It is a great pleasure to participate in today's prestigious economic conference. I stand before you with determination and the necessary readiness on the part of the executive to work together to transform our country into a model state that attracts quality investment, promotes entrepreneurship and offers a high standard of living to its citizens.
Cyprus, and you know this better than anyone else, has always been deeply committed to economic progress and growth. And I want to take this opportunity today to assure you that we will work hard to create an environment conducive to innovation, progress and prosperity. Especially today, as we are at a crossroads of an ever-changing global economy and with the geopolitical environment constantly changing, we are called upon to successfully address the challenges we face, but also to seize the opportunities that lie ahead.
Let me start with a brief overview of the current state of the Cypriot economy. After the unprecedented impact of the coronavirus crisis, Cyprus' economy has shown resilience and experienced a strong recovery in 2021. This positive trend continued throughout 2022, despite the difficult external environment caused by the illegal Russian invasion of Ukraine. In particular, Gross Domestic Product grew by 5.6% in 2022 in real terms, following a significant expansion of 6.6% in 2021. Sectors such as tourism, trade, accommodation and food services showed notable growth, alongside the information and communication technology sector. In addition, the labour market has shown improvement, with the unemployment rate falling to 6.8% in 2022, down from 7.5% in 2021. This was a result of the significant increase in economic activity in our country, which, among other things, is evidence of the resilience of the Cypriot economy.
Looking ahead, it is important to recognise that the economic challenges in 2023 with the continued situation in Ukraine, the energy crisis and high inflationary trends are expected to be somewhat greater than those of 2022. Based on the Government's macroeconomic projections, growth in 2023 is expected to continue on a positive trajectory, albeit at a slower pace of around 2.8 percent. Moreover, despite risks related to the international economic environment, inflation is expected to slow to around 3.2 percent in 2023, down from 8.1 percent in 2022.
Despite all the challenges we face, through our governance programme, which we have been implementing faithfully from day one, our objective is clear and unambiguous and is focused on creating a sustainable and prosperous economy that will benefit all Cypriot people inclusively. We are convinced that, through the adoption of an integrated approach, we will encourage the attraction of quality investment, the development of entrepreneurship and the creation of a supportive infrastructure that will enhance the transition to a new growth model.
Already, we are in contact with some countries, in advanced consultations and we expect to see some significant investments in our country in 2023. With our political relations, on the one hand with the countries of the wider Middle East, the Eastern Mediterranean and the Gulf, as well as India and Japan, but also within the framework of our now strategic relationship with the United States, and building on these excellent political relations, we will also have some important investments to announce in the coming period.
The focus of the government's strategy to implement our vision for the economy and society is guided through the implementation of the National Recovery and Resilience Plan, which includes key national policies for sustainable growth and strengthening competitiveness.
And when we talk about the economy of a country, the planning, the vision for the future of the economy, this should not be influenced by electoral cycles. So, we are building on what has been achieved over the last few years and we are here building on all of that to improve the weaknesses that we have identified that have emerged along the way and to create new prospects for our country.
The Recovery and Resilience Plan, with a completion date of 2026, will promote a more diverse and resilient growth model and improve the business environment. In particular, it includes a series of measures, reforms aimed at resolving the long-standing macroeconomic imbalances faced by Cyprus, such as diversifying the economy, limiting excessive borrowing by the private sector, ensuring the sustainability of public debt in the medium term and resolving non-performing loans both within and outside the banking sector. It is vital that these measures are implemented in a timely and effective manner, so that further progress can be made in these areas and sustainable actions can be taken to correct the weak, vulnerable parts of our economy.
According to the economic impact assessment of the Plan, conducted by the Economic Research Centre of the University of Cyprus, the Cyprus Recovery and Resilience Plan is expected to have a significant macroeconomic impact in the short, medium and long term. The Plan may lead to economic growth, in particular, cumulative GDP growth in Cyprus of about 3% in the short term and about 7% in the medium term until 2026, compared to the baseline growth scenario without its implementation. It is, at the same time, expected to significantly increase employment by more than 2.5%, where this translates into about 11,000 new quality jobs over the period 2021-2026 and about 6% in the long term.
The main focus of our governance is in partnership with all stakeholders, the private sector, but also the parliamentary parties - for much of the recovery and resilience plan there are conditions and pre-conditions that need to go through Parliament; so I hope for the cooperation of Parliament, away from approaches that we saw primarily in the context of the election campaign. So I look forward to its cooperation to prevent any loss of precious European resources, and I want to take the opportunity of my presence here today to call on everyone to work together for a stronger and more resilient economy, for the benefit of our country and especially the next generation of our country.
It is important to note that the Recovery and Resilience Plan is fully aligned with the Long-Term Strategy for the Sustainable Development of Cyprus.
It is important to note that the Recovery and Resilience Plan is fully aligned with the Long-Term Strategy for the Sustainable Development of Cyprus. The "Vision 2035" which is in essence the roadmap that articulates our aspirations, values and goals for the next decade, aims to make Cyprus one of the best places in the world to live, work and do business. All aspects of the Vision, through the implementation of more than 300 horizontal and sectoral actions, support the promotion of digital transformation and environmental sustainability with the key objectives of transitioning to a new, modern economic model, creating new jobs, achieving sustainable long-term growth and strengthening the international competitiveness of our country.
