Cyprus’ 2020 state budget forecasts slower GDP economic growth of 2.9% next year and a fiscal surplus of 2.7%.
The 2020 state budget, approved by the Cabinet, is balanced with a fiscal surplus, said Finance Minister Harris Georgiades. It foresees a fiscal surplus of 2.7% and a primary surplus of 5.1%.
Due to the state of government finances, Georgiades said there was no need for tax hikes or any other financial burdens.
But he did concede there was a significant increase in health expenditures as result of the implementation of the national health system (GHS) and the operation of the State Health Services Organisation OKYPY.
Georgiades said the budget forecasts a growth rate of 2.9% which would lead to conditions of full employment. Government revenues are estimated to reach €10 bln while expenditure is estimated at €9.4 bln.
Inflation is projected to stand at 1.2%, while the unemployment rate is expected to drop to around 6%. Public debt to GDP ratio is predicted to fall to 91.1% as a result of an early repayment of debt to the International Monetary Fund scheduled for 2020.
“This is yet another state budget without a deficit. Bad practices belong to the past with no return”, Georgiades said.
He said the budget enables the implementation of the government’s programme, with one-billion-euro worth of projects underway, while it foresees investments in e-governance and digital transformation worth €250 mln.
The budget also provides expenditures for new policies such as the establishment of an investment fund to finance new innovative enterprises as well as the establishment of a Deputy Ministry for Innovation and Digital Policy.
Georgiades said a Troika mission that is currently paying a visit to the island would be informed about budget projections. The budget will be discussed in parliament from next month.
He warned that the biggest and immediate potential risk that could undermine fiscal stability would be a decision of the Supreme Court to restore public service pay cuts.
Following an administrative court decision in March that salary reductions imposed on civil servants as part of austerity measures in 2012 were unconstitutional, the government appealed to the Supreme Court which has yet to rule on the case.
On Brexit, the Minister assured that Cyprus was “adequately prepared for any eventuality”.
