DISY urges caution on economic recovery

OPPOSITION DISY yesterday cautioned against celebrating too early over recent positive signs displayed by the economy.
“Indeed, some dim yet positive signs of recovery of the Cypriot economy have been observed, but this does not allow for celebrations,” DISY deputy chairman Averof Neophytou said.
The preliminary growth rate for the second quarter of the year is expected to be 0.4 per cent of gross domestic product compared to the previous one, it was announced earlier this month.
Neophytou said serious reflection should continue because even with the positive signs “we all forecast that, unfortunately, the public deficit in 2010 will not be reduced.”
The DISY official said the deficit will continue to increase in 2011 “for the simple reason” of expenditure being higher than state revenues.
“Thus, it is time to aim for containing the wasteful and inefficient state,” Neophytou said.
Neophytou said there should be concern that inflation in Cyprus in July reached 2.7 per cent when the average in the Eurozone was 1.7 per cent.
“And in some cases inflation on some basic goods was over 10 per cent,” Neophytou said.
He also struck a note of caution over the high percentage of unemployed, which reached around 7.0 per cent.
“Celebrations are not in order when over 30,000 of your compatriots are going through the nightmare of unemployment,” he added.
In an interview in Sunday’s Simerini newspaper, Finance Minister Charilaos Stavrakis said unemployment in Cyprus was not as bad as in the Eurozone, where it reached around 10 per cent.
The minister said without measures, everyone expects the deficit to reach 7.0 per cent.
“But we have worked a lot on cutting expenditure and personnel in the civil service,” Stavrakis said. “Thus, I feel that with great effort, and if revenue from corporate tax remains at last year’s levels – which in any case were low – the deficit will be close to 6.0 per cent.”
Stavrakis said the ministry had forecasted a growth rate of 0.5 per cent for the year when the IMF, the European Commission and other organisations said the economy would not show any growth.
“Even with conservative estimates … it looks like we will have a marginal, yet positive growth rate,” the minister said.
He added that the only sector still in the red, despite a small improvement, was construction but it is hoped it will gradually recover and boost growth further.
Stavrakis rejected suggestions that the government did not take any measures, pointing out that the cabinet had approved a package of 22 proposals that were ultimately rejected by parliament.
“It was a comprehensive package, which, in my opinion, would have resolved public finance problems to a large extent,” Stavrakis said.
The measures included proposals targeting tax evasion, temporarily raising corporate tax and taxing immovable property.