The Credit Rating Houses give a vote of confidence for the prospects and future developments in the Cypriot economy, said the Minister of Finance, Konstantinos Petridis, during his opening speech at the 1st Annual Financial Markets Forum held in Limassol.
Mr. Petridis said among other things that all Rating Houses agree that Cyprus’s economic performance, including public finances in 2021, but also the resilience it has shown in 2022 to date, has been much better than expected and that medium-term conditions continue to support efforts to reduce the country’s public debt.
At the same time, he noted, the Rating Houses also note the significant challenges still facing the economy that need to be addressed, particularly NPLs in the banking sector and high levels of public and private debt.
The Minister of Finance also said that essentially, the Rating Houses give a vote of confidence for the prospects and future developments in the Cypriot economy and that they base their opinion not only on the quick recovery of the economy after the crisis of 2011-2013 and the difficult health crisis of 2020, but also the consequences of the Russia-Ukraine war this year as well as their belief that in the medium term there are strong drivers of underlying growth and strong prospects for a return to fiscal surpluses.
He added that the recovery can be achieved by the rational absorption and utilization of funds from the EU and the Recovery and Resilience Fund as well as, in the long term, by the exploitation of natural gas reserves.
The Minister of Finance also noted that after a significant increase in debt to GDP to 115% in 2020 caused by the pandemic, the gross debt of the general government continued its downward trend, reaching 103% of GDP at the end of 2021.
He noted that as fiscal performance continues to improve along with steady GDP growth, general government debt is expected to decline to around 75% of GDP in 2025.
Mr Petridis said the government is keeping prudent cash reserves equivalent to at least the next nine months’ funding needs, reducing any refinancing risk.
He emphasized that the Cypriot government has the resources, tools, appetite and conviction to pursue growth by diversifying its production model and investing in high-value sectors such as information technology and green energy. The new production model, he said, is represented by investments and reforms in the recently published Vision 2035 long-term strategy and the Cyprus Resilience and Recovery Plan.
In addition, he said that Cyprus has, in recent years, made significant strides in the field of education, research and innovation, presenting one of the highest average annual growth rates of research and innovation investment among EU member states.
Noting that innovation needs space to flourish, the Minister said the government is currently considering redeveloping the old EXPO premises, a valuable government asset in a prime location, into an innovation/enterprise zone that will create a new economic hub development.
He said that the specific area of 250,000 square meters meets a number of conditions. He explained that it is centrally located with easy access to higher education institutions, medical/research centers and government services in an urban environment, which is expected to work in synergy with other measures promoted by the Government to develop the innovation ecosystem. The government, he continued, has commissioned a feasibility study and a master plan that will examine the prospect of creating an innovation zone and will soon issue an invitation to select a strategic investor.
Mr. Petridis added that the well-coordinated actions of the state allowed Cyprus to be upgraded to a strong innovator, according to the recently published results of the European Innovation Scoreboard.
“We further aspire to become a regional hub for ICT companies and a gateway for international business in the EU. To this end, we have prepared a Strategy for Attracting Business and Talent, which was approved by the Cabinet at the end of 2021.”
The Minister of Finance noted that the Strategy has been well received, as evidenced by the more than 1,200 companies registered with the Business Facilitation Unit and the more than 9,000 skilled workers who have recently moved to and are working in Cyprus.
However, he added, we are aware of the challenges faced by international businesses and their workforce and said our efforts are focused on further promoting e-government to provide, among other things, faster and more reliable services to businesses.
Concluding, Mr. Petridis said that the road ahead of us is complex and has challenges both regionally and internationally, noting that economic development stems from knowledge and innovation and this is where a significant part of efforts must be focused and of our investments.