Cyprus expects to lose significant wealth in 2020 since it is moving fast away from initial goals to raise GDP to €22.39 billion. And all this because of the coronavirus epidemic which has paralysed key sectors of the economy since mid-March.
It is still unknown when basic sectors such as hotels, construction, trade and airlines will start operation again so that the economy is also activated.
Data compiled by the Ministry of Finance estimating the Gross Domestic Product increasing by €895 million in 2020 compared to 2019 – that is, from €21.50 billion reaching €22.39 billion.
These numbers are unapproachable now. In fact, the coronavirus national wealth damage is expected to be over one billion with detrimental consequences on fiscal results.
That’s why “cushions” should be sought for the budget since public finances are expected to close with a significant deficit. Cash buffers are running low due to the government’s social policy with employee support plans aiming to counter the pandemic’s effects.
Minister of Finance Constantinos Petrides told in an interview that the coronavirus crisis will lead to a deep recession in 2020, probably exceeding 10% of GDP.
The Minister’s prediction is much bleaker than that of Fitch which revised last Friday the outlook for the Cypriot economy predicting a 2% recession in 2020. In 2012, the economy’s recession rose to 3.3% compared to GDP, in 2013 it stood at 6.6% and at 1.9% in 2014.
That is, the amount of the economic recession recorded within three years (2012 -2014) will be almost the same as the 2020 projection. Aside from the total GDP of billions that will be lost in 2020, the comparison by sector with last year’s is also quite interesting.
In the first quarter of 2019 the value added to the economy from trade, vehicle repair, hotels and catering sector was €1 billion and €1.23 billion in the second quarter. Wealth will be deducted this year due to the economy’s reduced production.
Time stood still on March 15, 2020, after the restrictive measures came in effect. And it is doubtful that any movement will take place in the second quarter – that is April, May, June 2020.
In fact, it is certain now that April will be paralyzed and very difficult to predict how much lower the movement of the three main sectors of the economy will be. The coronavirus side effects have also hit the construction sector, resulting in a significant loss of wealth for the economy.
Last year, the construction sector had an added value of €303 million in GDP in the first quarter and €324 million in the second quarter. As of March 23, 2020, all construction sites and ongoing projects shut down.
This means that, at least up until the first half of the year, a significant reduction in wealth generated by the construction sector is set to be recorded.