Nicosia: The fact that the autumn package of measures adopted on November 25, 2025, by the European Commission as part of the European Semester, clearly confirms the resilience of the Cypriot economy, which is reflected in strong growth momentum and stable fiscal performance, is welcomed by the Government, according to a Ministry of Finance statement.
According to Cyprus News Agency, the Ministry of Finance, remaining faithful to its policy of fiscal discipline and taking into account the European Commission’s references to the rate of growth of public expenditure, emphasizes its commitment to continue and intensify efforts to rationalize public spending. “Cyprus is among the 12 eurozone countries whose draft budgets for 2026 have been assessed by the EU as compliant with the European fiscal framework, although a deviation from Cyprus’ commitment to limit the increase of net primary expenditure is expected,” the Ministry of Finance stated.
In the context of the Republic of Cyprus’ commitments under the new European Economic Governance Framework, which entered into force on April 30, 2024, the annual percentage change in general government net primary expenditure was set at 6% for 2025 and 5% for 2026. However, European Commission forecasts indicate a deviation from the initial targets due to measures taken after the submission of the National Medium-Term Fiscal and Structural Plan in October 2024. These measures include the National Solidarity Fund Replenishment Plan, relief measures related to the wildfire in Limassol in July 2025, and adjustments in VAT rates on basic goods and electricity.
Citing the EU assessment, the Ministry of Finance added that the deviation from the reference path of net primary expenditure has not hindered the objective of reducing public debt as a GDP percentage. The latest estimates suggest that public debt is expected to fall to 41.8% in 2028. The autumn package documents also recognize that public debt as a percentage of GDP is expected to fall below the 60% threshold at the end of 2025 and maintain a downward trend.
The EU emphasizes that Cyprus retains its ability to service its public debt. According to the Ministry of Finance, the more positive reduction in public debt as a percentage of GDP during the period 2025-2028 is attributed to increased public revenue, high fiscal surpluses and growth rates, and GDP revisions by the Statistical Service of the Republic of Cyprus in October 2025.
Regarding the macroeconomic imbalances procedure, the Ministry of Finance states that the EU continues to classify Cyprus as having “macroeconomic imbalances,” acknowledging the significant reduction in non-performing loan ratios and the decline in public and private debt. This is supported by nominal GDP growth, primary fiscal surpluses, and the deleveraging of households and businesses.
Additionally, the European Commission stresses that the Cypriot financial sector remains robust, with banks maintaining strong profitability and capital positions amid high liquidity. Regarding the current account deficit, the EU notes that while it is expected to decline somewhat, it remains high, highlighting the need for further reduction.