Cyprus’ is set to deliver a fiscal surplus of €1.13 billion in 2025, equivalent to 3.3% of GDP, according to the state budged presented to the House of Representatives on Thursday. The budget outlines an overall increase in revenues of 6.2% in 2025, with a slight 1.2% reduction in expenditures compared to 2024.

Total state expenditure for 2025 is projected at €12.93 billion, encompassing debt repayments, interest, and investments. The breakdown includes €3.53 billion for the Fixed Fund, €7.85 billion in regular expenditures, and €1.55 billion for development expenses. This represents a slight decrease from the €13.1 billion allocated in 2024.

In terms of revenues (excluding financial flows), the government forecasts a 6.2% increase, bringing the total to €10.31 billion in 2025, compared to €9.71 billion in 2024. The main sources of revenue will come from direct and indirect taxation, estimated at €8.48 billion—or 82% of total revenues. The remaining 18% will be generated from non-tax income, including the sale of goods and services, rental income, and transfers.

Direct tax revenues are projected to rise by 4.9% to €3.92 billion, while indirect taxes are expected to increase by 5.6%, totalling €4.56 billion. Non-tax revenues are forecast to see a significant 10.3% increase, reaching €1.83 billion.

While there is a slight 1% decrease in personnel-related expenditures, totalling €3.62 billion in 2025, operational expenditures are expected to surge by 21.4%, reaching €1.42 billion. This is attributed to increases in reserve funds, defence, policing, and consulting services.

Transfer payments—including social benefits, grants to public and private organizations, and contributions to the EU budget—are expected to grow by 5.3%, reaching €3.99 billion. The largest increases in 2025 will be in contributions to the General Healthcare System (GeSY) and social security funds.

Capital expenditures, which cover co-financed projects, land and equipment purchases, and building renovations, are projected to rise by 4% in 2025 to €1.14 billion. Meanwhile, debt service expenditures are expected to fall by 18.6%, dropping to €2.75 billion in 2025 from €3.38 billion in 2024.

Steady growth until 2027

Looking at key economic indicators, the Cypriot economy is expected to grow steadily through 2027. GDP for 2025 is projected at €33.86 billion, with an annual growth rate of 3.1%. By 2027, GDP is forecast to reach €37.54 billion, with growth rates of 3.2% and 3.3% in 2026 and 2027, respectively.

Unemployment is set to decline from 5.0% in 2024 to 4.5% by 2027, while inflation is expected to remain stable at 2.0% annually from 2025 to 2027. The fiscal surplus is forecast to remain strong, at 3.3% of GDP in 2025, declining slightly to 3.1% by 2027.

The primary surplus is expected to reach 4.8% of GDP in 2025 and stabilize at 4.4% by 2027. Meanwhile, public debt as a percentage of GDP is projected to decline from 69.3% in 2024 to 64.2% in 2025 and 53.5% by 2027.

Capital expenditures are expected to peak at €1.39 billion (or 4.1% of GDP) in 2025, before dropping to 3.1% of GDP by 2027.