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The European Commission this week projected a significant 30 per cent decrease in Cyprus’ public debt, as a percentage of its Gross Domestic Product (GDP), by the end of 2024.

This projection was voiced within the framework of the European Semester, as the Commission greenlit the draft of Cyprus’ state budget for 2024, aligning it with the Council’s recommendation from July 14, 2023.

In a statement, the European Commission expressed its contentment with Cyprus’ budget draft, asserting that it corresponds to the Council’s recommendation. It also forecasted that Cyprus would achieve its mid-term target by 2024.

Notably, Cyprus had already met its mid-term target for a neutral structural position starting in 2023, with an estimated structural surplus of 1.2 per cent in 2023 and 1.9 per cent in 2024.

Moreover, the European Commission suggested maintaining a fiscally sound position while anticipating the cessation of energy support measures by 2024.

The commission’s recommendations in July 2023 advocated for gradually phasing out support measures by 2023 and 2024, suggesting that if energy price increases necessitate further actions, Cyprus should ensure targeted assistance for vulnerable households and businesses.

Additionally, the recommendation highlighted the need to maintain public investments, estimated to reach 2.8 per cent of GDP.

Regarding the fiscal balance, the Commission estimated a slightly lower surplus of 2.1 per cent of GDP in 2024 (compared to the budget estimate of 2.8 per cent).

This adjustment factored in the impact of the rent subsidy plan, expanded support measures, and other housing policies disclosed after the budget draft submission.

In terms of the public debt ratio to GDP, the commission projected it to be around 71.5 per cent by the end of 2024, exceeding the Maastricht Treaty’s reference point of 60 per cent but reflecting nearly a 30-percentage-point decrease from the ratio recorded in 2021.

This downward trend in the debt-to-GDP ratio is attributed to the nominal GDP increase and maturing debt repayments.

The commission’s assessment provides a positive outlook for Cyprus’ fiscal health, indicating progress in reducing public debt and maintaining fiscal stability as the country progresses through its economic targets.

Larnaca Chamber of Commerce & Industry (Evel) president Stavros Stavrou used his speech at this year’s annual assembly to highlight the city and district of Larnaca’s substantial strides toward economic recovery.

“After decades of stagnation, Larnaca is now firmly on the path to revitalisation,” stated Stavrou.

He placed the spotlight on major ongoing projects, such as the removal of oil tanks and gas facilities, the construction of the Larnaca-Dekelia road, port-marina development, and Phase 3 of the Larnaca-Dekelia road.

Stavrou underscored the transformative developments in the region, labelling them as quite substantial, acknowledging the new risks on political and economic fronts, particularly Cyprus’ proximity to geopolitical crises in neighbouring countries.

Moreover, Stavrou expressed concerns about the 5.9 per cent unemployment rate, urging collaboration among the government, Chamber of Commerce, and other social partners to strategise on resolving the ongoing issue of labour shortages.

Stavrou criticised the delay in implementing infrastructure for the reception of Liquefied Natural Gas (LNG), highlighting the burden of energy costs borne by businesses and consumers over the years.

Cyprus Chamber of Commerce (Keve) vice president Othonas Theodoulou echoed Stavrou’s sentiments, stressing the escalating risks in the Eastern Mediterranean region and the anticipated rise in energy costs, forewarning its impact on inflation, tourism, and investments, especially from Israel.

Despite some positive developments, including the influx of international or local firms based in Israel, Theodoulou emphasised that the conflict in Israel exacerbates Cyprus’ economic uncertainty, indicating less optimistic predictions for the country’s economic trajectory.

He further stated that “based on estimates from the European Union and the government, the growth rate in 2023 is expected to shrink to 2-2.5 per cent of GDP from the 5.2 per cent recorded in 2022”.

“At the same time, inflation, which stood at 3.85 per cent in October 2023, may increase due to the crisis in Israel,” he added.

He continued by saying that “unemployment, currently around 6 per cent, is expected to rise in the coming winter months due to the end of the tourist season”.

Regarding public finances, the Keve vice president mentioned that “new needs for state support to the people will arise, beyond the €196 million recently announced by the government”.

The International Monetary Fund (IMF) has made a slight increase to its global growth outlook for 2023, due to “surprisingly resilient” demand in the United States and Europe, easing energy costs and the reopening of China’s economy after Beijing abandoned its strict COVID-19 restrictions.

It still sees the pace of global growth falling this year compared with 2022, but by a smaller margin than it predicted in October. The IMF is now forecasting 2.9% growth for 2023 – up from a 2.7% forecast in October – versus 3.4% growth last year.

The figures are in its latest World Economic Outlook, which warns that the world could easily fall into recession this year. “Central banks are likely to continue to tighten monetary policy to fight inflation, and concerns that this restrictive stance could tip the economy into a recession have increased in major advanced economies,” the report says.

The IMF now expects US GDP growth of 1.4% this year, up from a 1.0% prediction in October and following 2.0% growth in 2022. This is down to stronger-than-expected consumption and investment in the third quarter of 2022, a robust labour market and strong consumer balance sheets.

The Eurozone outlook is also up – to 0.7%, versus 0.5% in October, although this is down from 3.5% growth in 2022. The IMF says Europe has adapted to higher energy costs more quickly than expected.

The IMF has revised China’s growth outlook sharply higher, to 5.2% from a 4.4% forecast in October. Zero-COVID policies in 2022 slashed China’s growth rate to 3.0%, putting it below the global average for the first time in more than 40 years.

India’s outlook remains robust, with unchanged forecasts for a dip in 2023 growth to 6.1% but a rebound to 6.8% in 2024, matching its 2022 performance.

Britain is the only major economy the IMF expects to shrink this year. It forecasts a 0.6% fall in GDP as households struggle with rising living costs, including for energy and mortgages.

For 2024, the IMF has cut its global growth forecast very slightly to 3.1%, from 3.2% in October.