ECONOMY

Cyprus budget swinging toward deficit

Cyprus expects its public finances to tilt into a deficit, with a worsening economic outlook in the medium term, according to an economic plan submitted to Brussels. A eurozone member since January 2008, Cyprus is sticking to its forecast of 2.1 percent growth in 2009, but says that could decline sharply to 1.0 percent this year in the worst-case scenario if the economic downturn is more protracted. Risks to the growth outlook remained tilted heavily to the downside over the medium term, as stated in the 2008-2012 Stability Program of Cyprus. This was submitted to the European Commission last week and released yesterday. «Notwithstanding significant risks to this scenario, it is forecast GDP [gross domestic product] will expand at an average rate of 2.7 percent during the 2009-2012 program period, below the estimated potential growth rate of 3.75 percent,» the Finance Ministry said. The general budget balance is predicted to swing to a deficit of 0.8 percent of GDP in 2009 from an estimated surplus of 1 percent in 2008. «The decline of the budget surplus is primarily attributed to the deteriorating external environment and the resulting marked slowdown in the activity of the real estate sector,» the ministry added. The Cypriot government last week announced a 300-million-euro package to support construction and tourism as the credit crisis weakens economies across Europe.