Cyprus braced for 'inflationary pressure'

Inflation in Cyprus is set to reach record levels in 2008, according Central Bank Governor Athanasios Orphanides…

Mr Orphanides warned recently that ‘fiscal restraint was needed as long as the economy continued to face inflationary pressures’.

He also stated: “The prospects are relatively good, but at this point our only great concern is the inflationary trends existing in the Cypriot economy as well as in the euro area,” Orphanides said after his first meeting with the new President Demetris Christofias.

Inflationary pressure

According to Finance Ministry forecasts, inflation for 2008 is expected to reach between 2.5 per cent and 2.75 per cent, compared to 2.4 per cent last year.

“Inflationary pressures are even higher due to the increase in the price of oil,” said Orphanides, adding that in light of this, the need to curb prices was even more acute.

Cyprus’ growth reached 4.3 per cent last year and is expected to hover around four per cent this year.

Asked to comment on the week-long slide on the Cyprus Stock Exchange (CSE), and particularly on banking stocks, Orphanides said the Central Bank was closely watching the situation.