Filenews 16 March 2022 - by Eleftheria Paizanos
The forecasts of the Ministry of Finance in relation to inflation are revised.
The fuel price rally due to the Russian invasion of Ukraine is estimated to raise the average inflation rate to 4% in 2022. That is, an increase of 2.5%, from the inflation originally estimated for 2022, which was 1.5%. According to a spokesperson for the Ministry of Finance at yesterday's meeting of the Trade Committee, the increase in inflation from the initial forecast will cost the state coffers an additional €25 million.
During yesterday's discussion of the consequences of the war in Ukraine, the director of the Directorate of Economic Policy, European and International Affairs of the Ministry of Finance, Lucy Herodotus Mouskou, said that every time inflation increases by 1% the fiscal cost is €10 million. from the increased indexation allowances. As he said, this increase should be taken into account in budgetary planning. He also indicated that any burden causes problems in the implementation of the development programme. He suggested that there is a lot of uncertainty from the events in Ukraine, pointing out that the sanctions imposed and the possible reprisals by Russia will push into inflationary tendencies. At the same time, Ms. Mouskou cited data according to which between January and February the consumer price index increased by 6%, transport increased by 14% due to international oil prices and an increase of 13.7% in housing and 5.7% in food.
The ministry spokeswoman referred to the measures taken by the state to contain inflation. He said electricity bills were reduced by 10% for a few months, while last November VAT was reduced for six months to 5% on electricity for vulnerable consumers and 9% for three months on other households. He also noted that a few days ago the reduced VAT was extended for another two months and referred to the reduction of the excise duty on fuel.
Increases in 100 products
On his part, the deputy director of the Consumer Protection Service of the Ministry of Energy, Antonis Ioannou, said that it is the last measure to impose a ceiling (maximum price) on some products. He also argued that there are price rises in 100 of the 170 products monitored by the Agency, while bread prices have been moving upwards since last September. Referring to fuel prices, he said that the problem is also due to the oligopoly, as the number of oil companies in Cyprus is small. He also said that the new fuel monitoring framework will be ready in the coming days. In conclusion, he also referred to complaints according to which some people kept the grain in the warehouses, only to sell it later at higher prices.
SOS for development projects
Meanwhile, a distress signal was sent by the building contractors. On behalf of their association, Yiannos Poumbouris warned that there will be an end to major projects, due to the large increases observed in materials. He said it is difficult to plan the work and called on the government to help address the impact the industry is having.
On the part of PEO, Pieri Pieri said that a network of consumer protection should be created and at the same time the development policy should be accelerated in order to avoid a recession. The need for support of the primary sector by the state was stressed by representatives of agricultural organizations. Some have argued that there are cases of farmers selling off their units and slaughtering their animals, as they cannot cope with the cost of keeping them.
Balance between debt and growth called for by Eurogroup
Gradual fiscal adjustment of member states with high public debt (initiation of a debt reduction process, i.e.), "if conditions allow", the Eurogroup decided on Monday evening.
In particular, the Eurogroup statement on fiscal planning in 2023 reads: "With a view to maintaining debt sustainability, in Member States with high public debt, we agree that the start of a gradual fiscal adjustment to reduce their public debt is appropriate, if conditions allow.
This adjustment should be integrated into a credible medium-term strategy that continues to promote the investments and reforms needed for the dual transition and the improvement of the composition of public finances."
Eurogroup President Pascal Donahue during the press conference noted that "it is possible for countries with high debt to be able to make gradual adjustments to their fiscal policy and this will be combined with a certain level of growth in order to improve their debt dynamics in 2023. From 2023 onwards, we believe that the issue of debt sustainability will continue to be extremely important."
It also noted the need to strike a balance between a secure level of debt and addressing economic challenges.
