Q2 revenue collapse puts Cyprus budget off target

Revenue and expenditure figures for the second quarter explain why the government had to admit this week that it will not meet its budget deficit target this year.
Total revenue in the second quarter fell by 9.7% over the year earlier to EUR 1,500.9 mln (EUR 1.5 bln) while total expenditure dropped by 3.4% to EUR 1,910.3 mln.
The deficit therefore grew to EUR 409.4 mln in the second quarter compared with EUR 315.8 mln deficit in the second quarter of 2011.
In the first quarter, the budget deficit had been cut in half.
VAT receipts fell by 3.6% in the second quarter to EUR 359.6 mln, despite a 2 percentage point increase in the VAT rate from 15% to 17% imposed from March 1.
Total taxes on production and imports, including VAT, dropped by 7.3% to EUR 620.7 mln.
Revenue from sales of goods and services increased by 5.3% to EUR 110.1 mln.
In the first six months of the year revenue rose by just 1.26% and expenditure fell by only 1.37%.
The original target was for a budget deficit of 2.5% of GDP in 2012, from more than 6% of GDP in 2011. However, the government said that without additional measures it could reach 4.5% of GDP in 2012.
Cyprus applied to the European Financial Stability Facility (EFSF), the EU support mechanism, at the end of June.
So far no agreement has been reached. The government has implemented virtually no austerity measures since late 2011.
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