Initial estimates point to a widening of Bermuda's fiscal deficit as revenue fell short of budget targets and capital spending increased, according to the latest report by the Economist Intelligence Unit.

The report revealed that despite official data yet to be released by Government for the first quarter of 2009/10, in November Finance Minister Paula Cox had announced that Government revenue projections were missed in the first quarter by as much as eight percent, resulting in a revenue shortfall of $20 million.

It said that, if confirmed, this would point to an acceleration of revenue declines seen in 2008/09, when total revenue was 3.3 percent below budget.

Although government spending was reported to have been on target in the first quarter of 2009/10, the revenue shortfall has prompted Government to make expenditure cuts, the report found.

And with civil servants seeking savings of around 20 percent on current budgets and public-sector recruitment being frozen, Government estimates will protect capital and social spending plans in the remainder of 2009/10, it added.

"The government's presentation of preliminary fiscal accounts for 2008/09 in November showed a fiscal deficit of $109m (around 2.6 percent of estimated GDP in 2009) as the global economic crisis compressed revenue in the second half of the fiscal year," the report read.

"The largest contributors to fiscal revenue in 2008/09 were payroll taxes, which accounted for $356.5m (37.4 percent of total revenues and $21m above budget), and customs duty, which contributed $224.2m (23.5 percent of the total).

"Shortfalls were recorded in customs duties ($35.6m below budget) owing to weaker import volumes and lower commodity prices in the second half of the fiscal year.

"Below-budget figures were also reported for stamp duty collection on property sales (down by $13.8m), for immigration receipts (down by $6.4m) and passenger taxes (down by $3.3m), as a result of lower tourist arrival numbers.

"With revenue falling, the Government overshot its expenditure target by $77m (with total expenditure of $1.2 billion).

"This was primarily owing to higher than budgeted capital spending ($45m above target).

"Current expenditure was also above budget (by $32m); the largest components were salaries and related costs, which accounted for $579.7m or 52.1 percent of total spending, and grants and contributions, which accounted for $234.9m or 21.1 percent of spending.

"As a result of these trends, net public debt increased by $204.9m during 2008/09, to $483.3m (7.9 percent of GDP) at the end of March 2009."