The Cypriot economy is estimated to record a positive growth rate of 2.9% in 2024
The 2024 Budget and the 2024-2026 Medium-Term Fiscal Framework have as their main priorities the maintenance of a surplus fiscal balance, the containment of public sector employment, the reduction of public debt in the medium term, the promotion of the green transition and digital transformation, the maintenance of a robust financial system and even more importantly the creation of conditions for sustainable development in key sectors of the economy. At the same time, the implementation of infrastructure projects with significant added value is considered of utmost importance, with particular emphasis on co-financed projects and the projects of the Recovery and Resilience Plan.
In the above context, it is noted that development expenditures are expected to increase by 12% in 2024 compared to 2023. Furthermore, in 2024 an increase of 15% is expected in expenditures for social benefits. Regarding employment in the public sector, there is a decrease in the total number of new/additional permanent positions for the year 2024 compared to 2023. For the year 2024 the total increase in positions amounts to 52, while for 2023 the total increase in positions was 485 positions.
Positive growth rate of 2.9%
The Cypriot economy is estimated to record a positive growth rate of 2.9% in 2024, affected by developments in prices and interest rates. It should be noted that, for 2023, it is estimated that the Cypriot economy will record a positive growth rate of 2.5%. Therefore, the labor market is expected to be positively affected, with the unemployment rate falling to 5.8% in 2024 from 6.5% in 2023.
Based on preliminary forecasts, the general government budget 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 the previous year. It is noted that, in the medium term, the fiscal position is projected to remain in surplus with the fiscal balance averaging around 2.1% of GDP in the period 2024-2026.
It is pointed out that, the projected maintenance of fiscal surpluses of the state in the year 2023, due to the improved economic activity in the economy despite the adverse external environment, in combination with the projected absorption of funds through the Recovery and Resilience Mechanism, is expected to play a positive role in shaping the of the government's financing plan, with the result that public debt in terms of GDP remains on a downward trajectory. 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.
As the Ministry of Finance notes, the conclusions from the credit assessments, which took place during the first half of 2023, are noteworthy, which were particularly positive for the Republic of Cyprus, demonstrating the stability and progress of the Cypriot economy. Ensuring macroeconomic stability and the further improvement of the financial system are the key/critical factors for further upgrading the creditworthiness of the Republic of Cyprus.
< p>With regard to the fiscal risks, the risk of an increase in inflation, due to the continuation or imposition of new sanctions in Russia and Belarus, is highlighted, leading to an erosion of the real income of citizens, with negative effects on consumption and state revenues. In this context, the risk of undertaking additional horizontal social support measures for the population due to ongoing inflationary pressures is formulated. Furthermore, there is the risk of a further increase in interest rates leading to a slowdown in economic growth, with the consequent reduction in government revenues, as well as the effects of any increase in immigration flows.