Cypriot Cabinet Approves 2006 State Budget

by Lorys Charalambous, Tax-News.com, Cyprus

29 August 2005

The Cypriot Council of Ministers has approved the 2006 State Budget during an extraordinary meeting last week under the chairmanship of the President of the Republic Tassos Papadopoulos.

The Budget was drafted taking into consideration Cyprus’s commitments emanating from its EU membership and its accession to the Exchange Rate Mechanism (ERM II) in April 2005, and relevant decisions of the Council of Ministers.

In view of external and internal developments as well as predictions by international organisations, the budget foresees a growth rate of 4% for 2005, an increase from last year’s 3.7% figure and in contrast to the anticipated slowdown internationally. Inflation is expected to vary at around 2.5%, slightly up on 2004 due to higher fuel prices. The unemployment rate will reach 3.7% from 3.6% in 2004, while the deficit in the balance of payments will be down to 5.1% of the Gross Domestic Product (GDP) from 5.7%.

The fiscal deficit will drop to 2.9% of GDP, down from 4.2% in 2004, complying therefore, after several years, with the relevant Maastricht criterion.

The Government notes that all key economic indicators are well within the targets set in the Cyprus Government’s revised economic convergence programme submitted to Brussels in December 2004.

The 2006 Budget will be submitted to the House of Representatives for approval on 6 October.

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