2017 ‘bal­anced’ bud­get ap­proved by Cab­i­net

Financial Mirror (Cyprus) - - FRONT PAGE -

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.

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