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The Cyprus economy will face increased difficulties in 2009, Minister of Finance Charilaos Stavrakis estimates.
The Minister, who was briefing the House Finance Committee, said that 2009 would be a difficult year for the local economy.
However, he stressed that Cyprus is in a better position in relation to most financial indicators by comparison to other eurozone member states.
He also pointed out that Cyprus growth rate hovers around 3.5% – 3.7%, twice the rate of other eurozone member states.
Referring to the negative record inflation has reached, climbing up to 4.9% in May 2008, Stavrakis attributed the increase to the dependence of Cyprus on oil. He underlined the constant efforts the government is making to improve the situation, noting though that “there are no magic solutions.”
Another serious problem which adds a heavy burden on public finances is the planned transportation of water from Greece at an estimated cost of 40 million euro, in an effort to alleviate the after effects of the prolonged drought and the subsequent water shortage Cyprus is facing.
Reminding deputies of Cyprus’ commitment to the EU to present a fiscal surplus of 0.5% in 2008, Stavrakis said that state revenues have followed a downward trend during the past couple of weeks and referred to allowances of 33 million euro handed out at Easter as well as to the 30 million euro estimated to be paid as a salary increase to all public servants.
After the deduction of these amounts, there are only 40 – 50 million euro left for development projects, he said. He also clarified that the government does not expect additional revenue with the exception of some taxes to be collected in arrears. He explained that it might not be possible to collect some 100 – 150 million euro out of the 480 million owed as income tax since various businesses in debt have gone bankrupt.
Having in mind the fact that approximately fixed expenditure has reach 80% of the state expenditure, Stavrakis estimated that 2009 would be a difficult year for the Cypriot economy.
However, he said that in the first quarter of 2008 the economy will record a surplus of 0.5% – 0.6%.
