Filenews 25 May 2023
The satisfaction of the Ministry of Finance was caused by yesterday's announcements of the Commission in relation to the European Semester, as the Ministry mentions that, based on the package of measures announced, Cyprus was upgraded to a higher category regarding the macroeconomic imbalance procedure.
Specifically, Cyprus is now classified in the category of "existence of macroeconomic imbalances" compared to the category of "excessive macroeconomic imbalances" that was in 2022. "We also consider it positive that the EU notes a significant reduction in NPL ratios, while forecasting that the reduction will continue," the Ministry of Finance continues, welcoming yesterday's EU announcements.
It is also positive that the EU records that private debt, as a percentage of GDP, will continue to decline, supported by both nominal GDP growth and the deleveraging of households and businesses. Government debt has been steadily declining and is expected to decline further in 2023 and 2024. The current account deficit widened in 2022, despite a recovery in tourism, attributing it to strong domestic demand as well as high energy prices.
We note "with satisfaction that, according to the Commission, the various measures implemented under the national Recovery and Resilience Plan, such as measures to develop the economy, support exports and mitigate over-dependence on oil imports, played an important role in improving indicators."
The end of the foreclosure moratorium is a positive element, as it is expected to encourage borrowers to participate in loan restructurings, leading to a further reduction in non-performing loans and freeing up resources to expand economic activity. The EU report said high private, government and foreign debt remained a vulnerability for the country and a source of concern despite the fact that they had fallen. However, on the occasion of the report, the Ministry of Finance in its announcement yesterday assured that the government will continue to promote measures to strengthen the competitiveness of the economy and expand the productive base, ensuring macroeconomic stability and sustainability of public finances.
