Fiscal deficit below 3% in 2014, says FinMin

The island’s fiscal deficit is expected to drop below 3% in this year, which is the EU requirement and to range close to 2.5%, while the forecast by the Troika of international lenders is 4.7% and the IMF 4.4%, Minister of Finance Harris Georgiades said on Friday.

Presenting the state budget for 2015 before the parliamentary Committee on Budgetary and Financial Affairs, Georgiades said that public debt will drop below 100% of GDP before 2017.

He also said that public debt will climb to 105% in 2014 and it will decline to 103% in 2015.

“We expect that public debt will decline below 100% of GDP, while output will register a third continuous year of growth by then,” he said.

Georgiades said Eurostat’s GDP revision has assisted in reducing the public debt, adding that under the Finance Ministry’s basic scenario, the public debt is deemed sustainable and downward trend.

He noted that especially if the stress test results, to be announced on October 26, show no capital shortfall for the Cypriot banks or needs below the programme’s EUR 1 bln buffer, there will be no increase in the island’s public debt and the downward trend will continue.

At the same time, he noted that the ministry expects a primary balance surplus of 0.5% in 2014 as a result of which the excessive deficit will be corrected two years before the ECOFIN’s recommendation.

Georgiades further said that “2014 was a year of stabilisation both for banks and public finances”, adding that it was also a year of restoring market trust to the economy of Cyprus.

He expressed the point of view that “2015 will be a year of recovery”.

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Referring to the budget for 2015 and the medium-term financial framework for 2015 – 2017 he told MPs that the goal is to help the path of correction of the economy rather than to undermine it.

“We are presenting a budget for 2015 which just as for 2014 will absolutely achieve all fiscal targets, will not create a new primary deficit, with no new taxes, no new burden placed on the private sector, households and businesses and which includes no new cuts and foresees a slight reasonable expenditure growth of 0.6% in line with the expected growth of the economy”, he pointed out.

At the same time he noted that the government remains reserved as regards its plans

Georgiades said that public debt is considered to be viable and to drop below 100% of GDP before 2020.

He also told MPs that unemployment is expected to be 14.8% in 2015.