Nicosia: Cyprus' economy remains resilient and continues to grow at a satisfactory pace, according to the Finance Ministry's Semi-annual Fiscal Policy Report, which Finance Minister Makis Keravnos presented at Tuesday morning's Cabinet meeting.
According to Cyprus News Agency, alongside the positive indicators, the report points to rising inflationary pressures. Keravnos said inflation had increased from 0.5% in January to 3.1% in June and was expected to remain at around 4% through the end of the year.
The Finance Minister expressed confidence that the fiscal surplus would allow the government to continue its social policy, which he said was helping to address inflationary pressures and the rising cost of living. Responding to questions, he noted that European Commission guidelines require cost-of-living support measures to be targeted and temporary.
'According to the report, the Cypriot economy continues to grow at a satisfactory pace despite heightened geopolitical uncertainty and the ongoing energy crisis, as international oil prices continue to rise,' Keravnos said, outlining its main findings.
'Our economy is showing resilience. Although our forecasts were somewhat conservative because of the prevailing conditions, the economy grew by 3.3% in the first half of the year, three times the EU average,' he said, adding that the government aimed to maintain this pace of growth.
Keravnos said the labour market also remained resilient and continued to operate under conditions of full employment. Unemployment stood at 4% in the first quarter of 2026, down from 5% in the corresponding period last year.
Inflation averaged 1.7% in the first half of 2026, rising from 0.5% in January to 3.1% in June, he said.
'Inflation is forecast to remain at higher levels, at around 4%, through the end of the year,' Keravnos said, adding that the government was taking measures to curb inflation.
'The fiscal position remains in surplus,' he said, noting that the government recorded a fiscal surplus of 1.1% of GDP in the first half of 2026.
The fiscal surplus for the full year is projected at pound 900 million, he added.
'This is crucial to the continuation of the government's social policy, which amounts to more than pound 1 billion, or almost 33% of the budget,' Keravnos said, noting that the policy was helping to address inflationary pressures and the rising cost of living.
Support measures currently in force amount to pound 200 million, he said, adding that the fiscal surplus was also crucial to reducing public debt.
'We are not complacent, because the challenges remain. Crises and wars are continuing, with unpredictable developments. We will therefore continue pursuing this prudent economic policy,' the Minister said.
Asked whether the reduction in fuel excise duty could be extended, Keravnos said the measures were being continuously reviewed in light of developments and that decisions would be taken at the appropriate time.
He recalled, however, that European Commission guidelines required such measures to be targeted and temporary.
'Nevertheless, we are weighing all the factors, because developments affect not only Cyprus but the European Union as a whole,' he added.
Asked whether the decline in the surplus was a cause for concern, Keravnos said it was not.
'The objective is not to generate surpluses simply for the sake of having them. Surpluses are intended to meet our needs and, above all, to repay pound 1 billion of our debt each year,' he said, adding that those needs might change once debt repayments began.
Regarding the cost of the pension reform, Keravnos said discussions between the Labour Minister and the social partners were continuing and that it would be premature to estimate the cost at this stage.
He noted, however, that the pension reform bill contains various provisions and scenarios.
'Once the social partners have submitted their views, it will be possible to determine which scenario could be pursued, and we will then be able to discuss the matter in more concrete terms,' he said.