19/10/2022 09:02
Cyprus submitted its draft budgetary plan for 2023 to the European Commission and the European Council featuring an upward revision for economic growth this year, followed by a slower growth in 2023.
According to the plan, real growth in 2022 is estimated to reach 5.5% of GDP compared with the previous projection of 2.7% in last April.
“This positive development is largely due the better-than-expected estimated performance in the tourism sector and continuing expansion in exports in services,” the plan said, according to a press release issued by the Finance Ministry.
The revised macroeconomic and fiscal projections were approved by the Cabinet and Cyprus’ Fiscal Council.
According to the Ministry, in the medium term, real GDP growth will reach around 3% in 2023, 3.3% in 2024 and 3.2% in 2025, while unemployment rate is expected to hover around 7% in 2022, compared with 7.5% in 2021.
“Projections for continued recovery are reflected in the reduction of unemployment rate which is projected to decline to 6.4% in 2023, 5.7% in 2024 and 5% in 2025,” the Ministry added.
Furthermore, the Ministry said that inflationary pressures are expected to peak in 2022 with harmonised inflation expected to decline to 3% in 2023 from 7.7% this year.
On the fiscal side, the budgetary plan provides for a surplus of 1.2% of GDP (€308.3 million) this year and a primary (excluding debt servicing expenditure) of 2.7% or €707 million.
Based on the projected growth rate in the 2023 state budget, fiscal surplus is expected to widen in the period of 2023-2025 reaching 1.7%, 2.3% and 2.3% of GDP respectively.
The Finance Ministry estimates that public debt this year will decline significantly to 89.3% of GDP from 103.6% in 2021 and will continue its downward trajectory, declining to 83.3% in 2023, 76.5% in 2023 and 72.3% in 2025.
The Ministry recalled that under the Cyprus’ country-specific recommendations approved in the Stability Programme of 2022, Cyprus is called on to ensure that in 2023 the growth of nationally-financed current expenditure is in line with an overall neutral policy stance, taking into account continued temporary and targeted support to households and firms most vulnerable to energy price hikes.”