24/10/2023 09:49
The 2024 state budget main aim is to safeguard fiscal stability, while promoting the green transition and digital transformation ushering in a new era of more modern economy, Minister of Finance Makis Keravnos said on Monday.
Keravnos presented the next year’s state budget to the Parliamentary Committee of Financial and Budgetary Affairs kickstarting a discussion which will conclude in mid-December with the debate on the budget in the House’s plenary.
“The budget features a surplus precisely because we are living in a period of constant negative developments and we should be prepared to tackle every development and to enable use to respond to our European obligations regarding the public debt and other commitments,” Keravnos said.
Recalling the Finance Ministry’s macroeconomic scenario, Keravnos said that the Cypriot economy’s medium-term prospects are positive with a significant extent of uncertainty particularly after the crisis in Israel.
He noted however, that the budget was drafted before the crisis in the neighbouring country, hence its potential impact has not been weighted in the assumptions, adding that the government’s €196 million support package was also not accounted for in the state budget.
According to Keravnos, growth rate in 2024 is projected to reach 2.9% from a reduced growth rate of 2.4% this year, to accelerate to 3.1% in 2025 and 3.2% in 2026 respectively.
“It is important to maintain this growth rate which is more than double of the Euro area average of 0.8%,” he said.
With regard to macroeconomic risks, Keravnos highlighted the significant rise in inflation which erodes real incomes negatively affecting consumption and consequently state revenue, further rising interest rates which will slow down growth and rising state spending for NHS.
The Minister also referred to a serious risk stemming from migration flows and from climate change.
Furthermore, responding to questions from MPs, Keravnos said that the rise in the state’s Wage Bill which amounted to €3.7 billion is worrying, adding that “this trend cannot continue, otherwise there will be problems.”
The Finance Minister made it clear that he will not accept any additional demands by trade unions, other than salary increases for low earners in the public service which is under consideration.