Cyprus economy resilient amid global uncertainty, Finance Ministry says

The Finance Ministry on Thursday said that the European Commission’s autumn forecast has underlined the resilience of the Cypriot economy, along with its flexibility and adaptability to challenging economic conditions.

According to the commission’s predictions, following robust GDP growth of 5.1 per cent in 2022, economic activity is expected to moderate to 2.2 per cent in 2023 amid ongoing global economic uncertainties and rising interest rates. However, a gradual recovery is anticipated in 2024 and 2025.

Key to this year’s growth will be primarily domestic demand, with private consumption significantly expanding due to sustained employment growth and wages. Additionally, automatic partial indexation of wages has somewhat mitigated the negative impact of increased prices on consumption.

The ministry also noted that government measures to contain inflation, combined with increased automatic partial indexation of wages, are expected to continue supporting consumption, albeit at a slower pace.

What is more, for the years 2024-2025, growth rates are expected to rise to 2.6 per cent and 2.9 per cent, respectively.

The ministry underscored the fact that Cyprus is among the top five countries in the Eurozone with the highest growth rates for the years 2023-2025, compared to the Eurozone and the EU as a whole. This highlights its resilience, adaptability, and capacity to thrive amidst challenging economic conditions,” the ministry explained.

Regarding employment, Cyprus is expected to maintain a robust job market, particularly in sectors like tourism and Information and Communication Technology (ICT).

Unemployment rates are projected to decrease from 6.8 per cent in 2022 to 6.4 per cent in 2023, further declining to 5.9 per cent by 2025, the lowest recorded in the past decade.

Inflation is expected to continue its deceleration, reaching 3 per cent in 2024 and 2.2 per cent in 2025, owing to reduced energy prices and government support measures.

Finally, in terms of public finances, forecasts suggest that the fiscal surplus will remain around 2.1 per cent of GDP in 2024 and 2.5 per cent in 2025.

The debt-to-GDP ratio is expected to significantly decrease to 66.3 per cent in 2025 from 85.6 per cent in 2022, driven by increased nominal GDP and substantial primary surpluses, despite pressures from higher refinancing costs.