Cyprus Current Account Balance (EUR bn)

Current Account Balance in Cyprus

Available data indicates that the economy started the year on a strong footing. Declining inflation throughout Q1 contributed to an acceleration in annual retail sales growth in January–February. Additionally, external demand was resilient during the period; tourist arrivals expanded at a faster pace in Q1 relative to Q4. These developments in the services sector drove economic sentiment to an over one-year high in March. Meanwhile, industrial output contracted at a softer rate in January–February as cost pressures eased somewhat. On the flip side, merchandise exports growth slowed in the same two-month period, which indicates that only the tourism sector managed to weather the ongoing global economic slowdown. Additionally, multiple ECB interest rate hikes during Q1 should have dented investment and are set to hamper activity ahead.