Budget stays on track despite IMF downgrade

Cyprus is set to slightly revise its growth forecast for the Medium-Term Fiscal Framework, Finance Minister Makis Keravnos said on Wednesday.

Speaking to the Cyprus News Agency (CNA), Keravnos pointed to a lack of stability on the global stage and a fluid economic environment as key influencing factors.

Responding to the International Monetary Fund’s (IMF) revised April outlook, which lowered its projection for Cyprus’ GDP growth in 2025 to 2.5 per cent from its October estimate of 3.1 per cent, Keravnos explained that the adjustment reflects broader economic uncertainty.

He also mentioned that the previous 3.1 per cent projection was also the figure included in Cyprus’ national budget.

“We are living in a period of great uncertainty and a fluid economic environment,” Keravnos said.

“Everyone is evaluating the data and, due to the uncertainty surrounding global developments, it is logical to expect a downward revision in various economic indicators, both across European and international markets,” he added.

However, he also contextualised the IMF’s updated forecast within this broader climate, saying that “the IMF always has more conservative estimates”.

Looking ahead, the finance minister said that Cyprus’ updated projections for the Medium-Term Fiscal Framework will reflect a “marginally lower growth rate” than previously expected.

Asked whether the downward revision could affect the implementation of the current year’s budget and fiscal planning, Keravnos said that this is not expected to be the case.

“Based on current data, our budget is being implemented as planned,” he stated.

He also stressed that economic trends, both in terms of growth and inflation, remain satisfactory.

“This is why we maintain fiscal surpluses, which allow us to respond to any crises, in addition to supporting our ongoing social policies,” Keravnos stated.

The IMF on Tuesday warned that rising global tariffs and economic uncertainty will slow global growth in the short term.

Its April outlook downgraded projections for most advanced and emerging economies compared to October estimates.

For Cyprus, inflation is now forecast at 2.3 per cent for both 2024 and 2025, falling to 2 per cent in 2026.

The IMF also improved Cyprus’ current account deficit and unemployment forecasts for 2025.

Tariffs, the IMF said, act as a negative supply shock, reducing productivity and growth by redirecting resources toward less competitive domestic industries and increasing overall costs and economic inefficiency.