Cyprus faces declining revenue, higher deficits

Cyprus is facing a decline in all sources of government revenue as the economic downturn bites, hitting the island's public finances, the finance minister said on Thursday.
Cyprus, which had posted surpluses for the past two years, had previously said it would try to keep its deficit below 3 percent of gross domestic product, the euro zone limit.
But Charilaos Stavrakis said demand had dropped sharply in the first half of the year and tax revenues had fallen, making it difficult to predict if Cyprus could meet its deficit target.
"All sources of revenue are showing a decline … there are losses of millions of euros which is purely down to exogenous factors," he told journalists.
"It is difficult to make a (deficit) forecast right now."
In the first half, the public deficit reached 2.4 percent of GDP. Revenue fell 4.2 percent while spending rose 15.9 percent.
The International Monetary Fund said in a report this month that Cyprus could register a 3.9 percent deficit in 2009, after posting surpluses in 2007 and 2008.
Stavrakis sidestepped a direct response to complaints from the island's main opposition party that the deficit could exceed 5 percent this year.
Cyprus fell into recession in the second quarter of 2009, showing the second successive quarter of negative growth of 0.5 percent, provisional official data has shown. The island represents 0.2 percent of the euro zone economy.