No tax breaks be­fore next elec­tions

Financial Mirror (Cyprus) - - FRONT PAGE -

House Com­mit­tee on Financial and Bud­getary Af­fairs be­gan the dis­cus­sion on the 2016 state bud­get on Mon­day with Fi­nance Min­is­ter Haris Ge­or­giades analysing the state rev­enues, the sit­u­a­tion of the pub­lic fi­nances and the fis­cal in­dex, adding that there will be no tax breaks be­fore the par­lia­men­tary elec­tions in May 2016.

The bud­get pro­vides for rev­enues, ex­clud­ing financial flows, amount­ing to EUR 5.94 bln, com­pared with re­vised rev­enues of EUR 5.86 bln in 2015, an in­crease of 1.3%.

The dis­cus­sion on the state bud­get will cover the bud­gets of all min­istries and pub­lic sec­tor ser­vices and will be con­cluded on Novem­ber 30 with the par­tic­i­pa­tion of the Cen­tral Bank Gover­nor Chrys­talla Yiorkadji.

Mean­while, the Fi­nance Min­istry said that medium term prospects for the econ­omy are more op­ti­mistic than had been an­tic­i­pated, fore­cast­ing that pub­lic debt will shrink to be­low 100% in 2018.

Ac­cord­ing to the Min­istry’s fore­cast, the growth rate for 2015 will range be­tween 1% and 1.5%, con­trary to the Troika’s lower pre­dic­tions of just 0.5%.

For 2016, the re­port says GDP change rate will range close to 1.8% com­pared to 1.4%, while it agrees with the in­ter­na­tional lenders’ fore­cast for growth of 2-2.2% in 2017 and 2018.

Re­fer­ring to the labour mar­ket, the Fi­nance Min­istry es­ti­mates that from 2016 on­ward un­em­ploy­ment will fol­low a down­ward trend at close to 15%, 13.7% in 2017 and in 2018 to 12.4%. At the same time in­fla­tion is ex­pected to in­crease to 0.9% in 2016 due to an ex­pected in­crease in pri­vate de­mand. For 2017 and 2018 in­fla­tion is ex­pected to reach 1.3% and 1.5%, re­spec­tively.

Fis­cal bal­ance in 2017 is es­ti­mated to be in sur­plus and reach 0.5% as a per­cent­age of GDP, the re­port said, while the pri­mary bal­ance (ex­clud­ing ex­pen­di­ture to ser­vice the debt) is fore­cast to also be well out of the red and reach 2.8% of GDP.

In 2018 fis­cal bal­ance is ex­pected to reach 1.1% of GDP while pri­mary bal­ance is ex­pected to be at least 3.3% of GDP.

“The bet­ter than ex­pected de­vel­op­ment of the econ­omy, in com­bi­na­tion with the grad­ual re­struc­tur­ing of the bank­ing sec­tor, has con­trib­uted to im­proved con­fi­dence,” the re­port pointed out.

On the bank­ing sec­tor, the Min­istry stressed that the most sig­nif­i­cant chal­lenge con­tin­ues to be “the very high per­cent­age of non per­form­ing loans (NPLs).” It added that a drop in NPLs will be achieved grad­u­ally as pos­i­tive prospects for the Cypriot econ­omy will con­tinue to im­prove ex­pec­ta­tions.

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