The Cyprus Statistical Service (Cystat) on Wednesday released the preliminary budget results for the period January-March 2022, with the report showing a general government surplus of €239.3 million.
The surplus corresponds to 1 per cent of Cyprus’ GDP and is an improvement on the deficit of €137.4 million (0.6 per cent of GDP) recorded during the corresponding period of 2021.
According to the Cystat report, a large year-on-year decrease was recorded in subsidies, while a sharp rise was also observed in the collection of taxes, both in terms of production and imports, as well as in income and wealth taxes.
Total expenditures during the period January-March 2022 decreased by €72.1 million (-3.2 per cent), falling to €2.21 billion, compared to €2.28 billion in the corresponding period of 2021.
Grants decreased by €254.1 million, falling to€ 20.7 million, compared to €274.8 million in 2021.
Current transfers decreased by €2.4 million (-1.5 per cent) and were limited to €157.9 million, compared to €160.3 million in 2021.
Social benefits increased by €91.4 million (11 per cent), reaching € 921.1 million, compared to €829.7 million in 2021.
Staff remuneration (including imputed social security contributions and pensions) increased by €28.4 million (4.1 per cent) to €717.1 million, compared to €688.7 million in 2021.
Intermediate consumption increased by €32.1 million (+18.6 per cent) and amounted to €204.7 million compared to €172.6 million in 2021.
Interest paid increased by €13.8 million (+20.1 per cent) and amounted to €82.4 million compared to €68.6 million in 2021.
The capital account increased by €18.6 million (+20.7 per cent) and amounted to €108.7, million compared to €90.1 million in 2021.
Fixed capital investments increased by €5.3 million (+7 per cent) and amounted to €80 million, compared to €74.8 million in 2021.
Other capital transfers increased by €13.4 million and amounted to €28.7 million, compared to €15.3 million in 2021.
Meanwhile, total revenues, during the period January-March 2022, increased by €304.6 million (+14.2 per cent) and amounted to € 2.45 billion, compared to €2.14 billion in the corresponding period of 2021.
Moreover, total taxes on production and imports increased by €108.5 million (+14 per cent) and amounted to €885.9 million, compared to €777.4 million in 2021.
Of those taxes, net VAT revenues (after deducting refunds) increased by €80.8 million (16.2 per cent), amounting to €579.7 million, compared to € 498.9 million in 2021.
Tax revenues in income and wealth increased by €129.3 million (+26.9 per cent) and amounted to € 609.8 million, compared to € 480.5 million in 2021.
Social contributions increased by €115.7 million (+18.4 per cent) and amounted to €744.7 million compared to €629.0 million in 2021.
Revenues from services increased by €15.4 million (+12.3 per cent) and amounted to €141 million, compared to €125.6 million in 2021.
Current transfers increased by €0.8 million (+1.9 per cent) and amounted to € 42 million, compared with €41.2 million in 2021.
In addition, capital transfers decreased by €58.4 million, falling to €4.1 million, compared to €62.5 million in 2021.
Finally, interest and dividends collected decreased by €6.7 million (-21.5 per cent) and were limited to €24.4 million compared to €31.1 million in 2021.
The University of Cyprus’ Economics Research Centre on Wednesday made a significant revision to its forecasts for the development of the Cypriot economy in 2022, reducing its original estimate by 1.5 percentage points, to 2.6 per cent.
In relation to inflation, the CypERC forecasts to reach 4.8 per cent in 2022, while stressing that there are risks for higher inflation than previously expected.
Specifically, in its May issue, the CypERC states that the real GDP growth rate is projected to slow down from 5.5 per cent in 2021 to 2.6 per cent in 2022, while in 2023, the GDP growth rate is projected to reach 3.1 per cent.
“Russia’s invasion of Ukraine and sanctions against Russia have weakened the prospects for Cyprus, mainly as a result of the loss of tourist arrivals from Russia and Ukraine, and the rise in international commodity prices,” the centre said.
“The weakening of the economic climate, as well as the less favourable international financial conditions, compared to the last quarter of 2021”, the CypERC added.
At the same time, the CypERC warns that “the war in Ukraine and the sanctions against Russia could have a more negative impact on activity in Cyprus than is estimated based on current forecasts”.
In addition, the centre said that the continuation of the war and tougher EU sanctions against Russia could affect growth prospects, especially through higher energy prices, as well as higher food and raw material costs.
It also stated that “new waves of COVID-19 infections continue to pose a significant risk to the prospects through possible new restrictive measures to curb the pandemic, as well as supply chain problems that are pushing up prices”.
According to the centre, “due to the war in Ukraine, rising energy prices and the continuing pandemic, additional budget support may be needed”.
The centre also said that fiscal challenges in the face of rising public debt and monetary tightening could further weaken Cyprus’ economic outlook.
In addition, the CypERC states that the negative impact of the war on Cypriot companies, combined with less loose financial conditions (due to high inflation), could negatively affect the quality of banks’ assets, creating additional risks.
Regarding inflation (based on the Consumer Price Index), the CypERC forecasts that it will reach 4.8 per cent in 2022 before falling to 2.2 per cent in 2023.
The centre noted that the 2022 inflation forecast has been revised upwards (by 2.2 percentage points) compared to the January issue.
“Russia’s invasion of Ukraine and sanctions on Russia have intensified inflationary pressures through increases in international commodity prices, especially for fuel and food,” the centre explained.
“The risks of higher-than-expected inflation prevail,” it concluded.
The Cyprus Stock Exchange (CSE) ended Wednesday, May 4 with losses.
The main Cyprus Stock Market Index was at 68.83 points at 13:06 during the day, reflecting a drop of 0.43 per cent over the previous day of trading.
The FTSE / CySE 20 Index was at 41.37 points, reflecting a decrease of 0.48 per cent over the previous day of trading.
The total value of transactions came up to €150,234.
In terms of the sub-indexes, the main and alternative indexes fell by 0.31 per cent and 0.96 per cent respectively.
The hotel index rose by 0.06 per cent, while the investment firm index remained stable.
The biggest investment interest was attracted by the Bank of Cyprus (+0.98 per cent), the Cyprus Cement Company (-1.6 per cent), Logicom (-1.96 per cent), Petrolina (no change) and Vassiliko Cement Works (-0.71 per cent).
