Cyprus currently appears to be particularly sheltered from excessive cost of living rises. There have been increases that Cypriot consumers find eyewatering, especially since basic consumer salaries remain particularly low. This article explains the present situation and current government plans to help.
Cyprus is heading towards its presidential elections in February 2023, when the political party currently heading our constitutional government is likely to change. It comes at a time when Cyprus is also experiencing a cost-of-living crisis like other countries, so the possible change in the ruling right-wing government party could affect the current government’s policy on how to deal with this situation.
The government is continuing its reduced excise duties on fuel until January 2023. This intends to combat rising inflation caused by the Ukraine war. So, excise duty is reduced by 7 cents on Unleaded 95, 8.2 cents on diesel and 6.4 cents on heating oil (still used to heat homes in villages, especially by the older generation). According to the government, fuel prices have dropped by 19%, having initially peaked in July this year, and it claims that Cyprus has the lowest excise tax fuel rate in the EU.
The government is also subsidizing consumers’ electricity bills. There have been three schemes so far. The Electricity Authority as a government organisation was asked to reduce its kw/hr rate on electricity bills to help consumers. The second scheme featured a reduced VAT rate on electricity bills from 19% to 9% for a short period until the third scheme came into play. This involved a government subsidy that alleviated a full VAT rate return and protected price increases put forward by the Electricity Authority as a result of global oil price rises.
The third scheme will remain until the end of 2022. Together, the government claims it put 400 million+ euros into supporting business and household energy costs. The government is subsidizing photovoltaic solar panel systems installation for households and businesses. Read more about that here.
It’s interesting to note the opposing party’s left-wing take on fuel and energy price rises. They would target fuel companies’ renewable energy with a 90% windfall tax to be calculated retrospectively on excess profits made in 2021 and 2022. The party also state that petrol garages would also be taxed (although it doesn’t say by how much) on extra profits they make from what the party sees as their exploitations of fluctuating international petrol prices, something that petrol garage owners deny.
As your average Cypriot shopper, I haven’t seen any noticeable food shortages. The supermarket shelves are well-stocked. The only product I noted shortage of was grains when Ukraine exports were paused. This mainly affected agricultural farmers and livestock. Then, the prices of pasta and wheat-based products rose virtually overnight but have since returned to affordable levels. Fresh fruit and vegetables have risen in price but that’s been partly due to the heavy rains we’ve just had. This always makes for slight price increases in these products. Luckily, the sun is shining brightly again now so prices for these will level out again.
Having said that, Cyprus hasn’t been immune from inflation rate increases. As I write, according to Cyprus’s Statistical Service inflation stands at 8.8% (October 2022), up from 8.7% in September this year. Food and soft drinks have gone up 13.6% in October from 7.69% in September. So, we are following the current cost of living crisis trend in this respect.
Still, inflation here remains a lot lower than the UK, and I see that the inflation rate for housing and utilities has dropped to 21.07% in October from 27.26% last September. View the data here.
At the moment the Cyprus government is resisting clear government help for consumers, although it’s talking a lot about providing help. I believe the forthcoming February election will be the time when politicians make clear references to how they intend to help consumers if they maintain or gain political power. And so, whatever happens in the future during this global cost of living crisis, it’s still cheaper to live here in Cyprus than in other EU countries, and certainly cheaper than living in the UK.