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- Ελληνικά
The Council of Ministers at its meeting today, 27.9.2023, approved the draft Budget for the year 2024 and the Medium Term Financial Framework 2024-2026.
The Budget 2024 and the Medium-Term Fiscal Framework 2024-2026 have as key priorities the maintenance of a fiscal surplus, containing public sector employment, reducing public debt over the medium term, promoting the green transition and digital transformation, maintaining a robust financial system and, more importantly, creating conditions for sustainable growth in key sectors of the economy. At the same time, the implementation of infrastructure projects with significant added value is considered of paramount importance, with particular emphasis on co-financed projects and the Recovery and Resilience Plan projects.
In the above context, it is noted that development expenditure is expected to increase by 12% in 2024 compared to the year 2023. Further, in 2024, an increase of 15% is expected in spending on social benefits. Regarding public sector employment, it is noted that the total number of new/additional permanent positions for the year 2024 is expected to decrease compared to 2023. For the year 2024 the total increase in positions is 52, while for 2023 the total increase in positions was 485 positions.
The Cypriot economy is estimated to record a positive growth rate of 2.9% in 2024, influenced by developments in prices and interest rates. Note that for 2023, the Cypriot economy is estimated to record a positive growth rate of 2.5%. Therefore, the labour market is expected to be positively affected, with the unemployment rate in 2024 declining to 5.8% from 6.5% in 2023.
Based on the preliminary projections, the general government fiscal balance for 2024 is expected to remain in surplus at 2.2% of GDP compared to a surplus of 1.9% in 2023. The primary surplus is estimated at 3.6% for 2024 compared to 3.3% of GDP in the previous year. It is noted that over the medium term, the fiscal position is projected to remain in surplus, with the fiscal balance averaging around 2.1% of GDP over the 2024-2026 period.
It is noted that the projected maintenance of government fiscal surpluses in the year 2023, due to improved economic activity in the economy despite the adverse external environment, coupled with the projected absorption of funds through the Recovery and Resilience Mechanism, is expected to play a positive role in shaping the government's financing plan, resulting in the government debt-to-GDP ratio remaining on a declining path. In this context, public debt as a percentage of GDP is expected to be limited to 72.9% at the end of 2024, compared to 80.9% in 2023.
Noteworthy are the conclusions from the credit ratings that took place during the first half of 2023, which were particularly positive for the Republic of Cyprus, demonstrating the steps of stability and progress of the Cypriot economy. Ensuring macroeconomic stability and further improvement of the financial system are key, critical factors for further upgrading the Republic of Cyprus' credit rating.
With regard to fiscal risks, the risk of rising inflation due to the continuation or imposition of new sanctions on Russia and Belarus is highlighted, leading to an erosion of citizens' real income, with negative effects on consumption and state revenues. In this context, there is also a risk of additional horizontal social support measures being taken to support the population as a result of ongoing inflationary pressures. Furthermore, there is a risk of a further increase in interest rates leading to a slowdown in economic growth, with a consequent reduction in government revenues, as well as the impact of any increase in migration flows.
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For the comparative tables of information on the State Budget click here.
For the indicative table of infrastructure projects click here.
(EC/EXP)
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