Cyprus is among the 12 eurozone countries whose draft budgets for 2026 were assessed as compliant with the European fiscal framework. This means that Cyprus is called upon to continue implementing its planned fiscal policy for 2026, in accordance with the relevant recommendations of the Council, while highlighting the risk of exceeding net expenditure for 2026.
"The Commission presented its opinion on the draft budgets for 2026 from the 17 eurozone member states that have already submitted them to the Commission in October,” Valdis Dombrovskis, Commissioner for Economy, Productivity, Implementation, and Simplification, after the College of Commissioners meeting in Strasbourg said.
“Twelve of these drafts align with the Commission's guidelines. These are: Luxembourg, Finland, Germany, Estonia, Greece, Latvia, Italy, Slovakia, France, Cyprus, Ireland, and Portugal," he noted.
In its Opinion on Cyprus's Draft Budget for 2026, the Commission notes that the government's macroeconomic projections are more optimistic than its own. "The macroeconomic scenario underpinning the fiscal projections in the Draft Budgetary Plan appears to be more favourable than the Commission's forecast for 2026," it says.
The Commission emphasises that "the fiscal stance is projected to be expansionary by 0.4% of GDP in 2026," following a similar expansion in 2025. Despite the slowdown in growth, the Commission forecasts that the fiscal surplus will remain high, as "the general government fiscal surplus is expected to remain significant," estimating it at 3.0% of GDP for 2026. At the same time, the public debt-to-GDP ratio is expected to continue declining, with the Commission noting that "the debt-to-GDP ratio is expected to decrease to 51.0% by the end of 2026."
Particular emphasis is placed on net expenditure, where Cyprus faces a risk of exceeding the Council's recommendations. According to the EU Commission's Opinion, "net expenditure is expected to increase by 6.5% in 2026, a rate higher than the recommended maximum of 5.0%." This excess corresponds to "a deviation of 0.5% of GDP," while the total cumulative deviation is also estimated at 0.5% of GDP.
Finally, despite these deviations, the Commission concludes that "the Draft Budgetary Plan of Cyprus complies with the fiscal obligations of the Stability and Growth Pact." However, it accompanies its assessment with a warning that "Cyprus risks substantially exceeding the maximum increase in net expenditure."
(Source: CNA)
