The Vatican turned a surplus last year but its finances could weaken this year, when costs are expected to rise due to Pope John Paul II's funeral.
Cardinal Sergio Sebastiani, chairman of the Holy See's economic affairs department, told a news conference the Holy See may drop back to break-even this year, although he hoped it would do better.
He declined to give specifics about the extraordinary expenses incurred by Pope John Paul's funeral and laying in state and how they would affect this year's Budget.
But asked if the funeral, one of the largest in living memory, could affect this year's accounts, Vatican deputy spokesman Father Ciro Benedettini said: "We expect to break even".
The Holy See, the administrative centre of the world's 1.1 billion Catholics, swung to a surplus of €3.1 million last year thanks to lower expenses at some diplomatic missions and smaller currency fluctuations.
Pope John Paul's death and funeral in April drew millions of people to the Vatican and created an unprecedented workload for all of its departments.
The annual accounts release offers just a glimpse of the finances of the central administration of the world's largest Church, which owns some of the world's great art and architectural treasures.
The Holy See's annual budget of around €200 million is smaller than some individual dioceses around the world.
It owns the Sistine Chapel and the 500-year old collection of the Vatican Museums, but the new Pope Benedict could not sell his way out of a liquidity crisis like a company executive.
The Vatican says it cannot sell its art treasures because they represent the heritage of all humanity.
The Holy See's budget concerns its central administration at home as well as its diplomatic missions in more than 150 countries, its newspaper and radio and television activities.
Its income comes mostly from stocks, bonds, real estate, and contributions from national Catholic Churches.
Cardinal Sebastiani said the return to the black last year was largely due to belt-tightening at some of its missions and because its investments were hit less hard by dollar currency fluctuations than in the previous year.
Its financial activities, which include investments in state bonds and low-risk stocks, swung to a profit from a loss. Real estate investments made a profit.
Pope Benedict is under pressure to keep the Holy See finances healthy for the Church to continue to reach its flock, which grew under Pope John Paul's media-savvy, globe-trotting papacy.
The financial picture was bleaker in terms of offerings from people and institutions, known as Peter's Pence, which fell 7.3 per cent.