Cyprus State budget for 2010 submitted to Parliament

Finance Minister Charilaos Stavrakis submitted the 2010 state budget to the President of the House of Representatives Marios Garoyian. Stavrakis said that the 2010 budget will feature a 14% cut in non-productive state expenditure, in a bid to contain Cyprus' fiscal deficit below the 3% ceiling, defined by the EU.
The draft budget forecasts revenue, excluding loans, amounting to EUR5,79 bln or up 7.9% year-on-year, compared to the revised revenue of EUR5,37 bln in 2009.
Total expenditure, excluding loan payments, is forecast to increase by 3% to EUR7,86 bln, compared to EUR7,63 bln in 2009.
Stavrakis described the drafting of the budget a ''difficult task,'' due to the drastic decline of state revenue, mainly as a result of the reduced income from the tourist and construction sectors, affected the most by the global financial crisis.
Regarding 2009, the Minister admitted that fiscal deficit might exceed 3.0% (in 8M09 the deficit stood at 2.65%). He explained that this is owned to December which is a very difficult month (due to the 13th salary payments) and historical creates a deficit of 1.0%.
He added that two bills prepared by the government, namely the bill to combat tax evasion and tax amnesty will yield significant revenues to the state which would in turn maintain the public deficit slightly below 3% in 2010.
The 2010 State Budget aims fiscal deficit to reach 4.5% of expected GDP, falling outside the 3.0% Maastrict criterion. According to the Ministry of Finance the GDP growth rate for 2009 is expected at to fall in negative territory at -0.5% vs. 3.6% in 2008 whilst for 2010 economic activity is expected to pose a marginal positive sign of +0.5%. Inflation is expected at 1.0% for 2009 and for 2010 at 2.5%, whilst registered unemployment is expected to climb even higher in 2010 at 6.5% vs. the expected 5.5% for 2009.