Cyprus achieved its two basic goals for growth rate and the reduction of the fiscal deficit below 6% of GDP for 2010, Finance Minister Charilaos Stavrakis has said. Speaking to a press conference concerning the public finances in the first eleven months of 2010 and the prospects for 2011, Stavrakis said that just a few days before the year’s end figures show a reduction of the budget deficit to 5.5% and public debt to 61% of GDP.
”We have emerged from recession in the clearest way defined by economic analysts internationally,” Stavrakis said, adding that if growth rate for the fourth quarter remains at the same levels of Q3, growth rate for 2010 will reach 0.8%, as opposed to the 1.7% contraction of the economy at the backdrop of the global downturn in 2009.
He added that 2010 will close with a fiscal deficit of 5.5% which will further decrease to 3.8% in 2011, to 2.8% in 2012 and to 2.5% by 2013, whereas public debt will reach 61% of GDP in 2010, 61.6% in 2012 and 61.1% in 2012 and will decrease below 60% by 2013.
According to the EU’s excessive deficit procedure, Cyprus must reduce its deficit to 4.5% of GDP in 2011 and below 3.0 percent in 2012.
The government’s duty is to convey the improved image of Cyprus’ public finances to the EU, foreign investors, foreign banks and the international rating agencies, the Finance Minister added.
Concerning 2011, Stavrakis said the Finance Ministry projects a 1.5% growth rate, compared to the IMF’s and the European Central Bank’s estimates for a growth rate of 1.8%.
He added that taking into account the measures approved by the parliament, concerning the introduction of a 5% VAT on foodstuffs and pharmaceuticals, the introduction of a 20% excise duty on cigarettes and the government’s plans for tax on large bank deposits and a dialogue for pension reform, ”the main scenario projects a 3.8% budget deficit for 2011.”
He noted however that the greatest danger to the Cypriot targets for 2011 is the deterioration of the global economy and the relaxation of the fiscal discipline.
Public spending in 2011 will increase marginally by just 0.2 compared to 2010, as the approved 2011 budget brought about a further reduction to the public expenditure by 40 million Euro and provided that the target for reducing the state payroll by 35 million Euro is achieved.