Cyprus: Economy records slowest growth since Q1 2021 in Q2 2023
According to a preliminary reading, GDP growth moderated to 2.1% year on year in the second quarter, from 3.1% in the first quarter. Q2’s reading marked the slowest growth since Q1 2021. On a seasonally adjusted quarter-on-quarter basis, GDP dropped 0.4% in Q2, contrasting the previous period’s 1.1% growth. Q2’s reading marked the worst reading since Q2 2020.
The preliminary release did not include a detailed breakdown. That said, the slowdown was likely due to higher interest rates and elevated inflation hurting purchasing power, and the impact of sanctions on Russia on the services sector.
A more comprehensive release will be available on 1 September.
Going forward, the economy will likely lose further steam in H2 2023. Fading pent-up domestic demand and external headwinds will cap growth in the tourism sector. Additionally, the ECB’s monetary policy tightening cycle and still-elevated inflation will hamper private spending. That said, our panelists see GDP growth exceeding the Euro area average amid higher projected growth in both public spending and investment. Further spillovers from the war in Ukraine pose a downside risk to the outlook.