Cyprus economy doing well

The Cyprus economy is doing well and is on track to meet its target for entry into the eurozone according to Finance Minister Makis Keravnos. Speaking before the House Finance Committee meeting, Keravnos said that the performance of the economy is very satisfactory and in line with the targets set by the government.

The growth rate by the end of May 2005 was 3.9%, unemployment was 4.1% and inflation was down at 2.8% while during the first five months of the year the fiscal balance displayed a surplus, mainly due to increased revenue from the tax amnesty, with public debt declining to 68.6%.

The improvement in the budget revenue was mostly due to one-time tax amnesty income, but Keravnos noted that there was an increase in income from VAT – 18% – and 4% more from income tax.

He noted that 13 points from the convergence programme had been implemented so far: no pay rises or new openings for the civil service, cutting overtime spending, restricting public and development spending to two and five per cent respectively, maintaining low spending on defence, extending the retirement age in the civil service to 63, scrapping unemployment benefits for retired civil servants (retired civil servants received unemployment benefits for six months after retirement) and improving the collection of taxes.

But Keravnos conceded that a law intended to give developers incentives to legalise irregular constructions had not yielded the expected results.