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Cyprus GDP Q3 2023

Cyprus: GDP growth speeds up in Q3

GDP growth accelerated to 2.5% year on year in Q3, from 2.2% in the second quarter. On a working-day and seasonally adjusted quarter-on-quarter basis, economic activity rebounded, expanding 1.1% in Q3, contrasting the previous period’s 0.4% fall. Q3’s reading marked the best result since Q3 2022.

The upturn reflected improvements in private consumption, fixed investment and exports.

Household spending increased 5.9% in the third quarter—above the second quarter’s 4.8% expansion—on the back of lower unemployment and inflation. Moreover, fixed investment rebounded, growing 8.4% in Q3, contrasting the 26.9% contraction logged in the previous quarter. The improvement was caused by sharp rebounds in machinery and transport equipment. Government consumption expanded 1.1% (Q2: +3.0% yoy)—the slowest rate since Q2 2023,

On the external front, exports of goods and services bounced back, growing 1.1% year on year in the third quarter, which marked the best reading since Q4 2022 (Q2: -2.7% yoy). The improvement was driven by a rebound in services exports. In addition, imports of goods and services rebounded, growing 6.7% in Q3 (Q2: -9.2% yoy).

Looking at next year, the economy is seen expanding at a similar pace to 2023’s projected level. A robust external sector, spearheaded by sturdy tourism activity, will underpin growth. On the flip side, domestic demand is forecast to soften, dented by the lagged effects of monetary policy tightening. The pace of absorption of EU funds remains a key factor to monitor. Meanwhile, extreme weather conditions, oil price spikes and additional spillover from the wars in Ukraine and the Middle East pose downside risks.

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