Cyprus Finance Ministry working on “contingency plan”

The Ministry of Finance is bracing for a deterioration in its initial estimates for economic growth in the light of the global credit crunch with a good possibility that the GDP growth forecast for 2H08, 2009 and 2010 will be marked lower. The Ministry does not anticipate that the economy would strengthen before the end of 2010.
Minister of Finance Charilaos Stavrakis said on Friday that his Ministry is processing a contingency plan in case the Cypriot economy is adversely affected by the international financial crisis, which he described as ''unprecedented.''
Speaking after a meeting with House of Representatives President Marios Garoyian, Stavrakis said the crisis may affect Cypriot economy growth rates for the year 2009, noting that the contingency plan may be implemented if the crisis begins to affect Cyprus.
He refrained from going into detail and said that the plan would have to be discussed and approved by the government and the President of the Republic first.
''However, flexibility and timely planning exist and, in the event that this international crisis affects some sectors of the Cypriot economy, with the most probable being tourism and purchasing holiday homes, we will adopt the measures we have in mind to soothe possible negative consequences,'' he added.
Asked about projections for Cyprus' growth rate, Stavrakis said it might possibly be around 3%, depending on international developments. The previous projection was referring to GDP growth of 3.7% in 2009.
He added that the aim was to achieve an economic growth rate more than double of that of the Eurozone, and expressed certainty that this ''ambitious aim'' can be achieved.
Referring to the state budget for the year 2009, which he presented to the House President, Stavrakis said social benefits are increased by 27%, noting that there was a development budget with a social mark, within the framework of a healthy public finance policy.
He added that the budget was not static, since it could be complemented by additional funds, especially in certain sectors, which may be adversely affected by the international financial crisis, such as tourism and real estate.
The Minister of Finance expressed hope and certainty that the budget would be approved by the House before the end of the year.
Garoyian said the meeting was very useful and that the proposed budget would be sent to the Committee of Finance for discussion, with an aim to pass the state budget by the end of the year.
Referring to the international financial crisis, Garoyian said that Cyprus has strong foundations and noted the government's political will to overcome any difficulties.
Meanwhile VAT receipts for the period January – September 2008 recorded an increase of 10.5% yoy to EUR 1.94 bln compared to EUR 1.76bln in the same period of the previous year.