Cyprus Economy Slows Amid Global Uncertainty, CCLEI Dips 0.9%

Signs of Economic Slowdown in Cyprus as Leading Index Dips

The economic pulse of Cyprus seems to be weakening, with the economy slowing and the growth rate dipping into negative territory for the second consecutive month. This trend was highlighted by the Cyprus Composite Leading Economic Index (CCLEI), a barometer for future economic activity, which is showing signs of contraction.

Compiled by the Economics Research Centre (CypERC) at the University of Cyprus, the CCLEI experienced a year-over-year decrease of 0.9% in March. This follows a 0.6% year-over-year decrease in February, marking a stark contrast to the 0.2% increase observed in January when compared to the same months in the previous year.

The report attributes this downturn to “the prevailing international developments and uncertainties,” which have had a significant impact on the island’s economic outlook. The international uncertainty, fueled by geopolitical tensions and conflicts, has been particularly detrimental to Cyprus’s economic sentiment.

Notably, the ongoing war between Russia and Ukraine, along with military conflicts in the Middle East, has heightened uncertainty. This has had a knock-on effect on Cyprus’s Economic Sentiment Indicators (ESI), which have turned negative in March 2024, both in the euro area and locally. The decline in Cyprus outpaces that of the broader euro area, signaling a more acute impact on the island’s economy.

Contributing factors to the economic slowdown include a negative growth rate in property sales contracts and an uptick in international Brent crude oil prices. For the first time since December 2022, oil prices have shown an increase in their year-over-year growth rate, potentially influencing inflation and economic stability.

Despite these challenges, there is a silver lining as domestic components of the CCLEI have helped to moderate the overall decline. However, recent escalations in the Middle East threaten to disrupt oil prices further and could influence the CCLEI growth rate in the near term.

The CCLEI’s estimation for March 2024 takes into account various factors such as Brent crude oil prices, ESI figures, property sales contracts, tourist arrivals, credit card transactions, and electricity production data. Meanwhile, retail sales volume estimates are based on the latest available information from a range of economic indicators.

As Cyprus navigates through these turbulent times, the insights provided by the CCLEI and other economic measures will be crucial for policymakers and businesses alike to adapt and strategize for the uncertain road ahead.