Central Bank predictions often differ, says minister

IT is not unusual for Cyprus’ Central Bank (CB) – or any European CB – to have differing forecasts from its government, Finance Minister Charilaos Stavrakis said yesterday.

But he warned that political and party conflicts on the internal front could only cause psychological damage to investment and consumption.

The minister had been asked to comment on the recent row that broke out between DISY and DIKO, and the government, over the latter’s differing predictions from the Central Bank over their forecasts on next year’s state deficit. The CB predicts a 7.0 per cent deficit next year, compared to the government’s forecast of 6.0 per cent of the GDP, which is double the EU recommended ceiling.

“The Central Bank’s views are respected; however, it is a common phenomenon in Cyprus as well as Europe for many forecasts and predictions by the Central Bank and government to differ to an extent,” said Stavrakis. “For example, our forecast for next year’s deficit is 5.4 per cent and this is almost the same as that of the International Monetary Fund, which predicts a 5.6 per cent deficit, while the Central Bank has a pessimistic view, predicting a 7.0 per cent deficit.”

He added that the CB had also predicted a negative growth rate for this year, “while at the end of the day, the government’s predictions have been confirmed and in 2010, despite the difficulties, we have a positive growth rate”.

But the minister added, “At the end of the day, the forecasts and who will win have the least significance, as what is most important is for us to unite our powers and make consensual efforts for the good of the economy.”

Stavrakis said the trust shown in recent days by foreign investors towards the Cyprus economy spoke for itself. “Unfortunately, it is on the internal front – due to party and political conflicts – that the real damage is being caused on the investment and consumption psyche,” he said. “The political powers need to keep party conflicts and political interests away from matters involving the economy, so we can carve and implement the strategy we are following, which is a success.”

 

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