Post-COVID aftershocks the island’s fragile economy is expected to bounce back next year with real GDP growth projected at 4.2% from a contraction -6.5% in 2020, according to economists.
The University of Cyprus Economics Research Centre said its negative growth forecast for 2020 incorporates the disruption in economic activity due to the March-May lockdown.
It said there are challenges to recovery due to ongoing or new measures and restrictions (e.g. social distancing, movement restrictions, partial lockdowns) to curb new outbreaks of COVID-19.
The contraction in real activity projected for 2020 is less severe than the forecast in August.
The upward revision is driven by the rebound in domestic activity and improvements in external economic conditions in the third quarter of the year as other European economies reopened.
Furthermore, the CPI inflation forecast for 2020 has remained unchanged from the previous outlook, at -0.7%.
In 2021, CPI inflation is forecast at 1.0% as demand is expected to pick up.
Predictions at this juncture are accompanied by elevated uncertainty as economic outcomes largely depend on the evolution of the pandemic, especially controlling the larger new wave of infections in Cyprus and abroad.
Cyprus faces stricter measures to fight coronavirus with a partial lockdown imminent.