Cyprus’s economy remains resilient amid global financial uncertainty, with a projected GDP growth of 2.2% in 2023. Driven by domestic demand, employment growth, wage increases, and government measures to curb inflation, Cyprus anticipates a gradual economic recovery, with growth rates expected to rise to 2.6% and 2.9% in 2024 and 2025, respectively.
How is the Cyprus economy performing amidst global financial uncertainty?
Cyprus’s economy proves resilient, anticipating a GDP growth of 2.2% in 2023 despite global uncertainty. Driven by domestic demand, sustained employment growth, wage rises, and government measures to curb inflation, Cyprus forecasts a gradual economic recovery with growth rates increasing to 2.6% and 2.9% in 2024 and 2025, respectively.
Economic Resilience in Uncertain Times
The Finance Ministry has recently shone a spotlight on the tenacious Cypriot economy. With the world facing economic tremors, the European Commission’s autumn forecast has laid bare the island’s impressive ability to weather the storm. The Ministry’s statement on Thursday highlighted the adaptability and flexibility the Cypriot economy has demonstrated in the current global financial climate.
A Moderated yet Positive Outlook for 2023
Last year’s robust GDP growth of 5.1% is set to moderate to a still respectable 2.2% in 2023. This comes amidst a backdrop of global uncertainties and rising interest rates, which have understandably tempered the economic fervor. However, tails are up with the anticipation of a gradual recovery into 2024 and 2025.
Domestic Demand Fuels Growth
What’s driving this year’s growth, you may wonder? It’s primarily domestic demand. With employment seeing sustained growth and wages on the rise, private consumption has seen a significant expansion. The ministry has also thrown its weight behind efforts to minimize the sting of inflation, utilizing automatic partial indexation of wages to cushion consumption from soaring prices.
Sustained Support and Future Growth
As the government implements measures to tame inflation, domestic consumption is expected to be nurtured further, albeit at a moderated pace. Peering into the horizon of 2024-2025, the ministry forecasts an increase in growth rates to 2.6% and 2.9%, respectively. Notably, Cyprus stands tall among the top five Eurozone countries with the highest anticipated growth rates for the period of 2023-2025. This is a testament to its resilience, adaptability, and potential to flourish despite economic headwinds.
Employment and Inflation Trends
Cyprus is set to maintain a robust job market, with sectors such as tourism and Information and Communication Technology (ICT) leading the charge. The unemployment rate, which stood at 6.8% in 2022, is projected to dip to 6.4% in 2023, with a further decline to 5.9% by 2025—marking the lowest rate in the past ten years. Moreover, the deceleration of inflation is on the cards, with forecasts predicting it to reach 3% in 2024 and 2.2% in 2025, thanks to declining energy prices and the bolstering hand of government support measures.
Public Finances Strengthen
Looking at the fiscal landscape, the projections suggest the fiscal surplus will hover around 2.1% of GDP in 2024, with a slight increase to 2.5% in 2025. The country’s debt-to-GDP ratio is expected to experience a significant reduction, from 85.6% in 2022 to 66.3% in 2025. This is attributed to the increase in nominal GDP and the generation of considerable primary surpluses, despite the pressures of higher refinancing costs.
Contributor’s Profile
Kyriacos Nicolaou
Since joining the Cyprus Mail in 2020, Kyriacos Nicolaou has been an integral part of the business & finance section. He has a keen eye on local enterprises, burgeoning startups, the broader economic landscape, and the ever-evolving world of technology.
This article seeks to provide insights into the state of Cyprus’s economy, reflecting on the recent findings and forecasts. As we refrain from drawing conclusions or reflections, we present a factual narrative that portrays the resilience and steady growth of Cyprus’s economy amidst global financial fluctuations.
Quick Recap:
- Cyprus’s economy is proving resilient amid global financial uncertainty, with a projected GDP growth of 2.2% in 2023.
- The economy is driven by domestic demand, sustained employment growth, wage increases, and government measures to curb inflation.
- Cyprus anticipates a gradual economic recovery, with growth rates expected to rise to 2.6% and 2.9% in 2024 and 2025, respectively.
- The Finance Ministry highlights the adaptability and flexibility of the Cypriot economy in the current global financial climate.
- Domestic demand, including sustained employment growth and wage increases, is fueling growth, while government measures are curbing inflation.
