The Ministry of Finance’s semi-annual Fiscal Policy Report indicates economic resilience and growth at a satisfactory pace, as stated by the Minister, Makis Keravnos, who presented the report at the Cabinet meeting on Tuesday morning.
Alongside these positive indicators, the report notes rising inflationary trends, with the Minister noting that inflation rose from 0.5% in January to 3.1% in June, and is expected to hover around 4% by the end of the year.
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The Minister of Finance expressed his confidence that the budget surplus will allow the government to continue its social policies, noting that this policy helps counter inflationary pressures and rising prices. Responding subsequently to a journalist’s question, Mr. Keravnos explained that the European Commission’s guidelines regarding measures implemented to address rising prices should be targeted and short-term.
“According to the report, the Cypriot economy continues to grow at a satisfactory rate, despite increased geopolitical uncertainty and the ongoing energy crisis driven by rising international oil prices,” the Minister stated, announcing the key findings of the Fiscal Policy Report.
He explained that “our economy is showing resilience, and despite the fact that our forecasts were somewhat conservative—precisely because of the data—nevertheless, as has already been announced, our economy grew at a rate of 3.3% in the first half of the year, which is three times the average growth rate of European countries.” He added that the government’s goal is to maintain these growth rates.
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Regarding the labor market, he said that it “continues to show resilience and operate under conditions of full employment,” adding that the unemployment rate in the first quarter of 2026 stood at 4%, down from 5% the previous year.
Inflation figures for the first half of 2026 showed that it averaged 1.7%, the Minister of Finance noted, explaining that it rose from 0.5% in January to 3.1% in June. “The forecast is that by the end of the year it will remain at higher levels, around 4%,” said Mr. Keravnos, adding that the government is taking measures to curb this trend.
“The fiscal position remains in surplus,” the minister continued, noting that “during the first half of 1926, the government’s budget balance showed a surplus of 1.1% of GDP.”
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He also noted that for the full year 2026, the budget surplus is estimated to be €900 million. “This contributes decisively to the continuation of the government’s social policy, which amounts to over €1 billion—nearly 33% of the budget,” he continued, noting that “this policy helps address inflationary pressures and rising prices.”
Referring to the measures that have been taken and are currently in effect, he said they amount to €200 million, while adding that the budget surplus is also crucial for reducing public debt. “We are not complacent, because challenges persist; crises and wars continue, with unpredictable developments. Therefore, we will continue to implement this prudent economic policy,” the Minister concluded.
Responding to a question about whether the reduced fuel tax measure could be extended, the Minister said that the measures “are continuously evaluated in light of developments, and specific decisions will be made at the appropriate time.”
He noted, however, “that the European Commission’s guidelines for implementing these measures stipulate that they must be targeted and of short duration.” He added, however, that “the situation is being assessed on an ongoing basis, because as developments change the situation for us, they also change it for the entire European Union.”
When asked if the reduction in the surplus concerned him, the Minister replied in the negative, explaining that “the goal is not to create surpluses just for the sake of having them; surpluses are meant to meet our needs and, above all, to repay one billion of our debt each year.” He added that “once we begin repayment, you realize that our needs may also change.”
When asked about the cost of pension reform, Mr. Keravnos replied that discussions are ongoing between the Minister of Labor and the social partners and that “it would be premature to start discussing the cost at this time.”
He noted, however, that the reform bill “includes various provisions and also various scenarios; therefore, once the social partners’ positions have been taken into account, it will become clear which scenario could be followed, and then we will be able to speak more specifically.”
Source: KYPE
