Finance Minister welcomes European Commission forecast

Finance Minister Constantinos Petrides on Friday welcomed the European Commission’s forecasts for the Cypriot economy, viewing them as a validation of the country’s recovery and future prospects.

In its Winter 2022 Economic Forecast report published on Thursday, the European Commission estimated that Cyprus’ real GDP will grow by 4.1 per cent in 2022, followed by a 3.5 per cent increase in 2023.

“The European Commission’s winter predictions announced today reaffirm the Cypriot economy’s positive trajectory and its positive prospects,” Petrides said.

The minister explained that Cyprus’ real GDP strongly recovered during the previous year, while also estimating that the fiscal damage sustained from the effects of the coronavirus pandemic will be fully offset in the future.

“This will increase confidence in the economic environment and strengthen the state’s ability to support sustainable development through a commitment to prudent fiscal policy, with a particular emphasis on investment and the promotion of necessary reforms,” Petrides stated.

Regarding Cyprus’ economy during the previous year, the minister said that real GDP grew by 5.3 per cent year-on-year during the first nine months of 2021.

This was primarily attributed to robust domestic demand, boosted by various incentive schemes, as well as the volume of export services, which includes tourism.

Between January and October 2021, tourism revenue continued to recover, reaching 53 per cent of the revenue generated during the corresponding period of 2019.

Cyprus’ real GDP growth for the entirety of 2021 is expected to be 5.3 per cent, continuing the trend of the first nine months.

Regarding the European Commission’s assessment on how things would evolve in the future, the minister said that risks and threats to economic development remained balanced.

“Despite the recent rise in infections and the erosion of consumer purchasing power due to high inflation, economic growth is expected to accelerate in the second quarter of 2022, supported by the high vaccination rate among adults and the expected relaxation of related Covid-19 restrictions,” the Finance Minister said.

“In addition, based on the data of scheduled international flights, the outlook for the tourist season is positive,” he added.

The minister said that the prediction of a 4.1 per cent real GDP growth in 2022 is linked to strong domestic demand, boosted by the investments facilitated by Cyprus’ recovery and resilience plan, as well as the positive contribution of the export sector.

The European Commission also reiterated that high energy prices were the main driver of inflation growth for 2021, which stood at 2.3 per cent.

“Forecasts show an increase in inflation for 2022 to 2.6 per cent, which remains significantly lower than the European average (3.9 per cent), while de-escalation is expected in 2023, with inflation expected to fall to 1.2 per cent,” the minister said.

Cyprus’ GDP growth rate for 2021 is equal to that of both the Eurozone and the EU as a whole, while it is projected to slightly outperform these benchmarks in 2022 by 0.1 per cent overall.

Cyprus’ GDP growth rate is projected to be higher than both the Eurozone and the EU in 2023, with a rate of 3.5 per cent. This is 0.8 per cent and 0.7 per cent higher than the Eurozone and EU average respectively.