Cyprus sees lower deficit in 2007
NICOSIA – Cyprus expects its budget deficit and public debt to drop markedly in 2008, in line with rules of the eurozone it expects to join on January 1, the island’s Finance Ministry said yesterday. The government’s proposed budget sees the deficit falling to 0.5 percent of gross domestic product next year, from a projected 1 percent in 2007. Public debt was expected to fall almost 10 percentage points to 53.2 percent of GDP. «Breaking the 60 percent barrier for public debt is an important target and commitment for eurozone membership,» the Finance Ministry said. Inflation would fluctuate between 2.3 and 2.5 percent, and the economy was expected to expand by 4 percent, steady on previous years, the ministry said in a statement. In money terms, the proposed budget sees spending at 3.85 billion Cyprus pounds ($9.16 billion) with revenue – showing declining rates of growth in a presidential election year – at 3.27 billion Cyprus pounds, it said. The budget still requires parliamentary approval. Under EU rules, eurozone members must keep their fiscal shortfalls below 3 percent of GDP, keep a lid on inflation and show declining public debt. Cyprus has in recent years tightened spending and offered tax amnesties to boost public coffers. Budgetary shortfalls from 2002 to 2005 knocked aspirations of early eurozone admission off target. The rate of growth of revenue next year was expected to decline to 9.6 percent in 2008 because of the anticipated impact of raising a tax-free income threshold, and the interruption of rebates from the EU budget, the finance ministry said. Revenue growth is forecast at 13.6 percent in 2007. Growth in spending was down to a forecast 7.1 percent from 7.8 percent in 2007. That represented a drop in spending on pensions after authorities raised retirement ages to 65 from 63, and a containment of spending on servicing public debt, the finance ministry said. Yesterday, the statistics department said that consumer inflation was running at 2.47 percent year-on-year in August after 2.43 percent in July. On a monthly basis the consumer price index (CPI) rose 0.54 percent in August to 104.59, it said. From January to August, the consumer price index rose 1.9 percent year-on-year.
