Keravnos: economy on the mend

FINANCE Minister Makis Keravnos yesterday said the economy was showing signs of recovery and reiterated the government’s determination to cut the budget deficit in line with the Eurozone ceiling.

Speaking before parliament, ahead of the discussion of the 2005 budget, Keravnos said the economy displayed a satisfactory recovery, compared to 2003.

“Based on the current data, the growth rate of the Cyprus economy is expected to be around 3.6 per cent, compared to two per cent in 2003,” Keravnos said.

The public deficit is expected to sit at around 4.8 per cent compared to 6.3 per cent last year, the minister said.

He added that the public debt was expected to continue to show an upward trend, reaching 74.9 per cent of GDP by the end of the year.

The government is poised to cut its budget deficit to 5.2 per cent of GDP by the end of this year and to 2.0 per cent by the end of 2005.

Cyprus now exceeds the Eurozone limit of a three per cent budget deficit and a public debt, which should be lower than 60 per cent.

The island’s budget deficit last year reached 6.4 per cent while the public debt exceeded 70 per cent of the GDP.

Keravnos said the government’s strategy was based on two basic axis: President Tassos Papadopoulos’ election programme and the pledges and obligations stemming from the island’s full membership of the European Union.

The 2005 budget forecasts net spending at £3.55 billion ad an income of £2.71 billion.

“There is no doubt that 2005 would be a important year for the Cyprus economy because it’s the first budget after our accession to the EU and because it’s the year, at the end of which we expect to achieve our goal for a public deficit under three per cent of GDP,” the minister said.

The convergence programme focuses on cutting consumer spending by promoting structural measures as well as improving the state’s tax collecting ability.

The convergence programme was designed to bring the island into line with the European Exchange mechanism, the precursor to the adoption of the Euro.

Countries must spend at least two years in the ERM-2 before joining the Eurozone.
The minister said tax collection has improved: tax income in the first nine months of the year increased by 10.6 per cent compared to the same period last year.

Discussion of the budget kicks off on December 8, and is expected to be completed in three consecutive plenary sessions.

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