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18 June, 2024
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The new president and finance minister will face new challenges

The three candidates' economic priorities in the face of rising prices and inflation just days before the election

Panayiotis Rougalas

Panayiotis Rougalas

We are only a few days away from voting for the new President of the Republic. Except for the DISY candidate, Mr. Averof Neofytou, who has stated that Mr. Constantinos Petrides will continue to work, whoever is elected will choose his new Finance Minister. Each candidate has his or her own agenda, priorities, and economic ideas, but the issues that remain unresolved are shared by all. The three candidates' primary economic pillars give insight into the policies they will pursue and the issues they think should be addressed.  The economic indicators that the new President of the Republic and his Finance Minister, or the incumbent (if the DISY candidate is elected), will receive are undeniably positive. Cyprus is growing at a rate of 6%, nearly double the Eurozone average of 3.2%, has a public debt of 90%, long-term unemployment is expected to be 2.3% in 2022, and a surplus of 1.2% of GDP is projected.

The coronavirus pandemic was followed by the invasion of Ukraine and an energy crisis. Now we must deal with an energy crisis, inflation, and high prices, a difficult combination to manage, but there are some fundamentals that remain stable. They may not be the most solid economic foundations, but they are foundations on which the new or current Minister of Finance can proceed with reforms and improvements in the open issues that he or she will receive and be called upon to manage from day one.  Furthermore, the developments have demonstrated that no one should be complacent, as no one predicted in the autumn of 2019 that the follow-up would be what we now face. There were no 'formulas' for the crises, particularly the coronavirus crisis.

The Recovery and Resilience Fund was another "financial gift" that the coronavirus brought to all the EU states.

If the two crises had not occurred, the economic indicators would have been better, and we would now live in a country free of the burdens of war and coronavirus. However, the coronavirus brought with it an 'economic gift' for all states, including Cyprus. The Recovery Fund plan and the possibility for states to receive funds to deal with future crises by making cuts. Originally intended to give nations the chance to escape the global health crisis, the war-related crisis has made it necessary to implement the programs. It is a legacy that if Cyprus receives all 1.1 billion euros, it will be able to face a subsequent crisis from a position of strength.

High prices and inflation

The aftermath of the two crises that plague society, namely high prices and inflation, is the number one issue for the candidates. All three candidates believe that prudent fiscal policies must be pursued while also supporting the groups that require the most financial assistance. The institution of the COLA (Cost of Living Allowance) is a major issue in this direction that the new President will have to deal with from his or her first day in office. COLA  may not be available to all groups of the population, but it is critical to find a solution for those who have agreed to receive it and at a reasonable cost.  The Minister of Labour, Mr. Kyriakos Kousios, also "threw up his hands" on this issue with employers and employers' organizations and gave the signal to the new Minister of Labour to resolve the "Gordian knot".

The minimum wage is also discussed in the same article. The Anastasiades Government may have provided a solution by introducing it at the end of its second five-year term, but the other two main candidates, Mr. Nicos Christodoulides and Mr. Andreas Mavroyiannis have signaled that they will try to bring a better and fairer solution than the one provided.

Moving toward tax reform

Tax reform is one of the candidates' "weapons," as "K" stated once more. Tax reform is their top priority, with the stated goal of modernizing the tax system to increase competitiveness. They promise to raise tax thresholds, improve procedures, eliminate unnecessary taxes, combat tax evasion, and make tax reform more environmentally friendly. Even the outgoing government went to the trouble of putting together a tax reform plan, despite the fact that Cyprus' tax system is already 20 years behind. The most recent tax reform was in 2003, and it is no longer relevant in 2023.

Tax reform is a difficult equation that, if not properly planned, can easily harm the state. It is not a case that can be implemented quickly and requires the input of industry experts, such as the Cyprus Association of Certified Public Accountants (ACCA).

The pension plan

The pension fund is another significant financial component. Candidates seek a decent living for retirees despite the fact that the Professional Pension Benefit Plan for State Service Employees and the Broader Public Sector was approved by Parliament in early December. The outgoing government has not made this a point, but the candidates for President will work to improve the framework. The ultimate goal of this is to help the middle class.

Attracting investment

The Cyprus Economic Council's Vision 2025 appears to have been "embraced" by the candidates. However, according to their announcements, there is room for several improvements to maximize the benefits of the reforms, policies, and projects that, together with the Recovery and Resilience Plan, will unlock investment and lay the groundwork for many more. All of the candidates are interested in tourism, health, land development, industry, technology, telecommunications, and shipping.

[This article was first published in Kathimerini's 'Oikonomiki' edition and was translated from its Greek original] 

Cyprus  |  economy  |  elections

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