Cyprus’ economy is expected to grow by 0.5 per cent in 2010.
“If the global recovery begins sooner and is more vigorous, then it would be possible to have an even better growth rate,” Finance Minister Charilaos Stavrakis told reporters.
Unemployment in 2010 is expected to rise to 6.5 per cent compared to 5.5 per cent this year.
The public deficit for 2010 is expected to reach 4.5 per cent but the government will try and keep it under the three per cent threshold stipulated by the EU to avoid going under surveillance.
“The challenge is to have a deficit under three per cent,” Stavrakis said.
To do so the state must save some €285 million from almost €8 billion in projected expenses.
Income for the year is expected to be in the region of €6 billion.
“The main target is for the deficit not to exceed three per cent, preferably 2.9 per cent,” Stavrakis said.
In the first half of 2009, the public deficit reached 2.4 per cent of GDP.
Among the measures in place to achieve this goal are better management of funds, rigorous tax collection and a freeze on civil service hiring for 18 months.
The number of civil servants swelled in recent years reaching 51,893 compared to 47,704 in 2005.
The civil service payroll will rise 4.8 per cent in 2010 while bonuses and pensions are expected to increase by 22.3 per cent.
The government has also intensified efforts to better manage funds.
We have introduced a “daily monitoring of expenses and income so as not to waste even one cent of taxpayer money,” the minister said.
For the first time operational expenses will show decline – 7.1 per cent — in 2010, the minister said.
And so far the state has collected some €80 million in late or disputed taxes.
The island’s inflation in 2010 is expected to reach 2.5 per cent compared to one per cent last year.
Cyprus’ economy technically entered recession in July after recording two successive quarters of negative growth.
Despite the sharp drop in revenue, the minister said the government will continue spending money on development while no new taxes will be imposed.
“We do not plan to introduce any new taxes unless imposed by the European acquis communitaire,” Stavrakis said.
Revenues from VAT were down 10.3 per cent – capital gains tax income dropped 80.8 per cent and income tax proceeds fell by 14.4 per cent.
By George Psyllides, Cyprus Mail, September 13, 2009
