Cyprus to Witness Significant Public Debt Reduction by End of 2024

1 public debt reduction

Cyprus is set to witness a significant reduction in its public debt by the end of 2024, with a projected 30 percent decrease in the debt-to-GDP ratio. The European Commission has praised Cyprus for its fiscal discipline and expects the country to achieve a structural surplus and maintain economic stability through prudent fiscal management.

What is the forecast for Cyprus’ public debt reduction by 2024?

Cyprus is projected to achieve a significant reduction in its public debt-to-GDP ratio by the end of 2024, with an estimated 30 percent decrease. The European Commission commends Cyprus for its fiscal discipline, as the country is expected to reach a structural surplus and maintain economic stability through prudent fiscal management.

European Commission’s Positive Forecast

Cyprus is on track to experience a substantial decrease in its public debt-to-GDP ratio by the end of 2024. The European Commission has made a favorable projection, estimating a 30 percent decline in this crucial economic indicator. This forecast was shared as part of the European Semester proceedings, which recently approved Cyprus’ state budget draft for 2024. The draft aligns with the Council’s recommendations issued on July 14, 2023.

Meeting and Exceeding Fiscal Targets

The European Commission has not only approved the draft budget but has also commended Cyprus for its fiscal planning, stating that it complies with the set recommendations. Cyprus has shown commendable financial discipline by meeting its mid-term target of achieving a neutral structural balance as early as 2023. The country is expected to boast a structural surplus of 1.2 percent in 2023, potentially increasing to 1.9 percent by 2024.

Future Budgetary Moves

Cyprus is advised to maintain prudent fiscal management and is anticipated to end energy support measures by 2024. The prior recommendations from the Commission encouraged a gradual phase-out of these support measures across 2023 and 2024. In the event of rising energy prices, Cyprus is urged to provide focused aid to the most impacted households and businesses. To sustain economic momentum, the Commission also emphasizes the importance of consistent public investments, which are projected to reach 2.8 percent of GDP.

Fiscal Balance and Debt Management

The fiscal balance for Cyprus is projected to have a surplus of about 2.1 percent of GDP in 2024, a slight adjustment from the budget’s initial estimate. This takes into account various factors, including the extension of rent subsidies and housing policies that were unveiled after the budget draft was submitted. With these policies taken into consideration, the debt-to-GDP ratio is expected to stand at approximately 71.5 percent by the end of 2024. While this figure exceeds the Maastricht Treaty’s reference value of 60 percent, it nevertheless represents a near 30-percentage-point reduction from the ratio observed in 2021.

The decline in the debt-to-GDP ratio can be largely attributed to an increase in nominal GDP alongside maturing debt repayments. The European Commission’s report offers an optimistic view of Cyprus’ fiscal future, indicating significant progress in diminishing public debt and upholding fiscal stability.

Sustaining Economic Growth

Cyprus’ adherence to fiscal recommendations and the projected reduction of its debt ratio are indicative of the nation’s efforts to maintain economic growth and stability. This trajectory of fiscal responsibility and careful planning lays a solid foundation for the country’s financial health and provides assurance to investors and international partners.

Given the dynamic nature of global economic conditions, Cyprus’ efforts to adapt its policies to match the changing landscape exemplify a strategic approach to governance and economic management. The country’s ability to exceed its own financial targets ahead of schedule suggests a robust and resilient economy capable of navigating the challenges of the future.

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