Filenews 10 October 2024 - by Eleftheria Paizanou
The growth rate of the Cypriot economy will close at 3.7% in 2024 according to the macroeconomic scenario included in the Draft Fiscal Plan 2024.
Looking ahead, growth next year is expected to be 3.1%, 3.2% in 2026 and 3.3% in 2027. Yesterday, the Council of Ministers approved the Draft Fiscal Plan for 2025 as well as the Medium-Term Fiscal – Structural Plan 2025-2028, which will be forwarded by the 15th of the month to the European Commission (EU). According to the estimates recorded in the Draft Fiscal Plan, unemployment is expected to fall to 5% this year compared to 5.8% last year and to continue its downward trend in the coming years as a result of the projected continuation of Cypriot GDP growth.
The forecasts for continued positive economic growth rates for the 2024-2026 horizon are also reflected in the decline in the unemployment rate, which is projected to fall to around 4.8% in 2025, 4.6% in 2026 and 4.5% in 2027. At the same time, inflation this year is expected to be limited to 2.2% and in the period 2025-2027 to fall to 2%. Moreover, the general government budget balance in 2024 is expected to be in surplus of 3.9% of GDP and the primary fiscal balance is also expected to be in surplus of 5.4% of GDP.
Based on macroeconomic projections and the 2025 budget, the fiscal balance is projected to remain in surplus for the three-year period 2025-2027 and to stand at 2.7%, 2.6% and 2.1% respectively. At the same time, the structural balance this year will be in surplus of 2.7%, while next year it will be limited to 1.8% of GDP, remaining at high levels. In relation to public debt, this is estimated to fall to 68.9% of GDP this year compared to 77.4% last year. In the medium term, it is expected to continue its downward trend and in 2025 to be limited to 64.1%, while in 2026 it will be below 60% and specifically to be limited to 58.8%. A further decrease is expected in 2027 where it is estimated to reach 53.3%.
The European Commission will complete its assessment of the Draft Budgetary Plans by November. Indeed, if the EU considers that a Member State is in breach of its obligations under the Stability Pact, then it can make a reasoned recommendation requesting the preparation of a new Fiscal Plan. Under the new economic governance framework, last June the EU provided Member States with the primary expenditure reference path as well as ex-ante guidance for the preparation of the 2025-2028 medium-term plan.
