Nicosia: Minister for Finance, Makis Keravnos, spoke on Wednesday of a balanced and growth-oriented budget for the year 2027, following the approval of the relevant bill by the Council of Ministers, which will be put to a vote in the House of Representatives in December.
According to Cyprus News Agency, following the conclusion of the Council's session, Keravnos stated that the 2027 budget amounts to pound 11.1 billion, representing an increase of approximately 470 million compared with last year's 2026 budget. He indicated that the growth rate in 2027 is expected to be around 2.9%, although there are signs it may exceed 3%. Unemployment is expected to remain at current levels of full employment, with a downward trend.
He added that the budget balance for 2027 is forecast to be in surplus and is expected to rise to 2.8% as a percentage of GDP, compared with 2.3% in 2026. The primary balance is expected to rise to 4% of GDP, compared with 3.6% in 2026. On inflation, Keravnos noted that it is influenced by fuel prices, with predictions estimating a rate of around 4%.
The Minister emphasized increased defence spending in the 2027 budget and the 2027-2029 medium-term fiscal framework. He expressed that the aim is to maintain a budget surplus, control public sector employment, reduce public debt, promote green and digital transitions, foster sustainable growth in key economic sectors, and maintain a robust financial system.
Development expenditure in 2027 is projected to reach pound 1.1 billion, with capital expenditure expected to increase by 2.1% compared to 2026. The government continues efforts to contain the public sector wage bill through specific measures, achieving stability in public sector employment for the third consecutive year and a reduction of 51 posts compared to the 2026 budget.
Keravnos highlighted a positive medium-term outlook for the Cypriot economy, acknowledged by international agencies and the European Commission, despite potential uncertainties from geopolitical developments. Public debt is expected to decrease to 46.6% of GDP in 2027, from 49.9% currently.
The draft budget for the National Solidarity Fund for 2026 was also approved, covering expenditure of pound 28,725,209 to be distributed to approved individuals. The platform for fund distribution is set to open by the end of September.
Regarding the potential impact of ongoing pension reform discussions, Keravnos confirmed that considerations have been factored into the budget. The state currently allocates around 360 million to pensions, with plans to continue this expenditure.
Responding to inquiries about the subsea electricity cable project connecting Greece and Cyprus, Keravnos refrained from commenting on the President's statement but assured alignment with the government's stance.
In a meeting addressing hourly-paid staff demands, Keravnos reported a constructive dialogue led to a decision to postpone any action or strikes. He acknowledged the government's attention to hourly-paid workers, noting significant concessions and benefits provided over the last three years.
Finally, Keravnos addressed inflation concerns, highlighting the influence of fluctuating energy prices and estimating an inflation rate of around 4% for 2027. He also noted that tax reform has increased government revenue by nearly 3% since 2026, against an expenditure increase of only 1.4%, resulting in a surplus of 2.8%.