The Fiscal Council continuously emphasizes the need to maintain fiscal space so that the government has funds available to finance social expenditures that may be required in the near future, in simple terms.
The Fiscal Council warns that as discretionary expenditures increase, there is a risk that the growth of government revenues may not continue at the same pace.
This limitation could reduce the government’s ability to implement social policies, leading to unmet needs among certain population groups and growing social inequalities.
Taking it a step further, the Fiscal Council signals that the state apparatus remains painfully outdated, with a significant increase in fiscal imbalances.
This implies an increasing fiscal risk over time as needs arise for expenditures in areas such as climate change, energy, and defense.
These concerns, presented in both the annual report for 2023 and a recent session in the Parliament on Monday, are closely tied to uncertainty about economic growth.
The Fiscal Council points out that this uncertainty is influenced by ongoing geopolitical instability, which could potentially impact the Cypriot economy.
Among the concerns outlined by the Fiscal Council is the worry about an upward trend in oil prices, which also affects fiscal management.
Despite markets not indicating a significant increase in prices, the Fiscal Council highlights the serious risk of substantial hikes in the international oil market.