The uncertainty that characterises the projections on which the 2022 state budget is based due to a possible new pandemic outbreak is the key feature highlighted in the report of the Parliamentary Committee on Finance on the 2022 state budget.
The conclusions of the report were mentioned by the Chairperson of the Finance Committee, Christiana Erotokritou, in her speech at the beginning of the debate on the State Budget for 2022.
The State Budget for 2022, as initially submitted to the Parliament, provides for regular and development expenditure for which payment approval is requested, not including expenditure charged to the Permanent Fund, amounting to €7.051,050,546 and shows a 6.9% decrease in expenditure compared to the initially budgeted and approved expenditure of the 2021 budget.
The report also notes the uncertain but positive medium-term prospects of the economy and the need for sustainable economic growth and proper implementation of the Recovery and Resilience Plan.
According to the Commission's conclusions, the Cypriot economy, like the European and global economy, remains highly dependent on the course of COVID-19. It is the wish of all parties to smooth the impact of the health crisis on the Cypriot economy as soon as possible and return it to a sustainable growth path.
It is also stated that the medium-term outlook, based on the Government's forecasts, although characterised by uncertainty, is positive.
It is also noted that the sustainable growth of the economy, the reduction of public debt to sustainable levels, the achievement of a fiscal surplus, the protection of consumers' standard of living from possible inflationary pressures, and the safeguarding of the welfare of citizens in general should be included in the Government's main policy priorities.
The promotion of the green economy, digital transformation, research and innovation, the rational and effective management of MFN, the implementation of structural reforms on a sound basis, as well as the implementation of major development projects, it is added, will contribute to the recovery and growth of the economy in the medium and long term.
It is further stated that the rational and optimal implementation of the National Recovery and Resilience Plan, the use of the European instruments included in the Policy Programme S They also acknowledge the uncertainty surrounding the forecasts on which the state budget for 2022 is based due to a possible new outbreak of the pandemic.
The majority of the members of the Committee points to a number of issues affecting the course of the Cypriot economy on which they express individual reservations, including the management of MEX, the protection of the main residence and small commercial housing, the high level of public debt and the budget deficit, social inequality, and the need to ensure the sustainability of the Cypriot economy. They also acknowledge the prospect of the Cypriot economy returning to positive growth rates from 2021, as well as the fiscal improvement observed. Further, some members stress the resilience of the Cypriot economy, the rational use of fiscal margins and access to international markets to meet financing needs for the pandemic in 2020 and 2021, the improvement in social indicators, the improvement in the credit rating of the Cypriot economy and the rational management of public debt. Members of the Committee express particular concern about the levels of unemployment, in particular long-term unemployment. They also express reservations with regard to the position of the Minister of Finance on achieving full employment conditions soon.
Members of the Committee note that the observed increase in the general level of prices, although temporary at the European level, raises concerns about its impact on the purchasing power of consumers, taking into account the uncertainty caused by the ongoing outbreak of COVID-19.
Members of the Committee express reservations in relation to the levels of social indicators, noting in particular the high proportion of the population close to or below the poverty line.
Furthermore, Committee members stress, inter alia, the need to adopt a sustainable growth model on the basis of which all productive sectors of the economy contribute to GDP growth, to implement a targeted social policy including, inter alia, housing policy measures, support for vulnerable groups of the population and mitigation of income inequality in order to ensure decent living conditions, to adjust the level of social benefits in view of the increase in prices b In particular, some of them express the view that it lacks vision and perspective and other members note that the proposed budget does not address the structural problems of the Cypriot economy in a proper and holistic way. In contrast, other Committee members express the view that the proposed budget serves the growth perspective of the Cypriot economy.
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