Cyprus’ debt-to -GDP ratio is estimated to register a reduction of almost 30% by the end of 2024 compared with the end-2021, the European Commission has said.
In the context of the European Semester the Commission gave on Tuesday the green light to Cyprus’ draft budgetary plan for 2024, noting that the budget is in line with the Council’s recommendations.
“Overall, the Commission is of the opinion that the Draft Budgetary Plan of Cyprus is in line with the Council Recommendation of 14 July 2023,” the Commission said.
As Cyprus has already achieved its medium-term objective over a neutral structural stance, estimated to register a structural surplus of 1.2% this year and 1.9% next year, the Commission recommended that Cyprus should maintain a sound fiscal position in 2024, while noting that support measures should be wound down in 2024.
In its July 2023 recommendations to Cyprus, the Commission said that support measures should be wound down the soonest possible in 2023 and 2024, noting that should new energy prices increases necessitate the reintroduction of support measures “Cyprus should ensure that these were targeted at protecting vulnerable households and firms, fiscally affordable, and preserve incentives for energy savings.”
The Commission also noted that Cyprus is in line with the recommendation to preserve public investments in 2024 which are estimated to amount to 2.8% of GDP.
With regard to the fiscal balance the Commission estimates that Cyprus budget surplus will be lower than the budget’s projection of 2.8% of GDP, namely at 2.1% as it has taken into account policy measures such as the mortgage-to-rent scheme to assist vulnerable borrowers to maintain their residences, the re-introduction of energy support measures, as well as some housing policy measures, launched following the submission of the draft budget.
On the public debt ratio, the Commission estimated that Cyprus’ public debt will decline to 71.4% of GDP by end-2024.
This may be “above the Treaty reference value of 60% of GDP but almost 30 percentage points of GDP below the ratio at end 2021,” the Commission added.