Cyprus: Economic growth moderates in Q1, but underlying momentum stays strong
June 1, 2022
Activity softened in the first quarter, with GDP expanding 5.9% year-on-year (Q4 2021: +6.4 yoy), chiefly driven by a dwindling base effect. Household spending growth improved to 7.9% year-on-year in Q1 from a 6.6% expansion in Q4. Public spending accelerated to a 1.7% increase in Q1 (Q4 2021: +0.5% yoy). Meanwhile, fixed investment contracted at a more moderate pace of 11.2% in Q1, from the 41.1% contraction in the previous quarter.
Exports of goods and services growth fell to 14.6% in Q1, marking the worst reading since Q2 2021 (Q4 2021: +16.6% yoy). Conversely, imports of goods and services growth picked up to 9.7% in Q1 (Q4 2021: +6.7% yoy).
On a working-day and seasonally-adjusted quarter-on-quarter basis, economic growth gathered pace, accelerating to 1.0% in Q1, following the previous period's 0.9% growth.
Turning to Q2, the economy is expected to continue benefiting from improved dynamics in the tourism sector as travel restrictions were further eased from mid-April. That said, the reliance on Russian tourists will impede the sector’s full recovery due to EU sanctions on Russia. Moreover, the domestic economic panorama has darkened since the war in Ukraine broke out, as surging energy and food prices will likely cap household spending.