Finance Minister Makis Keravnos outlined the government’s commitment to “steady and sustainable development” during the presentation of the inaugural budget led by President Christodoulides in the Parliament yesterday.
Emphasising the importance of fiscal discipline and financial stability, Keravnos described the budget as a “responsible” measure aimed at supporting society.
Addressing the economic landscape, Keravnos acknowledged the resilience of the Cypriot economy amidst uncertainties but cautioned that, despite positive economic indicators, the government does not “rest.”
Urging parliamentary approval for the 2024 budget, he recognised the challenges ahead, stating, “The next years are expected to be quite challenging for the global and Cypriot economies. Medium and long-term projections foresee a new era of challenges marked by de-globalisation, necessitating changes driven by the green transition, climate change, and rising energy costs.”
In his speech, Keraunos underlined the government’s strategic focus on the forthcoming period, specifically targeting the rationalization of the electricity market. He stressed the promotion of renewable energy sources and an intensified effort to harness natural gas resources.
Analysing macroeconomic indicators, Keraunos noted, “These positive fiscal performances will allow us to address any negative developments in the future, providing the opportunity to implement social policies, while simultaneously meeting our European obligations regarding fiscal rules, especially for reducing the debt-to-GDP ratio to 60% in the medium term.”
Discussing fiscal risks, the Finance Minister highlighted the government’s proactive approach to identify and address issues, particularly concerning “excessive spending.” He clarified that frozen positions, numbering around 700 annually, primarily result from retirements, with a need to fill those deemed necessary during that period.
The Minister also touched upon the General Health System (Gesy), describing it as a significant achievement. He stated, “The Government considers the Gesy as an important popular achievement, and therefore, the constant goal is the restructuring and modernisation of its two main pillars, Okypy and Hio, to ensure both the level of medical care and the protection of the state’s public finances.”
Commenting on the budget planning process, Keravnos highlighted that the 2024 budget’s formulation relied on “realistic macroeconomic predictions” and a comprehensive assessment of risks and uncertainties. The budget includes an increase in primary expenses compared to last year by about €1.16 billion, increased development expenses by 14%, and increased social benefits by 15%.
In 2024, the fiscal balance of the Government is expected to remain surplus, reaching 2.8% of GDP, which in absolute numbers corresponds to €870.6 million, compared to a surplus of 2.5% of GDP in 2023. Public debt for 2024 is expected to be limited to 74.7% of GDP, compared to 81.8% of GDP in 2023. The growth rate of the economy is projected to be around 2.9% in 2024, compared to the forecast of 2.4% in 2023, and for 2025 and 2026, it is expected to fluctuate at 3.1% and 3.2%, respectively.
Inflation is expected to be limited to 2.5% in 2024 and continue its downward trend in the coming years. The unemployment rate is expected to decrease to 5.8% of the labour force in 2024, compared to 6.4% in 2023, and is expected to further decrease during the program period 2025-2026.