Cyprus must prepare for the worst
By Jean Christou
CYPRUS must be prepared for any worst-case scenarios when it comes to the economy for 2009, Central Bank governor Athanasios Orphanides said yesterday.
In a written address marking one year of the euro, Orphanides said adoption of the single currency had so far protected Cyprus against major effects from the international crisis.
“But we must not overlook the fact that an open economy like ours cannot remain completely unaffected by the negative developments,” he said.
“Because the length and depth of the international crisis is difficult to predict, the government should be ready to take action if the worst scenarios materialise for the economy.”
Orphanides said the financial crisis had made it difficult to measure the exact effects of euro adoption, but its value had been seen in the last months of the year when the crisis broke out.
He said non-euro zone countries had seen their currencies devalued and interest rates skyrocket.
“The euro now operates as a shield to protect the purchasing power of Cypriot citizens and the generally sound macroeconomic framework which characterises the Cyprus economy,” said Orphanides.
“The euro zone currently works as a shield against the impact of global financial turmoil. However, we also need a firm commitment to rational choices and timely realistic strategies. In this way, we can and must build a stronger and more flexible economy.”
Orphanides’ comments echoed many others yesterday, which indicated that the economy was the number one concern for 2009 across all sectors.
Finance Minister Charilaos Stavrakis also praised the euro for keeping the economy stable, although he conceded it had added between 0.1 and 0.2 per cent to the year’s inflation.
The biggest concern for the economy this year, other than tourism, was the construction sector, the Minister said.
“There is a very significant decrease in property sales in recent weeks,” he said, adding that the situation was being monitored on a daily basis.
“To some extentm this is natural when compared to 2007, and is a little misleading because 2007 was a year when property sales were overheated. But certainly the trend is downward and is alarming,” Stavrakis added.
But he said it was not at a level which could create problems for the banking sector or the economy in general.
A fall in prices was good news for purchasers because prices had been distorted due to the high demand of recent years, Stavrakis said.
However, it also meant a fall in state revenue due to fewer taxes and transfer fees. This would have to be made up though other means, he said.
“This is why we insist that the major challenge for the economy in 2009 is to develop and maintain a strong growth rate, mainly through the development programme of the government,” Stavrakis added.
Employers and unions also put in their two cents’ worth yesterday.
SEK union federation was concerned over possible job losses in 2009 as a result of the problems in construction and tourism.
“The global outlook for 2009 is bleak and will inevitably begin adversely to affect the Cypriot economy,” a New Year message from SEK said.
The union said the government must proceed without further delay in implementing the planned development projects and to “declare war” on illegal employment.
“We expect employers to demonstrate a social awareness of the need to safeguard the jobs of Cypriot workers,” the union added.
The Chambers of Commerce and Industry (KEVE) reiterated the call for an action plan for tourism and construction but shied away from too many doom and gloom predictions.
“The problems and consequences of the crisis are focused on real estate and tourism, and mainly concern the future course of these sectors,” KEVE said.
“But if the crisis continues it will culminate in additional complications that will affect other areas such as trade, industry and the broader services sector,” it added.
Copyright © Cyprus Mail 2008
When money is tight...Do you think France will see 80 million people a better prospect for her worries than the few in Greece and the "RoC"????
