articles | 14 September 2016

Cyprus' ministers approve 2017 state budget

The Council of Ministers recently approved the 2017 state budget, the first to be drafted following Cyprus’ exit from the three-year economic adjustment programme.

The budget, based on the directives of the 2017-2019 Fiscal Policy Strategic Framework approved by the cabinet in May 2015, is balanced, placing special emphasis on the implementation of development projects that have been promoted throughout Cyprus, including projects co-financed by the EU.

“I present today before the Council of Ministers the state budget for next year, a budget that confirms and supports the recovery of our economy,” Finance Minister Haris Georgiades said.

The budget aims to assist the government to achieve the strategic target of securing the conditions for sustainable growth through further improving competitiveness, creating jobs and reducing unemployment.

According to the targets of the Fiscal Policy Strategic Framework, public revenue for 2017 is estimated to reach €6,964 million, marking an increase of 1.1% compared with €6,839 in 2016, whereas total General Government expenditure in 2017 will reach €7,069, recording an increase of 2.3% over 2016.

The 2017 central government primary expenditure (excluding debt servicing costs) is projected to reach to €6,150 million up by 1.6% over 2016, whereas total expenditure is projected to reach €7,139 million, down 3.4% compared to €7,392 of 2016, due to the decline of the average borrowing cost and consequently the further reduction in interest rate payments.

Fiscal balance for 2017 is estimated in the region of 0.6% of GDP compared to 0.3% of GDP in 2016.

The 2017 budget does not include revenue amounting €175 million from the temporary scaled contribution that expires on December 31 2016 as well the immovable property tax, set to be abolished by the Parliament.

Debt servicing expenditure for 2017 is estimated to reach €499 million down 13.3% compared with €576 million in 2016.

The state’s wage bill is projected to reach €2,342 million up 3.7% compared with 2016, whereas social transfers, that include welfare benefits, are projected to reach €2.573 million marking an increase of 1.3% compared with €2.539 in 2016.

In the medium-term the Finance Ministry projects GDP will grow with an annual rate of 2.8% in the period of 2017-2019, whereas inflation rate will reach 0.5% in 2017 and will further accelerate to 1.5% and 2.0% in 2018 and 2019 respectively.

Unemployment for 2017 is projected to reach to 11.0% and decline further to 10% in 2018 and 9% in 2019. However the Finance Ministry stresses youth and long term unemployment remain as key challenges.

Source: Cyprus Mail

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