Cyprus to achieve the 60% debt-to-GDP target sooner, IMF says

Cyprus will achieve sooner its 60% debt-to GDP-ratio as stipulated by the Maastricht Treaty, the International Monetary Fund (IMF) has said.

The IMF’s Fiscal Monitor, April 2024, has revised its projections over Cyprus debt with improved projections, driven by the nominal GDP growth.

According to the Fiscal Monitor, Cyprus Debt-to-GDP ratio is estimated to drop to 70.7% this year (compared with 71.9% of last year’s Fiscal Monitor) and will continue its downward trajectory dropping to 65.1% in 2025. In 2026 the dept to GDP ratio will achieve the 60% mark and will decline to 56%, 52.8% and 50% in 2027, 2028 and 2029 respectively.

The IMF also maintained its upbeat projections over the General Government’s primary balance (excluding debt servicing expenditure) and overall balance.

According to the Fiscal Monitor, Cyprus General Government overall balance is projected to amount to 2,5% of the GDP in 2024 from 2.9% in 2023 and will drop to 2.4% in 2025. In 2026 the overall balance is estimated to amount to 2.3% of the GDP and will ease to 1.4%, 1% and 0.8% of the GDP for the 2027, 2028 and 2029 respectively.

With regard to the primary balance, the IMF estimates that Cyprus will post significant surpluses during the forecast horizon. From 4.3% of the GDP in 2023, Cyprus primary surplus will amount to 3.9% this year and 3.8% in 2025.

In 2026 Cyprus’ primary surplus will ease to 3.7% of the GDP and will amount to 2.9%, 2.6% and 2.3% in 2027, 2028 and 2029, respectively.

Cyprus' government revenue is also projected to hover around 40% of the GDP in the forecast horizon. From 42,9% of the GDP in 2023, the general government’s revenue is estimated to reach 43.4% in 2024 and 2025. In 2026 public revenue will amount to 43.3% in 2026 and will hover around 42.7% in 2027, 2028 and 2029.

With regard to the general government expenditure, the IMF’s Fiscal Monitor said it will hover around 40% of the GDP. From 39.9% in 2023, state spending is estimated to increase to 40.9% this year and 41% both in 2025 and 2026. For the years 2027, 2028 and 2029 the general government’s expenditure is estimated to amount to 41.3%, 41.7% and 41.8%. respectively.

(Source: CNA)