President Nikos Christodoulides was perfectly entitled to boast about the economy’s performance at his meeting with the executive committee of the Employers and Industrialists Federation (OEV). The forecast growth rate for this year is 3.5 per cent, one of the highest in the euro area, while unemployment is down to the levels of 2008. Both are impressive indicators considering the instability in the world economy.

Tax reform, which led to a reduction of taxation on lower income earners, increased the disposable income of households, the president said and nobody could argue with the benefits of lower taxation to an economy. Of course, higher demand combined with full employment conditions may have also contributed to the rising rate of inflation, which is now above four per cent, the third highest in the euro. It would be wrong to blame government policy for this as the rising world price of oil has had an impact on all economies.

Christodoulides also told OEV that economic growth must be “transferred to society and the benefit returned to citizens.” These are vague concepts, because it’s very difficult to define society and the benefit that would be returned to citizens. Economic growth means a bigger cake for everyone to share and that is the objective of all developing countries, but there is no tidy or equitable way of the benefit, whatever that might be, being returned to citizens. As long as the economy is growing, as it has been under the Christodoulides presidency, everyone should be happy.

There is however a concern that the government does not seem to give any attention to. A respectable growth rate in conditions of full employment combined with exogenous inflationary pressure could accelerate price increases, which we are already experiencing. It is in this regard that the government needs to tread carefully. The president’s remark on Monday that the growth rate was the reason “we support families, strengthen disposable income and improve the daily lives of citizens,” was lacking in economic rationale.

Admittedly, the government is under pressure to do something about high prices, which have a negative effect on living standards, but increasing disposable income could make matters worse rather than better, boosting instead of checking the rate of inflation. Increasing people’s spending ability at a time of rising prices and what appears to be an overheating economy is more likely to push prices even higher. And this will not improve the daily lives of citizens either in the short or in the medium term.

This is why great care is required. The government may have the best intentions – Christodoulides announced new, important initiatives in the immediate future without giving details – but support measures for dealing with inflation rarely work. They usually have the opposite effect, pushing up prices. It would be a great shame for the government to ruin all its good work on the economy in the pursuit of such measures.