According to Mr. Georgiades, the aim is to keep a balanced annual budget and use any surpluses toward debt reduction. “This is the main principle, this is our policy and we keep on with this policy” he underlined. He also added that: “The 2019 state budget provides for €8.55 bln revenue and €7.91 bln spending, with a surplus of 2.8% of GDP.”
The Minister said that public debt is expected to rise to 104% of the Gross Domestic Product, in contrast to projections of a 110% increase, and is expected to decrease to 97% in 2019 (as a result of government moves to support the sale of the Co-op bank). He warns however, that Cyprus needs to be prepared for a rise in government bond yields.
Mr. Georgiades informed MPs of the government’s plans to continue its policy of no tax-rise, as well as plans to abolish stamp duty, alter road tax, eliminate fuel tax and reduce tax imposed on interest paid as a special contribution for the defense from 30% to 17%.
He also emphasized the importance of keeping public spending below 40% but also said that an increase in spending is expected in 2019 and 2020 due to the implementation of the General Health Scheme.
The Minister said that the several improvements after the big recession, did not immediately impact the citizens of Cyprus, but he highlighted the reduction of unemployment, the recovery of salaries, the creation of jobs and the poverty risk declining to 25.2% in 2017, from 28.9% in 2016.
Replying to questions from MPs, the minister stated that, in his opinion, there is no economic bubble because the economy presented all the opposite features of an economic bubble. However, he admitted that sales of high-value property would have to be monitored, saying: “Especially the sector of high – value properties, such as in Limassol, needs to be monitored. It does not present the characteristics of a conventional bubble but I would agree that it needs to be monitored carefully.”