Cyprus deficit grew to €2.46 billion in 2022; ties with Russia still strong

The Central Bank of Cyprus (CBC) this week released a report stating that the country’s current account deficit reached €2.46 billion in 2022, equivalent to 9.1 per cent of the country’s GDP.

This marks a significant increase from the previous year when the deficit was €1.64 billion, which represented 6.8 per cent of GDP.

Additionally, the widening of the deficit in 2022 was attributed to the balance of goods deficit worsening from €4.32 billion to €5.88 billion and the primary income deficit increasing from €2.03 billion to €2.15 billion.

However, this was offset in part by an improved services surplus from €5.02 billion to €5.78 billion and a reduction in the secondary income deficit from €310.7 million to €216.2 million.

What is more, data also revealed that Cyprus recorded bilateral surpluses against the United States of America, Germany, and the United Kingdom. This was offset by bilateral current account deficits against Russia and Greece.

The country’s largest stocks of assets and liabilities against a single country were with Russia, reflecting the fact that Cyprus hosts many special purpose entities of Russian origin.

Cyprus’ international investment position (IIP) saw a slight deterioration, presenting a net liability position of €28.44 billion in 2022, compared to €28.28 billion in 2021.

According to the report, the slight deterioration in 2022 came mainly from the increase in the net liability position of direct investments.

Moreover, Cyprus’ gross external debt decreased to €167.65 billion in 2022, with the net external debt decreasing to €15.36 billion.

The reduction in gross external debt is attributed to the reduction of debt in the categories of the general government, other sectors, and monetary financial institutions.

Adjusted for the effect of Special Purpose Vehicles, the gross external debt amounted to €61.86 billion in 2022, while the corresponding indicator for the net external debt further decreased to a negative €10.31 billion in 2022.