Budget safeguards fiscal stability

The 2024 state budget aims to safeguard fiscal stability while promoting green transition and digital transformation, ushering in a more modern economy, Finance Minister Makis Keravnos said.

Keravnos presented the next year’s state budget to the House Committee of Financial and Budgetary Affairs, kickstarting a discussion which will conclude in mid-December with the debate on the budget in the plenary.

“The budget features a surplus precisely because we are living in a period of constant negative developments, and we should be prepared to tackle every development and to enable us to respond to our European obligations regarding the public debt and other commitments,” Keravnos said.

He said that the Cypriot economy’s medium-term prospects are positive with significant uncertainty, particularly after the crisis in Israel.

But, the budget was drafted before the crisis in the neighbouring country; hence, its potential impact has not been weighted in the assumptions.

The government’s €196 million support package was also not accounted for in the budget.

According to Keravnos, the GDP growth rate in 2024 is projected to reach 2.9% from a reduced growth rate of 2.4% this year to accelerate to 3.1% in 2025 and 3.2% in 2026.

“It is important to maintain this growth rate, which is more than double the Euro area average of 0.8%,” he said.

Concerning macroeconomic risks, Keravnos highlighted the significant rise in inflation, which erodes real incomes, negatively affecting consumption and consequently state revenue, rising interest rates, which will slow growth and rising state spending for the GHS.

The minister also referred to a serious risk from migration flows and climate change.

Keravnos said the rise in the state payroll to €3.7 billion was worrying, “this trend cannot continue; otherwise there will be problems.”

He said the government will not accept any additional demands by trade unions other than salary increases for low earners in the public sector, which is under consideration.