Cyprus economy grew by close to 3 percent up to now this year, helping the government to achieve a surplus of 4 percent of GDP, and remains a strong economy, Finance Minister Harris Georgiades said on Tuesday.
“This was not the result of any additional taxes but came out of tax easing and incentives in the productive sectors,” Georgiades told an Economic Conference in Nicosia.
The country’s economy also received a strong endorsement from Klaus Regling, CEO of the European Stability Mechanism (ESM), the single biggest creditor of Cyprus.
Georgiades said the budgetary surplus generated so far this year was three times that of the Netherlands or Luxembourg and the biggest among European Union (EU) countries.
“It is a security buffer we have generated that will be managed carefully, possibly through an expansionist fiscal policy, but only in case an economic slowdown affects our country,” said the minister.
He also said the deceleration of the Cyprus economy after achieving a growth rate of 4 percent in 2018 is a normal phenomenon.
Georgiades deplored international “phenomena such as protectionism and national retrenchment” which, he said, are the “political reasons” behind an economic deceleration affecting both the European and the world economy.
Regarding the policy of fiscal easing by the European Central Bank, he said, it is “a one-way course” during a crisis period, adding that with rates being close to null the margins of further easing have been exhausted.
ESM CEO Regling said his organization is keeping a close watch over its economy, and his general conclusion is that there are no important risks for the ability of the eastern Mediterranean island to repay its debt.
Cyprus received 9 billion euros from ESM as part of the 2013 economic package assistance program, but actually used only 7.5 billion out of the total Eurogroup contribution to its bailout.
Regling said the development of the Cyprus economy remains strong and is facing only mild medium-term risks, though still being vulnerable to external turbulence as an open economy. (one euro is currently about 1.11 U.S. dollars)