Cyprus PIO: News Update in English, 03-01-13

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From: The Republic of Cyprus Press and Information Office Server at <http://www.pio.gov.cy/>

Monday, 13 January 2003

CONTENTS

• [01] Cyprus economy rated positively by EU and international organisations
• [02] Finance Ministry's forecast for positive economic outlook

[01] Cyprus economy rated positively by EU and international organisations

In other comments, the European Commission reaffirms that "the economic predictions by the Cyprus Government for the period 2001-2005, which refer to a rate of growth of more than 4%, full employment conditions, low inflation rate and balanced public finances by 2005, are realistic and feasible".

Moreover, the last progress report (2002) by the European Commission on Cyprus is particularly favourable for the economy, since it assess the economic performance as well as the monetary system as satisfactory and supports that the Cypriot economy can withstand competitive pressures within the EU internal market.

The Cypriot economy has also been rated positively by other international organisations, such as the International Monetary Fund (IMF), which states in its last report on Cyprus that "fiscal reform measures have decreased the fiscal deficit to 3% of the GDP, in 2001".

In addition, the international rating agency Standard & Poor's, in its last report on the Cypriot economy of 19 November 2002, reflects the Government's success in consolidating its finances and a commitment for further fiscal consolidation over the medium term, structural reforms and medium-term prospects for further reform, which underpin a prosperous and resilient economy and narrowing external imbalances.

"At $14,860, per capita income is high compared with that in similarly rated countries", the agency's report reads, adding that "Cyprus' economy has become increasingly resilient and flexible in recent years, on the back of a liberalization process accelerated by the requirements of EU accession" and that "the Republic is also well placed to meet the challenges of a possible solution fo the long-standing partition of the island".

[02] Finance Ministry's forecast for positive economic outlook

In specific terms, the fiscal deficit has remained just under 3% of the GDP, thus continuing to fulfil the relevant Maastricht criterion. For 2003, the Government's Pre-Accession Economic Programme foresees a further reduction of the fiscal deficit to 2,1% of the GDP, while the deficit will be wiped out by 2005.

With regard to the rate of growth, the Finance Ministry predicts a significant acceleration in 2003, leading to a rate of growth of 4,2% in comparison to 2,3% in 2002. This forecast is mainly based on the increased flow of tourists during October and November 2002, the expected rise in tourist arrivals for the next summer, the recent reduction of interest rates by the Central Bank, and the further reduction of tax rates in 2003, as part of the tax reform package.

The Finance Ministry supports that the inflation rate, despite having reached 2,8% in 2002, remains under control and continues to comply with the Maastricht criteria. The upward trend in the inflation rate for 2002, according to the Ministry's press release, is primarily a result of the increase in indirect tax rates. Regardless, though, of this development, Cyprus' inflation record compares favourably with that of some EU member states, such as Greece, Spain, Portugal, the Netherlands and Ireland.

Finally, the economy's over-dependency on tourism has been reduced to some extent in the last few years, and Cyprus has managed to make better use of its comparative advantages in other sectors, like telecommunications, banking, professional services, health, and education.

From the Republic of Cyprus Press and Information Office (PIO) Server at http://www.pio.gov.cy/

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