Economy forecast to grow 3.8% this year

Cyprus’ economy is forecast to grow by 3.8 per cent this year, although this will be in relation to a 5.1 per cent shrinkage in GDP in 2020, according to the Central Bank of Cyprus.

In its Economic Bulletin for June, the CBC also forecast a 3.1 per cent, and a 2.5 per cent, GDP growth for 2022 and 2023, respectively.

For 2021, the CBC said the growth will be driven by “all sub-categories of GDP spending.”

On 2020, the bulletin said the tourism and accommodation industries were the hardest hit, although real estate managed to hang on due to demand from local buyers.

Though the coronavirus-related restrictions had an adverse impact on employment, the consequences were less severe than initially expected.

However, the rate of unemployment is expected to rise to 8.1 per cent in 2021, due to ‘hysteresis effects,’ the CBC noted. At the end of 2019, joblessness stood at 7.6 per cent.

Hysteresis in the field of economics refers to an event in the economy that persists even after the factors that led to that event have been removed or otherwise run their course. It often occurs following extreme or prolonged economic events such as an economic crash or recession. After a recession, for example, the unemployment rate may continue to increase despite growth in the economy and the technical end of the recession.