Cyprus poised to declare 2007 budget surplus on tax revenues

NICOSIA (Reuters) – Cyprus is set to record a rare fiscal surplus in 2007 on higher-than-expected tax revenues, balancing the books a year earlier than forecast, its finance minister said yesterday. «We have managed to exceed our expectations and balance public finances, with the result of a small surplus in 2007,» Finance Minister Michalis Sarris told a news conference. This would be the first time in years that Cyprus has managed to balance the books. Until two years ago the island, which joins the eurozone in January 2008, was under an EU excessive deficit procedure. A Finance Ministry chart showed the surplus was expected to be approximately 1.5 percent of gross domestic product. The previous forecast showed Cyprus would end the year with a 0.5 percent GDP shortfall. Authorities had not yet factored in the full impact of an outbreak of foot and mouth disease in livestock in November, and the end of the year was heavy on payments, Sarris said. «Our forecast is for a surplus of about 1.5 percent of GDP. It could be more or less, but approximately the figure will be about there,» he said. January-to-September revenues from direct taxation released last week showed a 44 percent increase in revenue year-on-year to 860.9 million Cyprus pounds (US$2.15 billion). That exceeds the 787.3 million Cyprus pounds forecast for the whole year. Economists say increased retail volume should also boost VAT revenues. Latest figures show a 10.9 percent year-on-year increase in retail sales volume in January to August. The government expected VAT revenues to rise to 890 million Cyprus pounds in 2007 from 857.6 million Cyprus pounds in 2006.