Sunday, 28 February 2010

Continued misrepresentation of the Cypriot economic reality

I do not know Mr. Azarides, professor of economics at Washington university. I am sure he is a good economist, but he should not talk about things he has very little knowledge such as the Cypriot economy.

In the article in politis the professor says that the crisis is a joke - Cyprus will be awash with money since sooner or later we will go back to our rapid growth rates. Azarides did not take into account that:

1) people are not interested so much on levels on income but its rate of change. That is what worries us - thus the fact our development level is close to the European average does not affect our psychology and spending patterns.

2) our growth was mainly through catch-up. We were lagging in technical and professional skills. Our rapid growth was mainly due to our relative underdevelopment - we grew rapidly as we were catching up to more developed countries. This is now not the case any more - we are very close to the technical frontier of the world economy.
Thus now unless we increase investment, growth and recovery will be very difficult.

What worries me the most is the fact that we have no new export industry lined up: the tourism industry is in decline and the accounting services have reached maturity, yet there in no new industry to take their place.

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