Optimistic Projections for Cyprus’ Economic Growth
The University of Cyprus has provided an encouraging forecast for the Cypriot economy, with expectations of continued economic growth into 2024 and an acceleration in 2025. The April ‘Economic Outlook’ report from the university’s Economics Research Centre anticipates a real GDP growth of 2.6% in 2024, with a slight increase to 3.3% in 2025. These projections represent an upward revision from earlier estimates, marking a positive shift in economic expectations.
Despite a deceleration in 2023, where economic growth in Cyprus slowed to 2.5% from the previous year’s 5.1%, the final quarter showed resilience. The year-on-year growth rate of real GDP stood at 2.2%, outpacing the EU average and setting a robust foundation for future quarters. Key factors contributing to this resilience include a decline in inflation, a strong labour market, rising earnings, and a solid fiscal position.
However, challenges such as high domestic interest rates, a dip in economic sentiment, and subdued activity in key trading partner economies pose risks to the growth trajectory. Despite these headwinds, forecasts from other reputable institutions like the Central Bank, the European Commission, and the International Monetary Fund also signal robust economic growth for Cyprus in the coming years.
Inflation is expected to continue its downward trend through 2024 and 2025, with the Consumer Price Index (CPI) inflation projected at 2.0% and 1.9% respectively. These figures are slightly lower than previous forecasts, reflecting easing domestic inflation in the early part of the year.
The outlook for Cyprus’ economic growth and inflation is not without its risks. Geopolitical tensions, particularly in the Middle East, the economic performance of trading partners, and the uncertain trajectory of interest rates could impact future growth. Nevertheless, the current projections offer a hopeful outlook for Cyprus’ economy as it moves towards stronger and more sustained growth.
