Filenews 24 November 2023
Cyprus is experiencing macroeconomic imbalances in relation to the trade balance, net international investment position, youth unemployment, as well as public and private debt and this is expected to be recorded in the Alert Mechanism Report, a screening measure to identify possible macroeconomic imbalances.
The Ministry of Finance, on its website and in the section "European Semester autumn package", states that "this year's report concludes that in 2024 in-depth reviews will be prepared for the 11 Member States identified as experiencing imbalances or excessive imbalances in 2023, including Cyprus".
The ministry states that "on 21 November 2023, the European Commission launched the 2024 European Semester economic policy coordination cycle. The autumn package builds on the Autumn 2023 Economic Forecast, which showed that the EU economy is still resilient to the multiple shocks it has suffered in recent years, but that it lost its growth momentum in 2023 in a context of high inflation and tighter financial conditions, with only a moderate upward path expected for 2024."
Member States are required to submit each year, by 15 October, to the Commission and the Eurogroup a Draft Budgetary Plan, setting out the fiscal targets for the following year and including the main aspects underlying the fiscal outlook for general government and its subsectors. On 8 March 2023, the Commission adopted a Communication providing fiscal policy guidance for 2024 and confirming that the general escape clause of the Stability and Growth Pact will be deactivated at the end of 2023.
According to the Commission's autumn 2023 forecast, Cyprus is projected to achieve its medium-term fiscal target in 2024. Moreover, taking into account the information included in the Draft Budgetary Plan (DBP) of Cyprus, the emergency support measures in the energy sector are expected to be phased out as soon as possible in 2023 and 2024. In addition, Cyprus is expected to maintain nationally financed public investment.
Cyprus should also ensure the effective absorption of Recovery and Resilience Facility grants and other EU funds.
Overall, the Commission is of the opinion that the Cyprus DBP is in line with the Council recommendation of 14 July 2023. At the same time, the Commission projects a headline budget surplus of 2.1% of GDP for Cyprus in 2024, while the government debt-to-GDP ratio is projected to narrow to 71.5% in 2024, above the 60% of GDP Treaty reference value, but almost 30 percentage points of GDP below the corresponding rate at the end of 2021.
