2017 ‘balanced’ budget approved by Cabinet
The government has drafted a state budget for 2017 that sees a 1.1% increase in revenues, and a 2.3% increase in spending, resulting in a fiscal balance of 0.6% of GDP, bigger than the 0.3% targeted for this year.
This follows statements by Finance Minister Haris Georghiades that the aim was to achieve a balanced budget, hence any spending (on civil services wages or development) would be based on revenues.
The 2017 state budget aims to assist the government to achieve the strategic target of securing the conditions for sustainable growth through further improving competitiveness, creating jobs and reducing unemployment, a Council of Ministers statement said.
According to the targets of the Fiscal Policy Strategic Framework, public revenue for 2017 is estimated to reach EUR 6.964 bln marking an increase of 1.1% compared with EUR 6.839 bln in 2016.
Total General Government expenditure in 2017 will reach EUR 7.069 bln, an increase of 2.3% over 2016, according to the Cyprus News Agency.
The 2017 central government primary expenditure (excluding debt servicing costs) is projected to reach to EUR 6.15 bln up by 1.6% over 2016, whereas total expenditure is projected to reach EUR 7.139 bln, down 3.4% from EUR 7.392 bln in 2016, due to the decline of the average borrowing cost and consequently the further reduction in interest rate payments.
The fiscal balance for 2017 is estimated in the region of 0.6% of GDP compared to 0.3% of GDP in 2016.
The 2017 budget does not include revenue amounting EUR 175 mln from the temporary scaled contribution that expires on December 31, 2016, as well as the immovable property tax, set to be abolished by Parliament.
Debt servicing expenditure for 2017 is estimated to reach EUR 499 mln, down 13.3% from EUR 576 mln in 2016.
The civil service payroll is projected to reach EUR 2.342 bln, up 3.7% compared with 2016, whereas social transfers, that include welfare benefits, are projected to reach EUR 2.573 bln, an increase of 1.3% compared with EUR 2.539 bln in 2016.
In the medium-term, the Finance Ministry projects GDP will grow at an annual rate of 2.8% in the 2017-2019 period, whereas inflation will reach 0.5% in 2017 and will further accelerate to 1.5% and 2.0% in 2018 and 2019, respectively.
Unemployment for 2017 is projected to reach to 11.0% and decline further to 10% in 2018 and 9% in 2019. However, the Finance Ministry stresses youth and long term unemployment remain its key challenges.
According to the Finance Ministry, the main fiscal risks stem from possible adverse macroeconomic developments leading to lower growth rate, government liabilities due to past government guarantees to state-owned enterprises and local government authorities, liabilities due to legal proceedings tabled against the Republic of Cyprus and negative performance by state entities, local government agencies and public private partnerships.