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Cyprus Fiscal Health Bolstered By Strategic Reforms And Robust Economic Growth

by THEFUTURE.TEAM

September 29, 2025

Strong Fiscal Fundamentals And Economic Momentum

Cyprus continues to demonstrate exemplary fiscal discipline, with public debt projected to dip below 60% of GDP this year and fall under 50% in the subsequent years, according to German rating agency Scope. The report, highlighted by Cypriot daily Politis, reaffirms the country’s A- credit profile with a stable outlook, driven by robust fiscal indicators, a record primary surplus, and a persistent reduction in non-performing loans (NPLs).

Robust Economic Performance And Surplus Highlights

The country’s economic resilience is underscored by a 3.3% year-on-year GDP growth in the second quarter of 2025, positioning Cyprus as the second-fastest growing economy in the eurozone after Ireland. Looking ahead, Scope anticipates an annual growth rate of approximately 3% through 2030, even in the face of weaker euro area activity and elevated US tariffs.

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Fiscal performance has been particularly noteworthy. After achieving a record general government surplus of 4.3% of GDP in 2024, the nation posted a cash balance of €840.6 million—2.4% of GDP—for the first seven months of 2025, with expectations of a full-year surplus of around 3.5% fueled by rising social security contributions and income and wealth taxes.

Effective Debt Management And Banking Sector Improvements

Public debt has declined significantly to 65% of GDP in 2024, down nearly 49 percentage points from its 2020 peak. Analysts attribute further debt reduction to strict fiscal discipline and continued growth momentum. High cash reserves, estimated at 11% of GDP at the close of 2024, further strengthen fiscal flexibility.

In parallel, the banking sector is experiencing a marked improvement in asset quality. The NPL ratio dropped to 5.9% in May 2025, with an enhanced coverage of 61%, although household NPLs remain moderately elevated at 7.6% amidst high private debt. The impending activation of the countercyclical capital buffer in 2026 is expected to solidify bank capital levels, ensuring continued sector resilience.

Balancing Fiscal Pressures Amid External Risks

Despite buoyant revenue growth—including significant gains in social security contributions and income and wealth taxes—rising government wage costs and escalating social transfers present challenges to long-term budget flexibility. Planned tax reforms aimed at easing burdens on the middle class and curtailing evasion may not fully offset these pressures. Additionally, external risks such as tepid eurozone growth and intensifying trade tensions warrant cautious scrutiny.

A Promising Outlook For Cyprus

Nevertheless, Scope forecasts a gradual convergence of NPLs towards the EU average, accompanied by a fiscal balance that, while easing, will remain among the strongest in the eurozone at just under 1% of GDP by 2030. With strategic reforms and robust fiscal management, Cyprus is well-positioned to sustain its economic ascent, as evidenced by the upcoming sovereign rating review scheduled for October 10, 2025.

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EU Moderates Emissions While Sustaining Economic Momentum

by THEFUTURE.TEAM

November 15, 2025

The European Union witnessed a modest decline in greenhouse gas emissions in the second quarter of 2025, as reported by Eurostat. Emissions across the EU registered at 772 million tonnes of CO₂-equivalents, marking a 0.4 percent reduction from 775 million tonnes in the same period of 2024. Concurrently, the EU’s gross domestic product rose by 1.3 percent, reinforcing the ongoing decoupling between economic growth and environmental impact.

Sector-By-Sector Performance

Within the broader statistics on emissions by economic activity, the energy sector—specifically electricity, gas, steam, and air conditioning supply—experienced the most significant drop, declining by 2.9 percent. In comparison, the manufacturing sector and transportation and storage both achieved a 0.4 percent reduction. However, household emissions bucked the trend, increasing by 1.0 percent over the same period.

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National Highlights And Notable Exceptions

Among EU member states, 12 reported a reduction in emissions, while 14 saw increases, and Estonia’s figures remained static. Notably, Slovenia, the Netherlands, and Finland recorded the most pronounced declines at 8.6 percent, 5.9 percent, and 4.2 percent respectively. Of the 12 countries reducing emissions, three—Finland, Germany, and Luxembourg—also experienced a contraction in GDP growth.

Dual Achievement: Environmental And Economic Goals

In an encouraging development, nine member states, including Cyprus, managed to lower their emissions while maintaining economic expansion. This dual achievement—reducing environmental impact while fostering economic activity—is a trend that has increasingly influenced EU climate policies. Other nations that successfully balanced these outcomes include Austria, Denmark, France, Italy, the Netherlands, Romania, Slovenia, and Sweden.

Conclusion

As the EU continues to navigate its climate commitments, these quarterly insights underscore a gradual yet significant shift toward balancing emissions reductions with robust economic growth. The evolving landscape highlights the critical need for sustainable strategies that not only mitigate environmental risks but also invigorate economic resilience.