Keravnos targets enrichment of economic model

The enrichment of Cyprus’ economic model is of vital importance, said the finance minister, Makis Keravnos, stressing that “the bet is to maintain the investment level” which was objective of the government’s economic policy. 

Speaking at the 14th Nicosia Economic Conference, on Tuesday, on “Forecasts for the Cypriot economy and policies to protect it,” Keravnos said that “in the medium term, we should adopt a development model, which will promote a sustainable course and not an opportunistic one.” 

He added that “The enrichment of our economic model must be governed by a balanced economic development policy. Growth must also come from new productive sectors, but we must also return our attention to traditional sectors, such as the primary sector, agriculture, and animal husbandry.”  

He emphasised the importance of creating synergies, adopting modern production methods, and focusing mainly on export-oriented initiatives. 

“We will focus our attention in the next period on planning and creating conditions that facilitate joint investments by Cypriots and foreign investors, but investments that create infrastructure, new production units and jobs, encouraging export orientation”.  

Support for traditional sectors of the economy, such as tourism, shipping, retail trade, and professional services, would continue with an emphasis on improvement of their competitiveness. 

New sectors should be selected based on comparative advantages and developed through both private and public sector investments, in the context of international competition. The government, as Keravnos revealed, “has adopted targeted measures, to highlight Cyprus as a base for international companies with highly specialised staff, as an international financial centre, with a particular emphasis on attracting investment funds and as a destination with significant investment opportunities in strategic sectors such as renewable energy, health, and education.” 

He also spoke about the strategy to attract investment and talent, which included the speeding up of procedures through the Business Facilitation Unit (BFU). “This new strategy has already begun to bear fruit, with a significant number of companies having established their base in Cyprus, that is, they have a real presence and contribute to the economy”, he added. 

The government remained committed to public service reform, smoothing the operation of the national health scheme (Gesy), and reforming the justice system to ensure its swift and unhindered functioning.  

Additionally, “the government is proceeding decisively towards the implementation of tax reform.” It plans to have a tax system that stimulates business and at the same time is socially fair, reducing tax evasion and avoidance. 

Keravnos acknowledged challenges like transitioning to the green and digital economy and securing cheap energy, which required significant investment. Concerns about labour market distortions caused by labour shortages were also mentioned. 

He was optimistic about the economy’s prospects. Inflation was expected to decrease to about 2.5 per cent in 2024, supported by a positive fiscal performance, with public debt expected to come down to 60 per cent of GDP by 2026. 

Despite economic challenges, success was attainable through “the continuous implementation of a prudent and rational economic policy,” he said. The government would “not submit to opportunism and temporary populist approaches, but to an economic policy that will provide security to Cypriot citizens, Cypriot businesses and foreign investors”.