Cyprus’ Q3 reflects €0.52 billion current account deficit

In the third quarter of 2023, Cyprus experienced a notable increase in its current account deficit, reaching €517 million, compared to €399 million in the same period last year, according to preliminary data released by the Central Bank of Cyprus.

The deficit, reflecting the excess of imports over exports, as well as returns on investments and transfers, prompted concerns about the economic health of the nation. However, when accounting for Special Purpose Entity (SPE) and classifying them as non-residents, the adjusted deficit stood at €408.9m, signalling an improvement from the €548.8m deficit recorded in Q3 2022.

The International Investment Position (IIP) demonstrated positive signs, revealing a net liability position of €28,267.5m in Q3 2023, compared to €28,658.3m in the previous quarter. Adjusting for the impact of SPE, the net liability position decreased to €10,130.7m, further improving the country’s financial standing.

Additionally, Cyprus saw a decline in gross external debt, decreasing from €169,614.3m in Q2 2023 to €162,317.2m in Q3 2023. Simultaneously, external assets in debt instruments rose to €152,975.5m, resulting in a net external debt decrease of €13,441.7m, reaching €9,342.13m in Q3 2023.

After adjusting for the effect of SPE, gross external debt settled at €58,261.2m in Q3 2023, compared to €58,513.4m in the previous quarter. The corresponding net external debt decreased to -€14,534.8m in Q3 2023, showing a notable improvement from -€12,822.1m in Q2 2023.

While the overall current account deficit appears concerning, the adjusted figures and positive trends in the IIP and external debt suggest a more nuanced economic landscape for Cyprus in the third quarter of 2023. The impact of SPE adjustments highlights the importance of considering non-standard entities in understanding the nation’s financial position.