Cyprus Economic Outlook
A second estimate confirmed that annual economic growth slowed in Q4. The deceleration was broad-based, with private consumption, public spending, fixed investment and exports detracting from the reading. Shifting to this year, available data points to resilient activity. Retail sales growth accelerated in year-on-year terms in January, while economic sentiment rose to a one-year high in February. Moreover, tourist arrivals expanded at a brisker annual pace in January–February relative to Q4. In other news, on 10 March, Fitch upgraded the country’s rating to ‘BBB’ from ‘BBB-’ with a stable outlook. The agency highlighted that the fiscal deficit and public debt were declining. Notably, Fitch does not foresee substantial changes in economic policy under the new government.
Harmonized inflation inched down to 6.7% in February from January’s 6.8%. Softer price pressures for food and transportation drove the downtick. That said, prices for housing and utilities increased at a sharper rate. This year, inflation is seen decelerating further on higher interest rates. Volatile oil prices pose a risk to the outlook.