Filenews 18 May 2022 - by Theano Thiopoulou
The intensity of inflation, which is likely to pass to double digits in the coming period, as announced by the Minister of Finance Konstantinos Petrides, is causing a headache for the government, which is called upon to find measures to address the phenomenon and help the vulnerable. Yesterday, the President of the Republic, Nicos Anastasiades, stressed the government's determination to support households, without losing sight of the financial capabilities of the state.
The accuracy that Cyprus has been experiencing intensely since the beginning of the year and has intensified since March, due to the energy crisis and the sanctions of Europe on Russia, creates different consequences in each case, household income, operating costs of the business, state budget and public debt servicing.
Cyprus in its history since 1960 has experienced 15 inflationary shocks, sometimes large sometimes smaller, and the consumer price index has risen in these cases above 5% or was close to this level. According to data from the Statistical Service, the year that inflation really soared was 1974, with the Turkish invasion, reaching 16.2%, the highest in time since 1960. A year before, in 1973, inflation reached 7.8%. From 1977 to 1985 they were years of pain for Cyprus, with inflation reaching, in some cases, double-digit percentages. In 1997 it stood at 7.2%, in 1978 it rose to 7.4%, in 1979 the situation became even worse reaching 9.5% and the second largest blast since 1974 was in 1980, with inflation reaching 13.5%. In 1981 there was a slight decline to 10.8%, in 1982 it fell to 6.4%, in 1983 to 5.1%, in 1984 it rose to 6% and in 1985 it fell to 5%.
The years when inflation hit Cyprus again are 1991 with the rate reaching 5%, in 1992 at 6.5% and in 1993 it fell to 4.9%. The following years are relatively mild inflationary with the exception being recorded in 2008 when it reached 4.7%. We had years with negative inflation in 2020 (-0.6%), 2016 (-1.14%), 2014 (-1.14%), 2013 (-0.4%). Reaching today, the Ministry of Finance is optimistic and expects that 2022 will close with inflation of 4.5%, while the Commission raises the percentage even more to 5.2%, due to the increase in the price of energy.
YPIK's satisfaction with the Commission's forecasts
The European Commission's forecasts for the GDP of Cyprus in 2022 and 2023, at a time of great uncertainty and challenges, are generally in line with the latest forecasts of the Ministry of Finance, which predict growth of 2.7% and 3.8%, respectively, and demonstrate once again the resilience of the Cypriot economy in times of crisis, the Ministry of Finance said in a statement.
Regarding 2022, the spring forecast states that "the Cypriot economy started from a strong base, but the invasion of Ukraine and the related sanctions that have been imposed are expected to have an impact, especially on tourism and exports of services, as Russia is an important market in these two sectors. High fuel prices and rising inflation represent an additional challenge for the tourism sector. Overall, real GDP is projected to grow by 2.3% in 2022, marginally below the eurozone average growth," the ministry notes.
"Inflation for 2022 is expected at 5.2%, due to the increase in the price of energy but significantly lower than the average inflation in the EU and the Eurozone, estimated at 6.8% and 6.1% respectively. Specifically, for this year Cyprus is estimated to have the 6th lowest inflation in the EU", the ministry's announcement reads.
