percentage of GDP decreased from 90 per cent in January-May 2022 to 83.6 per cent currently.

Additionally, he noted that the revenue growth rate stood at 15 per cent for the same period, while the expenditure growth rate reached 9.7 per cent.

“With these figures, it is evident to everyone that the economy is on a highly positive trajectory,” Keravnos said.

“We are closely monitoring developments on a daily basis in order to ensure its continued progress in the coming years,” the Finance Minister added.

He concluded by reiterating that the Ministry of Finance adheres to the fundamental principle of creating primary surpluses, which will guarantee ongoing economic development and meet the Maastricht criteria by the end of 2026.

Economic indicators remain positive amidst challenging environment

Meanwhile, the Cyprus Composite Leading Economic Index (CCLEI) registered a 2.1 per cent annual increase in June, according to a report released this week by the University of Cyprus.

Compiled by the University of Cyprus’ Economic Research Centre (ERC), the CCLEI for Cyprus showed year-on-year growth of 2.1 per cent in June 2023, following the respective annual increases of 1.8 per cent and 1.7 per cent in May and April 2023, based on the latest and most recently revised data.

The CCLEI is designed to provide timely signals for turning points in economic cycles, indicating shifts in economic activity.

The index consists of a number of leading economic variables, whose changes tend to precede those in overall economic activity and are evaluated on a regular basis.

The majority of domestic components of the CCLEI, including total property sales, tourist arrivals, credit card transactions, and retail sales volume, contributed to maintaining the positive annual growth rate in June.

Notably, the international oil price continued to record a negative annual growth rate during the second quarter of 2023.

Conversely, the volume of electricity production, adjusted for temperature, played a significant role in sustaining the upward trend of the CCLEI, despite a decrease in June 2023 compared to June 2022.

Furthermore, the Eurozone Economic Climate Indicator (ECI) negatively impacted the upward trajectory of the CCLEI in June 2023, in contrast to the ECI in Cyprus, which saw year-on-year growth in the same period.

In conclusion, the CCLEI’s upward trend persisted during the second quarter of 2023 amidst a volatile economic and geopolitical environment, particularly on the international stage.

This is reflected in the Eurozone ECI and the contributions from various domestic and international components of the CCLEI, which supported its positive direction in June 2023, as stated in the announcement.