Revised Figures: Quarterly Accounts of General Government

3rd Quarter 2018

The sale process of parts of the assets and liabilities of the Cyprus Cooperative Bank Ltd (CCB) to the Hellenic Bank resulted in the establishment of two new entities, namely the Cooperative Asset Management Company Ltd (SEDIPES) and Cyprus Asset Management Company Ltd (KEDIPES), which received assets with a book value of €8,34 bn in return of a liability of €3,54 bn. Upon examination of the sale process details and taking into consideration the legal status of the new entities, the Statistical Service of Cyprus (CYSTAT) has classified both entities within the General Government sector. The fiscal burden of €1,5 bn in the revised fiscal accounts of the third quarter that resulted from the above transaction is analysed as follows: Non-performing loans (NPLs) of nominal value amounting to €6,97 bn are an asset of the new entities. The real economic value of these NPLs has been estimated by CYSTAT to be 20.94% of the nominal value, i.e. decreased by 79.06%. Therefore, the estimated real economic value of the NPLs received by the new entities is valued at €1,46 bn. According to this valuation, a negative investment of €710,0 mn is observed and recorded in fiscal accounts, which is the result of the acquisition value (€2,17 bn) minus the real economic value of NPLs (€2,17 bn - €1,46 bn = €710 mn). Further to this negative investment, an expenditure of €625 mn, which corresponds to the share of the collateral received from the former CCB and concerns its fixed assets, is recorded as investment. This investment increases the capital assets and hence the net worth of the General Government by the same amount. Finally, CYSTAT also recorded as expenditure the guarantee of €155 mn (contingent liability) received by the Hellenic Bank. Economic Development On the basis of the preliminary data on the General Government accounts for July-September 2018, which are compiled in accordance to EU concepts and definitions (ESA 2010), total revenue amounted €2.163,6 mn, while total expenditure reached €3.213,6 mn, resulting in a deficit of €1.050,0 mn as compared to a surplus of €366,7 mn in the corresponding period of the previous year. The main categories of revenue for the period July-September 2018 were: taxes on production and imports €854,7 mn (11,1% increase as compared to the third quarter of 2017), of which net VAT was €535,3 mn (14,6% increase), taxes on income and wealth €632,5 mn (0,4% increase), and social contributions €444,9 mn (10,3% increase). Revenue from the sale of goods and services reached €152,9 mn registering an increase of 9,3% as compared to the corresponding period of the previous year. The capital account recorded an expenditure of €1.595,7 mn (€715,2 mn investment and €880,5 mn capital transfers) as compared to €98,4 mn during the corresponding period of 2017 (€91,6 mn investment and €6,8 mn capital transfers). The remaining categories of expenditure for the period July-September 2018 were: social transfers €605,6 mn (3,7% increase compared to the corresponding period of 2017), and compensation of employees (including imputed social contributions and pensions of civil servants) €572,5 mn (5,0% increase). Intermediate consumption reached €174,7 mn (15,8% increase as compared to the corresponding period of the previous year).

STATISTICAL SUBTHEME: PUBLIC FINANCE