Cyprus: EU sees 7.7% recession – Finance Ministry issues double bond

Cyprus: EU sees 7.7% recession – Finance Ministry issues double bond

The European Commission’s spring forecasts show a serious blow to the European economy, revising downwards the 2020 and 2021 economic forecasts. According to the European Commission, the European economy has been hit harder than originally expected. The Eurozone in 2020 will suffer a deep recession of 8.7%, which is 1 percentage point up from the May forecast.

For Cyprus, a recession of 7.7% is expected, which constitutes a 0.3% increase compared to May, according to a written statement by Finance Minister Constantinos Petrides.

The report acknowledges that the Cypriot Government’s Support Program to counter the pandemic is expected to support jobs, disposable household income and businesses, while limiting to a large degree the impact on domestic demand, which is already reflected in the possible recovery in consumption. Furthermore, it is because of these measures that the forecast for the recession in the economy is more positive than in other tourist countries, despite the fact that, as the report shows, the main pandemic-related risks to the economy are seen on tourism, with revenue amounting to roughly 25% of last year’s turnover.

The European Commission’s predictions are largely in line with the government’s assessments, while confirming the appropriateness of the government’s support measures for employees and businesses.

He reaffirmed that the crisis was not over, and that the road to recovery would be difficult and uncertain, as was the progression of the pandemic and the efforts to find a vaccine, which are directly linked to the economic impact.

With the impact of the pandemic on unemployment and businesses expected to be felt around the end of 2021, it becomes necessary to continue pursuing a sound and prudent political economic plan at national level. The need for the rapid implementation of a common European recovery plan, the actualization of which should be Europe’s top priority at the moment, is becoming more urgent than ever, something that Cyprus will insist on at the level of European institutions in the near future.

Double bond issuance

Today, the Republic of Cyprus proceeded with a double issuance of bonds through the reopening of existing expiration bonds on December 3, 2024 and January 21, 2040 with a minimum issuance of € 250 million for each transaction. The books are closed and the editing of the results is currently in progress.

“I want to express my satisfaction for the extremely positive response of the markets. For the maturity bond in 2024 the demand exceeded € 2 billion, while for the maturity bond in 2040 the demand exceeded € 3 billion. In terms of interest rates, at this stage it seems that they will be approximately 0.34% for the five-year period and 1.47% for the twenty-year period”, said the Minister of Finance Constantinos Petrides.

Based on the above data, the Republic of Cyprus has decided to absorb a total of € 1 billion. The total supply has exceeded € 5 billion, an amount ten times larger the amount initially announced, which demonstrates the confidence with which the Cypriot economy is still surrounded by international markets.

Increasing the state’s available cash creates more options for possible repayment of more expensive or even short-term debt in the near future, reducing both the cost and the risks of public debt. In addition, it is emphasized that public debt will only increase temporarily, as the funds raised will soon be used exclusively to repay existing debt, according to the Minister of Finance. /ibna