The economic climate in Cyprus worsened in December 2023, accompanied by increased economic uncertainty, according to a report released this week by the University of Cyprus’ Economic Research Centre (CypERC).
According to the report, the Economic Sentiment Index (ESI) decreased by 4.6 units compared to November.
The decline in the ESI, the CypERC explained, “stems from the weakening of the business climate, mainly in services and, to a lesser extent, in construction,” while the business climate in retail trade and manufacturing did not show significant changes compared to November. However, consumer sentiment strengthened significantly.
“The decline in the service sector’s climate resulted from a significant deterioration in assessments of current economic conditions for businesses and their business cycle,” added the CypCER.
Specifically, the research findings indicated that in December 2023, the ESI slightly fell below the December 2022 level but remains above the long-term average (100 units), signifying that economic conditions in Cyprus are still favourable but face challenges that increase uncertainty, especially in the crucial, and sizeable, services sector.
However, the de-escalation of inflation continues, as in December 2023, the expectations of both businesses and consumers regarding price trends dropped significantly below December 2022 levels, noted the report.
“It was the construction sector’s businesses that assessed their ongoing projects more negatively and revised downward their estimates of the number of employees, resulting in a worsened climate in the sector,” the report stated.
Meanwhile, the business climate in retail trade and the manufacturing sector did not see any significant change in December compared to November, the centre noted.
Conversely, the CypERC stated that “consumer sentiment strengthened in December, as consumers evaluated less negatively their current and future economic household and country situations”.
Moreover, according to the research results, the Economic Uncertainty Index increased in December primarily due to heightened uncertainty among service sector businesses, while uncertainty among construction businesses and consumers decreased. The fluctuations in uncertainty in retail trade and manufacturing were marginal in December.
Finally, the research centre highlighted that the Economic Uncertainty Index in December 2023 sharply reverted to the level recorded in December 2022, despite fluctuating at relatively low levels throughout 2023.
