Cliff on the ocean in Cyprus

Cyprus Economic Forecast

Cyprus Economic Outlook

A second release confirmed that annual economic growth eased in Q2. Public spending and private consumption growth slowed. Moreover, fixed investment swung into contraction on the back of sharp declines in machinery and transport investment, likely due to higher interest rates. On the flip side, exports fell at a softer rate. Available data for Q3 paints a dual picture: Domestic demand likely strengthened thanks to declining inflation in July–August. That said, the external sector should have lost traction, as tourist arrivals grew at a slower annual rate in July–August relative to Q2, while merchandise exports plummeted in July. In other news, in early September, S&P Global Ratings affirmed the country’s rating at ‘BBB’ but revised the outlook to positive thanks to a reduction in non-performing loans and the prospect of fiscal surpluses in the coming years.

Cyprus Inflation

Harmonized inflation rose to 3.1% in August from July’s 2.4%. The acceleration was driven by smaller declines in prices for housing and utilities, as well as transportation. Inflation will average lower in 2023 relative to last year due to higher interest rates, lower commodity prices and VAT cuts. Spikes in oil prices pose an upside risk.

This chart displays Economic Growth (GDP, annual variation in %) for Cyprus from 2013 to 2022.

Cyprus Economic Data

2018 2019 2020 2021 2022
Population (million) 0.9 0.9 0.9 0.9 0.9
GDP (EUR bn) 21.7 23.2 21.9 24.0 27.0
GDP per capita (EUR) 25,086 26,457 24,658 26,807 29,841
Economic Growth (Nominal GDP, ann. var. %) 6.7 6.9 -5.5 9.7 12.4
Economic Growth (GDP, ann. var. %) 5.6 5.5 -4.4 6.6 5.6
Private Consumption (ann. var. %) 5.1 3.8 -6.9 4.5 7.8
Government Consumption (ann. var. %) 3.6 12.0 11.5 9.0 0.1
Fixed Investment (ann. var. %) -4.9 6.9 4.5 -4.2 6.6
Exports (G&S, ann. var. %) 7.2 8.7 2.2 13.5 13.7
Imports (G&S, ann. var. %) 4.3 9.5 3.2 9.0 18.8
Industrial Production (ann. var. %) 7.1 3.6 -7.4 6.9 1.2
Unemployment (% of active population, aop) 8.4 7.1 7.6 7.5 6.8
Fiscal Balance (% of GDP) -3.6 1.3 -5.8 -2.0 2.1
Public Debt (% of GDP) 98.6 90.8 113.8 101.2 86.5
Inflation (CPI, ann. var. %, eop) 1.7 0.7 -1.1 4.8 7.9
Inflation (HICP, ann. var. %, eop) 1.0 0.7 -0.8 4.8 7.6
Inflation (HICP, ann. var. %, aop) 0.8 0.5 -1.1 2.3 8.1
ECB Refinancing Rate (%, eop) 0.00 0.00 0.00 0.00 2.50
ECB Overnight Deposit Rate (%, eop) -0.40 -0.50 -0.50 -0.50 2.00
3-Month EURIBOR (%, eop) -0.31 -0.38 -0.55 -0.57 2.13
Exchange Rate (USD per EUR, eop) 1.14 1.12 1.22 1.14 1.07
Exchange Rate (USD per EUR, aop) 1.18 1.12 1.14 1.18 1.05
Current Account Balance (EUR bn) -0.9 -1.3 -2.2 -1.6 -2.5
Current Account Balance (% of GDP) -4.0 -5.6 -10.1 -6.8 -9.1
Merchandise Trade Balance (EUR bn) -4.5 -4.6 -4.2 -4.3 -5.9
Foreign Direct Investment (EUR bn) -0.4 46.6 -20.0 -31.4 4.6

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