COVID19: Cyprus goes from fiscal surplus to deficit

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As COVID-19 bit hard, Cyprus went from a budget surplus to recording an annual deficit of €251.7 mln (1.1% of GDP) in the first quarter of 2021, according to preliminary General Government fiscal results.

During the same period last year, the government recorded a surplus of €226.9 mln ( also 1.1% of GDP), but the COVID-19 pandemic has seen an upsurge in state spending.

In the first three months to March, total expenditure increased by €372.8 mln (+19.4%), amounting to €2.29 bln, compared to €1.91 bln in Q1 2020.

The sharp increase in expenditure is due to the support measures taken to address the effects of the Covid-19 pandemic on jobs and businesses.

Social benefits increased by €77.1 mln (+10.3%) to €826.6 mln, from €749.5 mln in 2020.

Compensation to employees (including social contributions and pensions of civil servants) increased by €30.1 mln (4.6%) to €679.8 mln, compared to €649.7 mln last year.

Subsidies increased by €264.4 mln to €274.8 mln, from €10.4 mln in Q1 2020.

It is mainly attributed to support measures for enterprises due to the consequences of lockdown.

The capital account decreased by €19.7 mln (14.5%) to €115.8 mln, from €135.5 mln in 2020.

This decrease is mainly due to gross capital formation, which decreased by €34.0 mln (30.6%) to €77.3 mln, from €111.3 mln.

On the contrary, other capital expenditure increased by €14.3 mln (59.3%), reaching €38.5 mln, compared to €24.2 mln in 2020.

Intermediate consumption decreased by €12.5 mln (7.3%) to €158.6 mln, down from €171.1 mln.

Revenue

During January-March 2021, total revenue decreased by €105.8 mln (4.9%) to €2.03 bln, compared to €2.14 mln in the same period of 2020.

Taxes on production and imports decreased by €49.1 mln (6.5%) to €702.7 mln, from €751.8 mln in 2020, of which net VAT revenue decreased by €38.7 mln (8.3%) to €427.2 mln, from €465.9 mln. Revenue from taxes on income and wealth decreased by €31.4 mln (6.1%) to € 480.4 mln, from €511.8 mln.

Social contributions decreased by €24.5 mln (4.0%) to €592.0 mln, from €616.5 mln in 2020.

Capital transfers increased by €15.6 mln (32.8%) to €63.2 mln from €47.6 mln.

Property income increased by €4.9 mln (17.8%) and amounted to €32.2 mln, from €27.3 mln in 2020.

Increased amounts of expenditure and revenue are partly attributed to the full implementation of the National Health System on 1 June 2020.