Finance Ministry increases 2022 inflation estimate to 4%

The Ministry of Finance has revised an initial 2022 inflation estimate of 1.5% to 4% due to the rise in petrol prices in the midst of the crisis in Ukraine.

The new projection was announced during Tuesday's parliamentary committee meeting on trade that discussed the matter of the continuous rise in prices and inflation.

Addressing MPs, Economic Director at the Ministry of Finance Lucy Herodotou Mouskou said that this increase will cost the public coffers €25 million because of the cost of living adjustment (COLA) and added that the rising prices are creating problems with the implementation of the government`s development programme.

She noted that revised inflation projections for 2022 are now at 4% rather than at 1.5% and said that any additional burden will cause further difficulty in the implementation of the government`s development programme.

Mouskou acknowledged that Cyprus is dependent on petrol for electricity production. "We expect to have additional inflationary tendencies in case of retaliation on the part of Russia," she added.

She further recalled that inflation has been increasing since September 2021 and said that the state has been supportive and will continue to do so. To that extent, she referred to a reduction of electricity bills by 10% in November 2021, a 5% drop on VAT for vulnerable groups for six months and a 9% reduction for other households for 3 months, and additionally, a recent reduction in consumer tax on fuel.

Consumer Protection Service Acting Director Antonis Ioannou said that price capping on specific products will be considered as a "last resort".

The Service, he added, is reviewing the new fuel cargo imported into Cyprus in order to inform the Minister of the new retail prices. Within the coming days a new monitoring framework for fuel pricing will be ready, he said. He further noted that the problem in the sector has to do with a small number of oil companies and not with petrol stations per se.

Among other things, Ioannou said that price increases were seen in 100 out of 170 products being monitored by the department. Bread prices have been increasing since last September, he noted.

Speaking on behalf of the federation of building contractor's unions Giannos Poumbouris warned that the large increase seen in construction materials may result in current projects being suspended.

Pancyprian Farmer's Union honorary president Michalis Lytras spoke of the difficulties livestock farmers are having and asked for state support.