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IMF Projects Positive Fiscal Outlook for Cyprus, Anticipates Reduced Debt

The International Monetary Fund (IMF) has released a favorable fiscal outlook for Cyprus, predicting substantial primary surpluses and a significant reduction in public debt, which is expected to drop below the Maastricht Treaty's 60% of GDP limit.

IMF Projects Positive Fiscal Outlook for Cyprus, Anticipates Reduced Debt

According to the IMF's Fiscal Monitor report, Cyprus is expected to maintain surpluses through 2028, with an average surplus of nearly 1.4% of GDP during this period.

Specifically, the IMF projects a surplus of 1.9% of GDP for Cyprus in 2023, with surpluses of 1.7% in 2024 and 1.5% in 2025. From 2026 to 2028, surpluses are estimated to be around 1.3%, 1.0%, and 0.9%, respectively.

The IMF highlights substantial primary surpluses (excluding debt service expenditures) for Cyprus throughout the entire projection period. In 2023, the primary balance is expected to reach 3.2% of GDP, decreasing to 3.0% in 2024 and 2.7% in 2025. For the period from 2026 to 2028, the IMF estimates primary surpluses of 2.5%, 2.2%, and 2.2%, respectively.

Regarding public revenues as a share of GDP, the IMF forecasts a decrease from 42% in 2022 to 40.5% in 2023, 40.3% in 2024, and 40% in 2025. The estimates for the years 2026, 2027, and 2028 stand at 39.4%, 39.2%, and 39.1% of GDP, respectively.

Government expenditures in Cyprus are set to decrease from 39.8% in the previous year to 38.6% in 2023, rising slightly to 38.7% in 2024 and then falling to 38.5% in 2025. For the period from 2026 to 2028, stability is projected at 38.2%.

The IMF's estimation for Cyprus's gross public debt is 78.6% of GDP in 2023, decreasing to 70.9% in 2024 and 66.8% in 2025. The report anticipates a further decline to 61.7% in 2026, with Cyprus's debt expected to fall below the 60% threshold to 58.4% in 2027 and 55.1% in 2028.

It's noteworthy that this year's estimates are more optimistic compared to last year's Fiscal Outlook, primarily due to a nominal GDP increase caused by high inflation. The previous Fiscal Outlook had projected Cyprus's debt to reach 66.2% at the end of the period.

Finally, the gross financing needs for 2023 remain unchanged at 8.1% of GDP. The IMF's outlook suggests positive trends in Cyprus's fiscal health, marked by surpluses and a reduction in public debt.



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