Cyprus’ state budget for 2024 and the Medium-Term Fiscal Framework 2024-2026 were submitted on Thursday in the Plenary of the House of Representatives, marking the beginning of the proceedings for their discussion and approval by the end of the year.

The budget shows a fiscal surplus of 2.2% of GDP and a primary surplus of 3.6% of GDP.

The state budget for the year 2024 presents revenues amounting to €9,892 million, marking a 9.6% increase compared to the previous year, while expenses (excluding loan repayment and investments) are expected to increase by 17.7% to reach €10,584 million.

The total expenses of the state budget for 2024 (including loan repayments, interest, and investments) amount to €13,040.7 million. The allocation of expenses in the three main categories is as follows: (a) Fixed Fund expenses €4,340.8 million, (b) Regular expenses €7,221.1 million, and (c) Development expenses €1,478.8 million.

Development expenses are expected to increase from €1,295.051 in 2023 to €1,478.828 in 2024, marking a 14.2% increase.

The primary source of revenue is taxes, as approximately 81% of total revenues come from direct and indirect taxes. Revenues from direct taxation are expected to increase by 5.7%, while revenues from indirect taxation are expected to increase by 7.4%. Non-tax revenues, such as sales of goods and services, rents, and transfers/grants, are expected to increase by approximately 24.5%.

Regarding expenses, the most significant increase is observed in personnel expenses, including pensions and grants, with an increase of approximately 14%. This increase is mainly due to increased nominal benefits and contributions to insurance funds such as the Social Insurance Fund and the National Health System.

Operational expenses are expected to increase by approximately 7% in 2024, reaching €1,168.4 million compared to €1,093.3 million in 2023. This increase is mainly due to increases in allocations for maintenance/repairs and provisions for defence and policing expenses.

Transfers are expected to increase by approximately 16%, from €3,198.5 million in 2023 to €3,709.7 million in 2024. The main increases for 2024 concern the increase in the General Government Contribution to Social Insurance Funds, the General Government Contribution to the National Health System, grants to government agencies and local authorities, and social welfare benefits, with a notable increase in the welfare provision for the Solidarity Fund amounting to €25 million.

It is also noteworthy that expenses for servicing public debt show a significant increase of 68.5%, specifically estimated at €3,379.2 million in 2024, compared to €2,005.5 million in 2023.

Projection for stable growth until 2026

According to the budget submitted in Parliament, GDP is expected to increase from €28,876.4 million in 2023 to €30,417.9 million in 2024, marking a 2.9% increase, compared to a 2.5% increase projected for 2023. Growth is expected to be 3.1% in 2025 and 3.2% in 2026.

The unemployment rate is expected to drop from 6.5% in 2023 to 5.8% in 2024.

Inflation is projected to remain relatively low, decreasing from 3.5% in 2023 to 2.5% in 2024, stabilising at 2% in 2025 and 2026.

The fiscal balance as a percentage of GDP is expected to increase from 1.9% in 2023 to 2.2% in 2024.

The primary surplus as a percentage of GDP is expected to increase from 3.3% in 2023 to 3.6% in 2024.

Capital expenditures are expected to decrease from 3% of GDP in 2023 to 2.8% of GDP in 2024.

Public debt is projected to continue its reduction as a percentage of GDP, decreasing from 80.9% in 2023 to 72.9% in 2024, and further to 67.3% and 60.1% in 2025 and 2026, respectively.

External public debt is expected to continue its reduction, decreasing from 75.5% of GDP in 2023 to 69.0% of GDP in 2024.

General Government revenue is expected to increase from €12,361.4 million in 2023 to €13,166.2 million in 2024.

General Government expenses are projected to increase from €11,804.0 million in 2023 to €12,506.8 million in 2024.

The fiscal surplus is expected to increase from €557.4 million in 2023 to €659.4 million in 2024, equivalent to 2.2% of GDP, up from 1.9% in 2023.