THE government yesterday voiced satisfaction over the EU’s economic forecasts for Cyprus, which align with the finance ministry’s assessments.
“I want to stress that the EU’s assessments and forecasts are identical with the government’s assessments as regards the public finances and the growth rate,” Finance Minister Charilaos Stavrakis said.
According to the EU forecast released yesterday, Cyprus will record a 0.5 per cent growth rate in 2010 and a 5.9 per cent deficit, which meets the government’s target of a shortfall of under 6.0 per cent.
“This is a huge success for the Cypriot economy considering that no measures have been taken officially and this big improvement in the public deficit was achieved through cutting state spending and personnel,” Stavrakis said.
The growth rate for 2011 and 2012 will accelerate to 1.5 per cent and 2.2 per cent respectively, the EU said.
The fiscal deficit is expected to drop slightly to 5.7 per cent in the next two years, the EU said.
Stavrakis struck a note of caution as the economy’s structural problems remain and international markets are especially nervous due to the problems faced by euro zone countries like Greece and Ireland and possibly others.
“Despite the significant improvement of the economic indicators of the Cypriot economy we should remain focused on our targets – consolidating the public finances with a considerable cut in the deficit to at least 4.5 per cent,” the minister said.
The EU said the 2011 deficit projection incorporates a “more prudent assessment of revenue prospects, given a less tax-rich growth composition, and on the expenditure side, given past trends on key items such as the wage bill and social transfers.”
“Measures which are still under discussion with an uncertain outcome, or with no information on the modalities or the timing of implementation are not incorporated in this forecast,” the EU report said.
Based on the customary no-policy-change assumption, the deficit is set to remain at 5.7 per cent in 2012, as gradually rising revenues are offset by higher expenditures.
With still moderate growth and an increasing deficit, the debt-to-GDP ratio will rise and reach about 68.5 per cent by 2012, the EU said.
According to the report, unemployment is expected to drop slightly in 2011 to 6.6 per cent from 6.8 per cent this year.
A further reduction in unemployment is forecasted for 2012 when it is expected to reach 5.9 per cent.
