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Cyprus is set to spend more in 2026, with the government estimating total expenditures at €13.7 billion, up from €12.9 billion in 2025. Personnel costs, including pensions, will rise to €3.7 billion, a 4.2% increase.
According to Kathimerini's Panayiotis Rougalas, after months of negotiations, the government, employers, and unions agreed on a new framework for Automatic Price Indexation (ATA), the system that adjusts wages for inflation. Nearly 50% of Cyprus’ workforce will benefit from ATA next year, including 55,000 minimum-wage workers.
The increases will roll out gradually: 80% of ATA in January 2026, 90% in July, and the full 100% by July 2027. From then on, the adjustment will be paid in full each July, capped at 4% even if inflation rises higher.
While the private sector will cover its own costs, public payrolls are set to rise, affecting taxpayers. Critics warn high earners may benefit disproportionately, diluting ATA’s goal of helping lower-income workers cope with rising prices.
According to the Cyprus Fiscal Council, government wage costs will stay around 12% of GDP in 2025 and 11.9% in 2026, with public sector wages rising €193 million next year. Without careful planning, inelastic spending could climb to 90% of total expenditures by 2027.
Currently, 75,000 public sector and 93,000 private sector employees receive ATA. With the minimum wage adjustment, coverage will rise to around 223,000 workers of roughly 470,000 total employees, plus 50,000 self-employed.
Economically, Cyprus is growing. GDP rose an estimated 3.6% in Q3 2025, driven by trade, communications, and hospitality, according to the Cyprus Statistical Service.
The new budget and ATA reforms aim to ease living costs, but economists warn careful management is needed to keep public spending sustainable.
*Read the full Greek version in Kathimerini and Kathimerini.com.cy
