On Wednesday, Finance Minister Makis Keravnos, following the Cabinet’s approval of the relevant bill, which will be submitted to the House of Representatives for a vote in December.
In his remarks following the conclusion of the Cabinet meeting, Mr. Keravnos noted that the 2027 budget totals €11.1 billion, representing an increase of approximately 470 million compared to last year’s 2026 budget.
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He also said that the growth rate in 2027 is expected to hover around 2.9%, despite the fact that there are encouraging signs it could exceed 3%, while unemployment is expected to remain at current levels of full employment, with a downward trend.
He added that the budget balance for 2027 is projected to be in surplus and is expected to reach 2.8% as a percentage of gross domestic product, compared to 2.3% in 2026; meanwhile, the primary balance is expected to rise to 4% of GDP, compared to 3.6% in 2026.
Regarding inflation, he said it is directly affected by fuel prices, with the forecast projecting a rate of around 4%.
In addition, the Minister of Finance noted that in the 2027 budget, as well as in the 2027–2029 medium-term fiscal framework, special emphasis is placed on increasing defense spending.
“The goal of the 2027 state budget, as well as the medium-term fiscal framework, is to maintain a fiscal surplus, to continue containing public-sector employment, to further reduce public debt in the medium term, and the promotion of the green transition and digital transformation, as well as the creation of sustainable growth in key sectors of the economy and the maintenance of a robust financial system,” he noted in this regard.
He added that in 2027, development spending is expected to reach €1.1 billion, while capital expenditures are projected to increase by 2.1% in 2027 compared to 2026.
He also said that the government is consistently continuing its efforts to contain the public sector wage bill as a result of specific measures and policies implemented by the Ministry of Finance.
“True to these commitments, we have succeeded for the third consecutive year in maintaining public-sector employment, as well as in the 2027 budget, which calls for a reduction of 51 positions compared to the 2026 budget. More specifically, spending on civil servant costs, salaries, and the public sector in the 2025 budget stood at 28.2%, 27.2% in 2026, and 26.1% in the 2027 budget just approved by the Council of Ministers,” he further explained.
Mr. Keravnos then said that the medium-term outlook for the Cypriot economy remains positive, as recognized by international agencies and the European Commission; however, there is a significant degree of uncertainty due to adverse geopolitical developments.
Regarding the growth rate in 2027, he said it is expected to hover around 2.9%, despite the fact that there are encouraging signs it could exceed 3%, while the level of public debt as a percentage of gross domestic product is expected to be reduced to 46.6% in 2027, compared to 49.9% today.
“The 2027 national budget, as well as the 2027–2029 medium-term fiscal framework, are concrete evidence of the government’s policy, for yet another year, to pursue stable growth, fiscal responsibility, and social progress. The ultimate and fundamental goal of both the budget—as the primary tool for implementing economic policy—and development-oriented economic policy is to channel the benefits to society, to our workers and businesses, ensuring the continued resilience of our economy as well as that of the next generation,” he emphasized.
The Minister of Finance also announced the Cabinet’s decision to approve the budget that has been approved by the National Solidarity Fund; in accordance with the procedure, it must be approved by theand submitted to the House of Representatives.
As he explained, the Fund’s 2026 draft budget covers expenditures of €28,725,209, which will be distributed to eligible individuals.
“The platform will go live sometime in the coming period toward the end of September; the details of those who have been approved will be entered, as well as those who have not yet submitted them, so they can benefit from the funds allocated in the Fund’s budget I mentioned, as well as those who have already received payments from the program approved in 2025 and continuing through 2026,” he added.
When asked whether the budget takes into account the potential impact of the pension reform currently under discussion, Mr. Keravnos said that it has been considered and factored in.
“A well-organized institution—and every government is an institution—must function well and plan properly. We are implementing the supplemental budget; if savings arise, we immediately ensure they are allocated through the supplemental budget. Pension reform has not been completed. The government currently pays approximately 360 million to cover the pensions being paid out today; the government will continue to pay these, and they are budgeted for. “The budget has been prepared with the understanding that there may be additional costs, including those related to pension reform,” he noted.
When asked to comment on a statement by the President of the Republic during a television interview that the issuance of the NAVTEX would free up €25 million for the electricity interconnection project would be released, and whether, in such a case, the Ministry of Finance would give the “green light,” Mr. Keravnos said he could not comment on the President of the Republic’s views. “When the President of the Republic has made a statement, it is a given that it represents the government’s position,” he added.
When asked about today’s meeting regarding the demands of hourly-wage employees, he said it was a meeting held in a constructive spirit.
“That is why, after all, we concluded that any action or strike should be postponed. A number of demands have been submitted by hourly-wage workers. I should note that the government has shown considerable attention and interest in the category of hourly-wage workers, which is why, over the past three years, there have been significant concessions and benefits, and the majority of the requests submitted have been addressed positively. There remains an outstanding issue regarding pay raises, which they will discuss with me sometime next week, because tomorrow I am leaving for Ireland for the Eurogroup and ECOFIN meetings, and then we will have a meeting with the President of the Republic and representatives of hourly-wage workers to reach a final conclusion.”
When asked about inflation levels in 2027, the Minister explained that inflation is directly affected by energy prices and that fuel prices fluctuate daily, having reached certain high levels.
“The estimate is that it will be around 4 percent. Beyond that, however, it is just an estimate, and we must closely monitor developments,” he noted.
When asked whether the tax reform had offset the cost of social benefits, Mr. Keravnos said that as a result of the tax reform, general government revenue has increased by nearly 3% since 2026, reaching €17 billion, while expenditures have increased by only 1.4%, meaning that the resulting surplus is 2.8%.
“Therefore, there is an increase in revenue and an increase in spending that is growing at a slower rate than revenue. This is a first safeguard, but this slower rate of growth can also be explained by the factors mentioned above,” he concluded.
Source: KYPE