In order to achieve our goals, it is imperative that we give the highest priority to digital transformation aimed at enhancing the Investing in cybersecurity, digital skills training and 5G networks is fundamental to creating a more competitive and innovative economy capable of meeting the challenges of today's digital age.
Today's conference is an opportunity to highlight, once again, both the paramount importance of the green transition for a carbon-neutral economy and the promotion of sustainable growth. In Cyprus, the adverse impacts of climate change are already being felt, including on agriculture, water resources and the state of forests, while projections of the climate conditions expected to prevail in the future foresee significant economic impacts on society as a whole. In this context, the Ministry of Finance has collaborated with the Economic Research Centre of the University of Cyprus to prepare a comprehensive study of the impacts of climate change on the Cypriot economy. Our aim is to continue to invest in renewable energy, sustainable transport and energy efficiency, which are vital to reduce our country's carbon footprint and fully comply with the Paris Agreement on climate change, the implementation of the goal of reducing greenhouse gas emissions and achieving climate neutrality by 2050.
In addition, it is our intention to align our tax policy with the objectives outlined in the European Green Deal, especially in the context of the ongoing promotion of green tax reform. The primary objectives of the modernisation of our tax system are to enhance the competitiveness of Cyprus' tax model, to reduce the administrative burden on taxpayers and businesses and, at the same time, to facilitate a more equitable redistribution of the tax burden while maintaining tax neutrality. This is a national bet that will strengthen the rule of law, deter offences and enable the effective application of justice. The long period of adjudication of cases and the length of time required to enforce justice, in addition to the disproportionate costs to the state and the negative impact on the economy, is in effect a denial of justice.
Promoting entrepreneurship and improving the business environment is also an important priority. Through the National Research and Innovation Strategy, we are implementing a set of initiatives aimed at promoting and supporting research and innovation activities and facilitating the transfer of knowledge and technology between research institutions and businesses. The operation of the central Knowledge Transfer Office will facilitate the commercial exploitation of research results and technologies, linking researchers with businesses and other potential users of research results.
The strengthening of links between research organisations and businesses is part of the effort to promote cooperation and partnerships between academia and industry in order to enhance innovation and accelerate the commercial exploitation of new technologies. We aim to broaden funding channels for robust and start-up companies with high growth potential by providing seed capital, government guarantees and other forms of financing. This measure is of particular importance today in the context of the current economic environment, which is characterised by increased interest rates.
At the top of our priorities is to invest in the most critical foundation of businesses and the economy, what I personally consider our most important asset, our human resources. Although as a country we can boast of a highly skilled workforce, there is always room for improvement in terms of cultivating the skills and abilities of our young people. In this context, we intend to provide high quality education and training opportunities with a focus on promoting lifelong learning. The development of curricula, monitoring and guidance of graduates, as well as the establishment of modern vocational education and training schools will address the mismatches between education and the needs of our economy and the labour market. A key objective is to link our education to the local economy.
Among our key objectives is to ensure conditions of prosperity for the whole of our society. We aim to reduce inequalities and mitigate the adverse effects of rising energy costs on both businesses and citizens. In the light of increasing inflationary pressures, our aim is to target financial assistance to vulnerable groups, while maintaining fiscal prudence and discipline, an essential element to be able to develop social policy. It was in this context that we recently took the decision for a zero VAT rate on basic necessities as well as the extension of some broad-based measures. These measures include reducing excise duties on fuel, reducing VAT rates on electricity consumption, supporting livestock units, supporting low pensioners and subsidising electricity bills.
In conclusion, I would like to stress once again - and I insist on this point, I consider it particularly important, taking into account my former capacity as Foreign Minister - that preserving the credibility and the name of Cyprus as a business and financial centre, especially after the recent sanctions imposed by the United States and the United Kingdom on Cypriot service providers, is an objective of the utmost importance.
And I want to inform you that yesterday we received the first information from the United States, the first package of information, two more will follow in the next period. I have already spoken with the Attorney General this morning, and all the information we received yesterday will be sent to him today, so that the relevant work can be started by the competent authorities of the Republic, awaiting the other two information packages from the United States.
It is imperative that we approach this issue with the appropriate seriousness and do everything possible to not allow anyone to tarnish the name of our country and I am sure that first of all you who are the economy of our country understand and share this need to get this matter over with and move on to the new era.
I have a strong belief that with a constructive approach, the cooperation of all, including the political parties, which I consider as collaborators in this effort, we will successfully implement our ambitious but achievable governance programme.
We must not forget that the road ahead is complex and full of challenges both regionally and internationally, however, challenges and crises always create opportunities. We should seize these opportunities and achieve the effective implementation of everything we have planned. I believe that this is a one-way street and can lead us to achieve our goals.
Let us all work together to achieve the transition of our country into the new era and build a better tomorrow for Cyprus, for us and our children.
PM/EP/SX
Contents of this article including associated images are belongs PIO
Views & opinions expressed are those of the author and/or PIO
Source
