Cyprus: GDP slides at milder rate in Q3
GDP dropped at a softer pace in the third quarter, contracting 4.1% on an annual basis (Q2: -12.2% yoy) as the gradual lifting of Covid-19-related restrictions allowed activities to resume.
Q3’s softer downturn was attributed to reviving domestic demand: Household spending rebounded solidly, growing 5.5% year-on-year in the third quarter, marking the best reading since Q1 2017 (Q2: -9.3% yoy). In addition, fixed investment declined at a significantly softer pace of 6.9% in Q3, after the 45.3% slump logged in the previous quarter. Meanwhile, public consumption moderated noticeably in Q3, expanding 8.9%, below Q2’s 17.4% increase.
On the external front, exports of goods and services fell at a steeper pace of 33.0% in Q3 (Q2: -15.6% yoy), amid a still-depressed tourism industry and downbeat foreign demand. Similarly, imports of goods and services contracted more sharply, dropping 19.4% in Q3 (Q2: -17.2% yoy).
On a working-day and seasonally-adjusted quarter-on-quarter basis, activity bounced back, with GDP expanding 9.4% in Q3—the best reading on record—contrasting the previous quarter’s 13.1% fall.
Despite Q3’s result, a spike in new Covid-19 infections and the tightening of restrictions since mid-October are expected to hinder the recovery in the last quarter of the year. That said, GDP is expected to bounce back firmly in 2021 on the back of a strengthening tourism industry—which should revitalize the external sector—recovering domestic demand and new inflows of EU funding.