Cyprus Economic Forecast

Cyprus Economic Outlook

October 27, 2020

Available data suggests that the economic panorama remained subdued in Q3, following the unprecedented GDP drop in Q2. On the external front, tourist arrivals nosedived by more than 80%, on average, in Q3, while merchandise exports dropped markedly in July–August, as Covid-19 continued to suppress foreign demand. On the domestic side, consumers turned only marginally less pessimistic in Q3 compared to Q2—the peak of the health crisis—while the unemployment rate rose in August, likely dragging on household consumption. Moving to Q4, a spike in new Covid-19 infections prompted the government to introduce new restrictions in mid-October, boding ill for recovery at the tail-end of the year. More positively, on 2 October, Fitch Ratings affirmed the country’s BBB- credit rating with a stable outlook, citing its solid governance, strong institutions and sound fiscal policy.

Cyprus Economic Growth

GDP is seen dropping at the sharpest pace since 2013 this year, before rebounding in 2021 on the back of recovering domestic and foreign demand, and supported by EU funding. However, the unpredictable course of the pandemic, uncertainty around Brexit negotiations, with the UK being a major trading partner, and the country’s significant public debt load, cloud the outlook. FocusEconomics analysts see GDP growing 4.5% in 2021, which is down 0.4 percentage points from last month’s forecast. In 2022, our panel sees the economy expanding 4.0%.

Cyprus Economy Data

2015 2016 2017 2018 2019
Population (million)0.80.80.90.90.9
GDP per capita (EUR)21,04722,25623,43824,46525,050
GDP (EUR bn)17.818.920.021.121.9
Economic Growth (GDP, annual variation in %)3.46.84.44.13.2
Consumption (annual variation in %)2.84.44.53.33.0
Investment (annual variation in %)-0.248.924.1-6.60.1
Exports (G&S, annual variation in %)9.97.28.74.62.0
Imports (G&S, annual variation in %)8.19.012.82.41.5
Industrial Production (annual variation in %)4.810.37.76.63.2
Retail Sales (annual variation in %)-  5.26.25.43.2
Unemployment Rate14.913.011.18.47.0
Fiscal Balance (% of GDP)-1.00.32.0-3.71.7
Public Debt (% of GDP)10810393.910195.5
Inflation Rate (HICP, annual variation in %, eop)-0.60.1-0.41.00.7
Inflation Rate (HICP, annual variation in %)-1.6-1.20.70.80.6
Inflation (PPI, annual variation in %)-5.1-4.23.42.32.2
Policy Interest Rate (%)-  -  -  -  -  
Exchange Rate (vs USD)-  -  -  -  -  
Exchange Rate (vs USD, aop)1.111.111.131.181.12
Current Account (% of GDP)-0.5-4.2-5.1-4.4-6.7
Current Account Balance (EUR bn)-0.1-0.8-1.0-0.9-1.5
Trade Balance (EUR billion)-3.2-4.2-5.0-4.7-4.7

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Cyprus Facts

Value Change Date
Exchange Rate1.120.65 %Dec 31

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