Nicosia: The trajectory of public debt remains downward and is expected to fall to levels below 60% of GDP once the official 2025 data are announced, said the Chairman of the Cyprus Fiscal Council, Michalis Persianis, who estimates that the downward trend in debt will continue in 2026 and possibly in 2027.
According to Cyprus News Agency, Persianis stated that despite expected overruns in net primary national expenditure, there is no cause for concern regarding adopting new measures, as the debt trajectory remains downward. He emphasized that the Republic's liquid assets are close to 10% of GDP, providing additional options for the state. Inflation showed almost zero trends in 2025 and is expected to move slightly above 2% in 2026.
Persianis highlighted that although high growth rates are observed, the growth is driven by a small number of industries reliant on foreign-controlled enterprises, creating vulnerability for the economy and public finances. He anticipates increased demands for additional social spending in the coming years.
He also mentioned significant funding needs related to infrastructure projects such as water, energy, transport, and defense, which are expected to mature in the coming years. Delaying these needs could pose significant risks to public finances.
Persianis noted that current spending priorities do not support long-term solutions to worsening problems. He cited traffic congestion as an example, where spending focuses on road network expansion instead of enhancing public transport infrastructure.
Regarding wage increases, he said that they are driven by large increases in few sectors, leading to an overestimation of households' real income. The gap between Gross National Income (GNI) and Gross Domestic Product (GDP) is nearing 12% of GDP, indicating that while GDP per capita has increased, disposable income growth for households remains marginal.
Marios Polemidiotis, Head of the Economic Analysis and Monetary Policy Section at the Central Bank of Cyprus, noted that Cyprus' economy shows significant growth and resilience. He highlighted a tight but flexible labor market and mentioned that wages have moderated while productivity growth continues.
According to Polemidiotis, Cyprus maintains a cost advantage compared to the eurozone, with inflation returning closer to target in early 2026. However, the current account deficit remains high, and the rise in the services surplus is outweighed by the deterioration in the trade balance of goods.
Economist Ioannis Tirkides, President of the Cyprus Economic Society, stated that the public and banking sectors are now "fortresses" of liquidity and low debt. He noted that the private sector is recovering despite legacy issues, while the external sector remains the primary vulnerability due to foreign ownership of domestic assets. He concluded by mentioning the positive development of a rising surplus in the goods and services balance.