Cyprus is set to spend more in 2026, with the government estimating total expenditure at 13.7 billion euros, up from €12.9 billion in 2025. Personnel costs, including pensions, will rise to €3.7 billion, a 4.2% increase.
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.