Cyprus’s 900 million euro surplus expected to buffer inflation impact

Economy inflationstate budgetTop News Cyprus’s 900 million euro surplus expected to buffer inflation impact Cyprus's 900 Million Euro Surplus Expected To Buffer Inflation Impact Relevant News Cyprus’s 900 million euro surplus expected to buffer inflation impact 26 August 2026 Unions and employers race against the clock on pension reform 26 August 2026 Christodoulides, Erhürman meet today, divided over path to talks 26 August 2026 Eleftheria Paizanou 26 August 2026 FacebookXWhatsAppEmailPrintViber Cyprus’s fiscal surplus of 900 million euros, equivalent to 2.3 per cent of GDP, is expected to act as a buffer against the inflation and high cost of living straining the economy. According to the biannual Fiscal Policy Report for 2026, which sets out fiscal developments and forecasts under the 2027-2029 Fiscal Policy Strategic Framework and the Annual Progress Report of the Fiscal Plan submitted to the European Commission last April, inflation will remain elevated, at around 4 per cent. Finance Minister Makis Keravnos said the government is taking measures to contain inflationary pressures. He added that the country’s fiscal position remains in surplus, the economy is showing resilience, and growth is proceeding at a satisfactory pace. Uncertain outlook Presenting the Biannual Report to the Cabinet yesterday, Keravnos said the forecast for a 900 million euro surplus for the whole of 2026 will not be revised for now, citing uncertainty over the final fiscal impact of measures to address higher energy costs and ongoing geopolitical developments. Keravnos said the 900 million euro surplus plays a decisive role in sustaining the government’s social policy spending, which exceeds one billion euros and accounts for 33 per cent of the budget. He said the goal is not to generate surpluses for their own sake, but to serve the state’s needs, including the one billion euros paid annually towards debt repayment. Decisions on reduced fuel tax expected soon The government currently has 200 million euros in measures in place to address high energy and essential goods prices. These include zero VAT on specific products, continued electricity price subsidies for vulnerable groups, and a reduced consumption tax on fuel, in effect until September 17. Asked whether the government would extend the reduced fuel consumption tax, Keravnos said only that the measures are being assessed in line with developments and that specific decisions would be taken. He reiterated European Union recommendations that such measures be targeted and applied for a short duration. 28 million euro shortfall According to the Finance Ministry’s recent forecasts, the fiscal balance for the first half of 2026 had been estimated at a surplus of 448.3 million euros. A negative deviation of 28 million euros is now expected, due to the exclusion of revenue from grants under the Recovery and Resilience Plan. Brussels has already informed Cypriot authorities that 28 million euros will be lost from the plan’s total funding of 1.02 billion euros, due to unmet commitments relating to the imposition of a carbon tax and a landfill levy. Bleak picture on inflation Meanwhile, the outlook for inflation remains bleak, driven by an unstable geopolitical situation causing repeated energy shocks. The forecast for the annual change in the Consumer Price Index for 2026, included in the 2027-2029 Fiscal Policy Strategic Framework, stands at 4.5 per cent. Inflation averaged 1.7 per cent in the first half of 2026, rising from 0.5 per cent in January to 3.1 per cent in June, driven mainly by rising international oil prices. Based on data available up to June 2026, Cypriot authorities are keeping the full-year forecast unchanged. Growth rate and unemployment Estimates show the real growth rate of the economy for 2026 was revised down, from 3.1 per cent at the time the 2026 budget was drawn up to 2.7 per cent under the 2027-2029 Strategic Framework. Growth stood at 3 per cent in the first quarter of 2026, and based on the most recent available data, the full-year forecast remains unchanged at 2.7 per cent. The unemployment forecast has been revised to 4.5 per cent. Meanwhile, the growth rate of primary spending must be kept below 2.4 per cent in 2027 and 2028, to offset deviations from previous years and keep Cyprus within the cumulative path of net primary expenditure set for the 2025-2028 period. Subscribe to our Newsletter Latest News Unions and employers race against the clock on pension reform Christodoulides, Erhürman meet today, divided over path to talks Chloraka restaurant damaged in fire, arson not ruled out Things to do on Wednesday, August 26 Four Cypriots summit Mount Elbrus, raise Anti-Cancer Society flag Up to 20,000 Israelis now call Cyprus home as emigration rises Binge it or skip it: Scarpetta – Between past and present, a divisive puzzle Follow en.philenews on Google News and be the first to know all the news about Cyprus and the world.