Cyprus Economic Uncertainty Ebbs and Flows Early 2024

Title: Cyprus Economic Uncertainty Eases After January Spike, University Survey Reveals

In the latest report from the University of Cyprus, the Economic Policy Uncertainty (EPU) index has shown a period of fluctuation in the Cypriot economy, with a notable spike in January 2024. The survey, conducted by the Economics Research Centre (ERC) of the university’s Department of Economics, tracked the EPU index over a three-month period, highlighting the impact of global events on economic stability.

The EPU index, which measures economic uncertainty by assessing factors such as news mentions and policy-related economic indicators, stood at 223.04 in December 2023, before jumping to 279.76 in January 2024. This temporary increase was attributed to heightened geopolitical turmoil, particularly the crisis in the Middle East and the Red Sea, which stoked fears of potential disruptions to global trade and subsequent economic fallout.

This pattern of increased economic uncertainty in January was not unique to Cyprus, as similar trends were observed across the European EPU index. However, by February 2024, both Cyprus and Europe experienced a decline in economic uncertainty, returning close to December levels. This suggests a relative de-escalation of concerns, though it is noted that uncertainty remains at historically high levels.

The ERC’s role extends beyond constructing the EPU index for Cyprus; it also examines how economic uncertainty affects the broader economy. Historical data from the survey indicates that prior to 2007, economic uncertainty in Cyprus was typically lower and less volatile. However, following 2008, there has been an uptick in uncertainty with significant peaks occurring in 2012 during the banking crisis, in 2020 amidst the Covid-19 pandemic, and in 2022 due to the Russia-Ukraine conflict.

The findings of this survey provide valuable insights for policymakers and investors alike as they navigate the complexities of the current economic landscape. With the EPU index serving as a barometer for economic sentiment, stakeholders can better prepare for and respond to the dynamic challenges posed by both local and international events.

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