Central Bank of Cyprus (CBC) governor Christodoulos Patsalides praised the resilience of Cyprus’ economy in the face of global challenges on Thursday, during a monthly meeting of the Cyprus Shipping Chamber (CSC).

In his address at the meeting, Patsalides stated that Cyprus is well-equipped to sustain its growth despite risks stemming from climate change and geopolitical turbulence,

Speaking on the topic ‘Cyprus and the Euro Area: Navigating Growth, Stability and Opportunities’, he explained that the economy remains strong despite external pressures.

“Geopolitical risks, such as the ongoing war in Ukraine and conflicts in the Middle East, alongside rising international tensions, have increased economic uncertainty,” he observed.

He also said that “amid these challenges, the Cypriot economy has consistently demonstrated remarkable resilience and flexibility.”

This resilience, he continued, is clearly reflected in the recent upgrades by international credit rating agencies to category ‘A’, which further strengthen Cyprus’ reputation in international financial markets. 

“These upgrades,” he noted, “reflect the growing confidence in Cyprus’ fiscal policies and the stable prospects for its financial and banking systems.  

This improvement,” he added, “is a clear indicator of Cyprus’ economic resilience and its capacity to adapt to adverse conditions.” 

Patsalides also shared key fiscal achievements, including the reduction in public debt from 114 per cent of GDP in 2020 to 74 per cent in 2023, with expectations from the Ministry of Finance to lower it further to below 50 per cent by 2028.  

“This progress enhances our fiscal sustainability and strengthens our capacity to address future economic challenges,” he explained. 

For 2024, the CBC anticipates economic growth of 3.7 per cent, significantly exceeding the Eurozone’s average projection of 0.7 per cent.  

Patsalides credited this optimistic outlook to advancements in critical sectors such as technology, trade, tourism, financial services, shipping, and construction, all buoyed by substantial private sector infrastructure investments. 

Looking ahead to 2025-2027, he mentioned that GDP is expected to grow approximately 3 per cent annually, propelled by an increase in domestic demand alongside rising real disposable household incomes and a robust labour market.  

“Moreover, this growth will be supported by ongoing large-scale private investments and infrastructure projects, particularly those fostering digital and green growth under the Recovery and Resilience Plan,” Patsalides said.

Regarding shipping, he highlighted that the sector has managed to remain focused and strong despite the unprecedented challenges it has faced in recent years, mainly the coronavirus pandemic and the wars in Ukraine and Gaza, as well as tensions in the Red Sea.  

“Based on 2023 data, the shipping sector ranks third with a share of 17.2 per cent of the total value of services exports, trailing behind the information and communications technology sector and the financial services sector,” he added. 

Concerning employment, the governor noted that unemployment fell to 5 per cent in the first nine months of 2024, down from 5.8 per cent in the previous year, with forecasts to stabilize at this level and decrease further to 4.6 per cent by 2027.  

“These figures compare favourably with the Eurozone, where unemployment is projected to stabilise at 6.1 per cent by 2027,” he said. 

He reported that inflationary pressures have eased significantly, with inflation dropping to 2.2 per cent in the first eleven months of 2024, compared to 4.1 per cent in the same period of 2023.

According to the CBC’s forecasts, from December 2024, inflation is expected to stabilise near 2 per cent, with projections of 1.9 per cent for 2025, 2.1 per cent for 2026, and a return to 2 per cent in 2027.

Regarding the country’s banking sector, Patsalides remarked that “it has demonstrated tangible progress and resilience, with key financial indicators reflecting strong and healthy performance.”  

However, he cautioned that “despite the challenges posed by successive crises, there have been no signs of deterioration in their credit quality.” 

He highlighted that the non-performing loan ratio has decreased significantly, reaching 6.5 per cent in September 2024, down from 7.9 per cent in December 2023.

However, he noted that there is still a long way to go, as the EU average was 1.9 per cent in September 2024.

Additionally, he pointed out that the improvement in the Cyprus banking sector was not uniform across all institutions, with some banks lagging and needing to accelerate their efforts to align with developments across the sector. 

“With solid performance, prudent fiscal policies, and a stable financial system, Cyprus is strategically prepared to maintain its growth trajectory amid ongoing global uncertainties,” Patsalides concluded.