PRESIDENT Demetris Christofias is optimistic about Cyprus’ economic growth, saying yesterday that Cyprus’ growth rate will be between 1.5 and 2.0 per cent, while in other EU countries growth will be minus 5 per cent.
“I am optimistic about the course of the Cyprus economy because we have an imaginative Finance Minister who together with his staff is trying day and night to create new ideas”, Christofias said.
The comment came just as official data released by the Statistics Department yesterday said Cyprus’ public deficit hit 0.8 per cent of gross domestic product in the first quarter of 2009, with a sharp increase in spending and a drop in revenue.
Public expenditure rose 10.2 per cent in the first three months of 2009 and revenue fell 4.1 per cent, according to preliminary figures.
In money terms, state coffers were running a €137.7 million cash deficit in the first three months of 2009 compared to a €90 million surplus – representing 0.5 per cent of GDP – in the first quarter of 2008.
Tax revenues on the basis of production and imports were down 12.8 per cent compared to the same period last year, and income and wealth tax fell 7.7 per cent. Revenue from the provision of services rose 3.9 per cent. The biggest rises in state expenditure were in wages (8.7 per cent) and social benefits (13.2 per cent).
DISY Vice Chairman Averoff Neophytou said yesterday that “a public deficit of 0.8 per cent of GDP in the first quarter of 2009 is a warning bell for those in charge of managing the Cypriot economy”.
At an informal meeting of the European Union’s Economic and Financial Committee last Thursday, Finance Minister Charilaos Stavrakis had said that Cyprus now expects to see growth of around 1.0 per cent in 2009, compared to his forecast last April of between 1.0 and 2.0 per cent.
Stavrakis said at the same meeting that he expected the public deficit to reach between 2.0 and 2.5 per cent of GDP for the full year, based on slowing revenues and falling demand. Cyprus recorded a 0.9 per cent public surplus in 2008.
This latest economic data for Cyprus came just before today’s planned auction by the Finance Ministry for the allocation of the €1.5 billion drawn against Cyprus’ issue of four-year foreign bonds.
The government’s recent four-year bond issue was massively oversubscribed, with €5.4 billion bid against the €1 billion sought. Given the exceptional interest expressed, the government decided to draw on €1.5 billion, consisting of €1.25 billion from foreign investors and €250 from Cypriot investors.
The funds will be allocated through a written bidding process and “will be deposited with the commercial and co-operative banks offering the most competitive rates”, Stavrakis told reporters yesterday.
