year, Finance Minister the Hon. David Saul told Members of Parliament yesterday.

Increased social costs and huge revenue shortfalls have levelled Government's planning for a $26 million surplus.

Dr. Saul said projections for the financial year suggested tax revenues will fall $16-$19 million short of the estimates set down in this year's Budget.

Spending will be $6 million higher -- mainly due to increased social assistance payments.

"These projections suggest that the projected current account balance of $26 million will be severely eroded,'' Dr. Saul said during a statement reviewing the Island's economic performance over the past six months.

The Minister's statement also carried the prediction that the recession-weakened economy was about to turn the corner.

Signs of improvement in the Island's overall financial position should be visible next summer.

But "cautious optimism'' should be exercised because economic analysts have warned there are still several down-side factors at play -- despite a sharp rise in consumer confidence since the presidential election, Dr. Saul pointed out.

"Those factors may dampen the rise in consumer expenditure and serve to slow the pace of growth compared with the recovery from previous recessions.'' he said. "Hence, cautious optimism is the watchword at this time.'' He said the weak performance of July and August dominated the statistical bulletin for the third quarter of the year, released on Monday.

But September saw some general improvement which has been sustained since, he said.

Dr. Saul noted August air arrivals, at 43,314, were the poorest performance since 1972.

But arrivals picked up in September, ending up 10.3 percent higher than September 1991.

And the last three months of the year, taken together, showed a four percent improvement year-over-year.

"While a far cry from the higher levels of 1990, these improved numbers are a step in the right direction,'' Dr. Saul said. "If the improvement of the past three months is sustained, tourism arrivals in 1992 are likely to be only marginally under the 514,329 achieved in 1991.

"This will be a marked improvement when compared with the poor performance in the first quarter of the year, when arrivals were down 17.2 percent on the same period in 1991.'' Dr. Saul said visitor arrivals figures were an important indicator, but visitor spending was of prime importance to the economy.

And the bulletin showed visitor spending fell by nearly $5 million in the third quarter compared with the same period last year.

But On a per capita basis, expenditure by visitors rose from $1,106 in the second quarter to $1,171 in the third quarter, amounting to $10 per visitor less than last year, which was "very reasonable'' considering the weak growth in US incomes.

Dr. Saul also said the number of international companies registered in Bermuda increased by 1.6 percent and gross domestic product at March 31 rose one percent to $1,642.4 million.