The government is maintaining its fiscal forecasts for 2024 despite improved economic performance in the first half of the year, citing upcoming public sector wage increases and supplementary budget allocations.
Cyprus’s fiscal policy report projects a general government surplus of 2.9% of GDP for 2024. Despite a positive deviation of one percentage point in the first half-year results, officials are not revising the forecast upwards.
“Any revision of the forecast for the fiscal balance for the whole of 2024 is not deemed appropriate at this stage,” the report stated, pointing to the impact of a 351.3 million euro supplementary budget approved in July and a 1.5% increase in public sector salaries from October.
Economic growth reached 3.4% in the first quarter compared to the same period in 2023, potentially warranting a marginal upward revision of the full-year GDP growth forecast.
Unemployment is expected to improve on the initial 5.8% forecast for 2024, having fallen to 6% in the first quarter from 6.8% a year earlier.
The government is maintaining its 2.5% inflation forecast for the year, with inflation at 2.1% through June. Anti-inflationary measures, including electricity subsidies and fuel tax reductions, are estimated to have a fiscal impact of -0.3%.
Public debt decreased to 22.8 billion euros at the end of June, down from 23.1 billion euros a year earlier. As a percentage of GDP, it fell to 72.3% from 77.6% in the same period. The government expects public debt to further reduce to 22.2 billion euros, or 70.5% of GDP, by the end of 2024.
The Council of Ministers is set to review the first-half economic results today.
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