Nicosia:The Cypriot economy is forecasted to grow by 3.1% in 2026, despite global economic challenges from the Russia-Ukraine war and Middle East conflicts, Finance Minister Makis Keravnos announced while presenting the 2027 state budget to the House Finance Committee.

According to Cyprus News Agency, Keravnos outlined that economic growth is expected to remain steady at around 3% during the 2027-2029 period. He also projected inflation to be at 4% in 2026, decreasing to 2.5% in 2027 and maintaining 2% in both 2028 and 2029, with unemployment estimated at 3.8%.

The Finance Minister highlighted that the general government fiscal balance is anticipated to stay in surplus, hitting 2.7% of GDP in 2026 and improving to 3.9% in 2027. Public debt as a percentage of GDP is projected to decline significantly, with a reduction of 6.1 percentage points in 2026 and expected to fall further to 46.6% in 2027 from the current 48.9%, reinforcing a steady downward trend in public debt over the medium term.

Addressing the banking sector, Keravnos noted an upward trend in deposits, spurred by inflows from households and businesses, along with a slight increase in deposits by domestic non-financial corporations. He observed that total loans extended by Cypriot banks have been rising since 2023, accompanied by an increase in new lending.

Keravnos emphasized that the banking sector continues to maintain a strong capital base and enhance its resilience, with credit institutions holding high liquidity levels. The 2027 state budget aims to sustain a fiscal surplus, reduce public debt, promote the green transition, control public sector employment, and preserve a robust financial system to mitigate potential risks to public finances.