The Central Bank of Cyprus has revised its growth projections for 2023 and 2024. They now expect GDP growth to be 2.4% in 2023 and 2.7% in 2024, down from their previous forecasts of 2.6% and 2.8%. This is due to Western sanctions against Russia and the fragile external environment affecting professional and non-tourism services.
The bank maintains a 3.1% growth projection for 2025. Cyprus outperformed the Euro area with a 2.7% growth rate in H1 2023.
Economic growth will rely on local demand and investments in digitalization and green growth. Private consumption remains a key driver.
Consumer prices are expected to rise, with the harmonized consumer price index estimated at 3.9% in 2023 and 2.7% in 2024, mainly due to higher energy and food prices.
Core inflation (excluding energy and food) remains stable at 3.7% in 2023, 2.5% in 2024, and 2.4% in 2025.
Unemployment projections have improved, with rates of 6.3% in 2023 and 5.9% in 2024 (down from previous estimates by 0.4% and 0.2%, respectively). For 2025, it stays at 5.6%.
Despite challenges, Cyprus's labor market shows resilience, with unemployment falling from 6.8% in Q1 to 5.9% in Q2 2023, reflecting better-than-expected performance despite sanctions and external factors.
[Information sourced from CNA]