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Revenue up and significant deficit reduction in state budget for 2022

08/10/2021 15:55

Cyprus state budget for 2022, provides for increased revenue and slightly reduced expenses, while an increase of 10% is recorded in development expenditure. The growth of the economy in 2022 is projected at 4%, while the budget deficit is expected to record a significant decrease and reach 1.1% of GDP.

The state budget that was submitted to the Parliament on Thursday will be in deficit for another year.

Revenue, excluding financial flows, is expected to reach €6,731 million compared to revised revenue of €6,473 million in 2020, marking an increase of 4% . The most important categories of revenue are direct and indirect taxes that for 2022 are budgeted at €5,193.3 million and constitute approximately 82% of total revenue. The remaining 18% of revenue is budgeted at €1,132 million and concerns non-tax revenue such as sales of goods and services, rental rights and transfers / sponsorships. 
Expenditure, excluding loan repayments, is expected to show a slight decrease compared to the previous year. Specifically, for 2022 it is budgeted at €8,408 million compared to €8,479 million in 2021.

Among the main categories of budget expenditure are staff costs, including pensions and gratuities, estimated to increase by approximately 3% to €3,044 million in 2022 compared to €2,961 million in 2021, operating expenses, which are projected to increase by 8% in 2022 and amount to €972 million compared to €899 million in 2021, transfer payments including social benefits, sponsorships and contributions projected to decrease by approximately 8% to €3,049 million compared to €3,332 million in 2021. 

The reduction in transfer payments is mainly due to the reduction in the payments for dealing with the pandemic. Also, the budget provides for development expenditure such as projects under construction or co-financed projects, which are expected to increase by 10% in 2022 and reach approximately, to €1,135 million compared to €1,032 million in 2021.
The above increase is due to the start of the implementation of major development projects including road, building and other projects as well as projects included in National Recovery and Resilience Plan.

Expenditure for servicing the public debt (interest) shows a decrease of 13% for 2022 and is estimated at €458.2 million compared to €529.5 million in 2021.
Growth continues with emphasis on deficit reduction
Based on the forecasts for 2022, the growth rate is expected to reach 4% compared to an estimated growth of 5.5% in 2021.
Gross Domestic Product is projected at €23,664.0 million for 2022 compared to an estimate of €22,416.4 million in 2021.

Unemployment is projected to fall to 6.5% in 2022 compared to 7.5% in 2021. Inflation is expected to fall to 1.5% in 2022 compared to the estimated 2% inflation in 2021.

Budget deficit is projected to fall to 1.1% of GDP in 2022 (€268.5 million) compared to 5% estimated for 2021 (€1,129.8 million).
Capital expenditures are projected for 2022 at 3.1% of GDP compared to 3% in 2021.
In 2022, a primary surplus of 0.7% of GDP (€ 156.5 million) is projected, compared to a deficit of 3% (€ 683.6 million) as estimated for 2021.
Public debt is expected to decrease to 100.9% of GDP (€23,866.6 million) in 2022 compared to 107.7% of GDP (€24,148.1 million) estimated for 2021.
Public external debt is projected to fall to 93.8% of GDP in 2022 compared to 96.7% of GDP estimated for 2021.