The state budget is based on a “wait and see” policy
Sunday 22 November 2020, HARAVGI newspaper
Article by Stefanos Stefanou, AKEL C.C. Spokesperson, AKEL MP
The 2021 state budget is called upon to address the extraordinary and very difficult conditions which the coronavirus pandemic is causing to the economy and society in general. That is precisely why it needs to have specifications, provisions and forecasts that will permit the state, on the one hand, to meet the pressing needs and, on the other hand, to create prospects for a rapid recovery of the economy and for overcoming the structural problems it has. Examining the 2021 state budget, some very important conclusions can be drawn:
- Optimistic forecasts
The budget doesn’t address the challenges posed by the pandemic. With regards the economy’s key figures, the government doesn’t appear to be worried about 2021, as it expects that a growth rate of 4.5% of the GDP will be recorded and that unemployment will fall to 7%, 1% lower than in 2019. These forecasts, in addition to being very optimistic, illustrate that the government is approaching the current situation in 2020 as a parenthesis that has not and will not affect the Cyprus economy’s productive potential. At the same time, the government doesn’t have a “Plan B” in the event it falls short of its forecasts. We note that as to the first phase of the pandemic, it fell well short of its own economic forecasts.
- Difference between words and practice
The government expects a high rate of implementation of the developmental budget, so that the state shall operate as a driving force for the economy’s growth. It is a fact that in times of recession and crisis the state is called upon to take on the greatest burden of responsibility. It is extremely uncertain, however, whether the government will manage to record high percentages as regards the implementation of the developmental budget. The Government’s performance and record in this area too is poor. Characteristically, we point out that in 2019, under much better conditions, the budget’s implementation rate reached just 62%, which is one of the lowest in recent years. The work and results of the government in the almost eight years of its administration, shows that there is a big discrepancy between its proclamations and practical actions. The government will therefore need to change course if it to register better results, something that is however unlikely.
- Need for a new developmental model
The government doesn’t seem to be worried about the inefficiency and distortions of the country’s developmental model, which has obviously reached its limits in a number of important fields. The situation as it has evolved as a result of the pandemic has demonstrated just how vulnerable Cyprus’ economy is to external situations/developments and how dependent it is on sensitive sectors, such as tourism, the construction and consulting sector. The need to elaborate a new developmental model is urgent and imperative. A model is needed that will invest in the primary sector, green growth, new technologies and innovation. A model that is free from the excessive dependence on specific areas, where distortions and imbalances will be corrected, which all cause problems. The government doesn’t have any plan even for this and is content with making general references and issuing declarations.
- They don’t care about people’s problems
According to what the Minister of Finance presented in the House of Representatives on the budget, the government does not seem to be worried – and even more so it doesn’t have any solutions for important problems which people face, such as the question of foreclosures, rents, loan installments and evictions. The “Estia” one-time government scheme has failed, as the government itself has admitted. There are no plans in place with regards the non-performing loans of the vulnerable groups of the population. In November, the President of the Republic referred to Parliament (who rejected it) the Bill for the suspension of installments. He doesn’t say what he will eventually do when the measure will expire next December.
- “Wait and see” policy
With the 2021 state budget, which it submitted before the House of Representatives, the government has for the umpteenth time confirmed that its administration pursues the sloppy and dangerous doctrine of “wait and see”.
