Cabinet approves 2025 state budget

Cabinet on Friday approved the state budget for 2025 and the government’s medium-term fiscal framework for the three years between 2025 and 2027.

Speaking after the day’s cabinet meeting, Finance Minister Makis Keravnos said both the coming year’s budget and the medium-term fiscal framework “have as their main priorities the maintenance of a budget surplus, the restraint of public sector employment, the reduction of public debt, and the promotion of the green transition and digital transformation.”

This, he said, will be done with the aim of “creating conditions for sustainable growth in key sectors of the economy and maintaining a sound financial system.”

He then added that the government’s implementation of various infrastructure projects, all of which have “significant added value”, is “considered of utmost importance”.

With this in mind, he said that Cyprus’ development expenditure would increase by 2.1 per cent next year compared to this year, while government spending on education, health, and social benefits will increase by 5.2 per cent.

On the matter of public sector employment, he was keen to point out that while in the last three years, the state budget has forecast an increase in the number of public sector employees in Cyprus, the 2025 budget foresees there being four less public sector employees by the end of the next year.

He pointed out that this falls in line with longer-term trends on the island, with there being no less than 1,569 public sector workers in 2024 than there were in 2012.

Moving on to Cyprus’ overall economic picture, he said that Cyprus’ medium-term prospects “remain positive”, though said there is now a “significant degree of uncertainty”.

He said gross domestic product (GDP) growth is set to fluctuate around 3.7 per cent throughout 2025, with a knock-on positive impact on the country’s labour market, where the unemployment rate will fall from its current level of five per cent to around 4.8 per cent.

Additionally, Cyprus’ budget surplus is set to rise to 3.3 per cent of its GDP, with public debt as a percentage of GDP set to continue to fall, down from its current level of 69.3 per cent to a forecast 64.2 per cent by the end of 2025.

Keravnos also made reference to the credit rating upgrades Cyprus has received over the last 12 months, describing them as “demonstrations of the steps of stability and progress the Cypriot economy has made”.

President Nikos Christodoulides had made similar statements when the upgrades had been announced, saying in June that agency Fitch’s upgrade of Cyprus’ rating from BBB to BBB+ constituted “a vote of confidence in the government”.

“The latest upgrade … which comes in addition to successive upgrades seen in the last 15 months, confirms the fact that the Cypriot economy is on a trajectory towards stable growth and is plotting a dynamic course,” he said.

He added that his government’s approach, emphasising “responsibility and staying away from populist approaches”, will continue “with the same determination and strategic planning”.

Earlier in the year, the International Monetary Fund’s deputy chief Alex Pienkowski had painted a largely rosy picture of Cyprus’ economy, also concurring with Keravnos’ stated view that Cyprus’ economy is performing better than many countries in Europe.

“Supported by strong policies, Cyprus has recovered quickly from the Covid-19 pandemic and has proven to be broadly resilient to multiple adverse shocks. Its growth rate is above most of its European partners and inflation is approaching two per cent,” Pienkowski said.

Looking ahead, he said government budget surpluses should be maintained until public debt falls “well below” 60 per cent of GDP.