Cyprus GDP Q1 2021


Cyprus: Economy contracts at milder pace in Q1

May 31, 2021

A second reading of national accounts data confirmed that the economy shrank at a softer rate of 1.6% year-on-year in the first quarter of the year, following the 4.5% contraction recorded in the prior quarter. That said, the print still marked the fourth successive quarter of contracting output. The softer downturn was largely driven by an improvement in the external sector as lingering Covid-19 restrictions subdued domestic activity.

Household consumption declined at a softer pace of 5.8% in Q1 (Q4 2020: -6.4% yoy). Meanwhile, fixed investment grew again in the quarter, but at a markedly weaker rate of 8.0% compared to the 21.6% jump tallied in the previous quarter. More positively, government consumption gained traction, growing 12.1% in the first quarter (Q4 2020: +10.5% yoy).

On the external front, exports of goods and services declined at a significantly softer pace of 1.8% year-on-year following Q4 2020’s 8.7% slide, likely bolstered by progressing vaccination efforts, which should have helped the crucial tourism industry. Meanwhile, imports of goods and services swung back to contraction, falling 1.9% and contrasting the 0.9% expansion logged in the prior quarter.

Lastly, on a working-day and seasonally-adjusted quarter-on-quarter basis, economic growth accelerated to 2.0% in Q1 from Q4 2020’s 1.1% expansion.

Looking ahead, the economy is poised to return to growth this year, with the recovery gaining traction particularly in H2 as domestic demand gradually firms, supported by incoming EU funds and the ECB’s loose monetary policy. Moreover, increasing tourist arrivals should bolster the external sector and further support the recovery. However, much depends on the pace of the vaccine rollout, with any possible delays posing a key downside risk.

Commenting on the outlook ahead, analysts at EIU, said:

“Cyprus's reliance on external demand for tourism will make for a protracted economic recovery [...]. Real GDP will not return to pre-crisis levels before late 2022.”

FocusEconomics panelists see activity rebounding and growing 4.2% in 2021, which is up 0.1 percentage points from last month’s forecast. In 2022, GDP growth is seen at 4.3%.


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Cyprus GDP Chart

Cyprus GDPH Q1  2021 3

Note: Year-on year changes of GDP in %.
Source: Central Statistics Bureau and FocusEconomics Consensus Forecast.

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