By Stelios Orphanides
THE FISCAL council, a body set up earlier this year to supervise the planning and execution of budgetary policy, said on Monday it expected that economic growth for 2015 will range around 0 per cent, but did not rule out “some low growth rate”.
Assumptions on which the preparation of next year’s budget were based “lie within acceptable margins”, chairman Demetris Georgiades said in a statement. “However, since current forecasts may be overturned, the fiscal council asked the authorities in charge at the ministry of finance to be prepared to take immediate action, provided it is deemed necessary.”
The fiscal council considers that that the main reason the contraction in 2014 was less than expected was because private consumption was higher than forecasted. “As the fiscal council, we are cautious whether this phenomenon may be sustained in the years to come,” Georgiades said.
The finance ministry expects that gross domestic product will rise 0.4 per cent in 2015. On Friday, Finance Minister Harris Georgiades said Cyprus may post a primary budgetary surplus for 2015, instead of 1.6 per cent primary deficit as was the original forecast. The primary balance is the difference between total revenue and expenditure and excludes expenditure related to servicing public debt.
According to the finance minister, this year is expected to end with a primary deficit of 1.3 per cent of gross domestic product, compared to an initial forecast of 4.25 per cent, as the economy will shrink 3 per cent compared to an earlier forecast of 4.2 per cent.
Cyprus’ economy shrank 5.4 per cent in 2013, compared to an initial forecast of 8.7 per cent, the year in which it agreed the terms of an international bailout with international lenders – International Monetary Fund, the European Commission and the European Central Bank – also known as the troika which supervises bailouts in the euro area.
According to the finance minister, next year’s budget provides for marginally increased spending mainly on increased budgets for co-financed investment projects and social cohesion programmes.