Panayiotis Rougalas
Finance Minister Makis Keravnos stressed the need for the Finance Ministry to assess the Great Sea Interconnector’s (GSI) feasibility study, while acknowledging the project’s geopolitical importance, during his presentation of the 2027 state budget to Parliament. He also called for greater investment in countries’ energy infrastructure rather than spending on subsidies to address the rising cost of living.
Responding to lawmakers’ questions, Keravnos said the Finance Ministry was obliged to examine the project’s feasibility study, just as it would for any other project.
He emphasized the GSI’s recognized geopolitical value and the need to move it forward.
“I must acknowledge that the previous government’s decision to pursue the GSI was correct. However, the project’s financial circumstances have changed considerably since then,” he said.
The minister also referred to discussions at the European level on tackling higher energy costs. At Friday’s ECOFIN meeting, he called for additional funding not only for temporary cost-of-living relief but also for energy infrastructure that would help reduce costs and ease the burden on households.
“At every European Council meeting, discussion is dominated by the development of networks in countries through which energy is transmitted—at a cost reaching €17 billion—with the aim of transmitting only renewable energy. What I asked for was flexibility in the EU’s economic governance framework, particularly for countries with strong economic indicators, so that funding can go toward improving their infrastructure rather than being turned into subsidies,” he said.
Keravnos traveled to Luxembourg on Wednesday, Oct. 7, 2026, to attend the Eurogroup and ECOFIN meetings on Oct. 8 and 9, respectively.
Both meetings examined the effectiveness of public finances under the European Economic Governance Framework and the impact of the energy crisis on Europe’s economy.
Positive outlook
Under the baseline macroeconomic scenario, the medium-term outlook for the Cypriot economy remains positive, although some uncertainty persists.
Despite the significant challenges facing the global economy because of the continuing Russia–Ukraine war and the conflict in the Middle East, Cyprus is expected to record relatively strong growth of 3.1% in 2026. Growth is forecast to remain robust in 2027–2029, at around 3%.
Inflation is expected to rise sharply in 2026 as fuel prices increase, reaching 4%, compared with 0.8% the previous year. It is then forecast to ease to 2.5% in 2027 and decline further to 2% in 2028–2029.
The labor market has continued to improve since 2021, with unemployment falling further—a trend expected to continue in the coming years. Unemployment is forecast to stand at around 3.8% of the workforce in 2026–2029, compared with 4.4% in 2025, a level considered consistent with full employment.
The general government budget balance is expected to remain in surplus in 2026, at 2.7% of GDP. The surplus is forecast to improve further in 2027, reaching 3.9% of GDP.
