The EU Commission forecast of economic progress for Cyprus shows the recovery of the Cypriot economy with projections of over 4% GDP growth in 2021 in line with Nicosia, the Finance Ministry said.
The EU Commission’s summer forecast said the Cypriot GDP is estimated to grow by 4.3% in 2021, upgrading its previous projection of a 3.1% growth rate.
“This (estimate) is higher than the previous forecast of 3.1% growth due to the better-than-expected performance in the third quarter and the significant improvement to the economic climate in June,” the Ministry said.
The Cyprus Finance Ministry also updated its projection, estimating a growth rate of over 4% GDP this year.
According to the Ministry, the accelerated pace of vaccinations against Covid in Cyprus and the rest of the EU lead to a significant relaxation of domestic and travel restrictions, setting the ground for growth in the months to come.
The Commission said the tourism sector is expected to recover from Covid disruption gradually.
“The tourism sector is still expected to recover only gradually, as uncertainty remains and international travel, particularly from the UK – an important market for Cyprus – has yet to fully recover.
“Rebound in activity, which started in the second half of 2020, has been driven by domestic demand, underpinned by fiscal stimulus, and exports of services other than tourism.”
The slight annual increase in employment in the first quarter of 2021 is expected to support the recovery of domestic demand.
In 2022 growth is estimated to reach 3.8% of GDP and remains the same as the previous projections due to favourable internal and external demand prospects.
The implementation of the National Recovery and Resilience Plan is expected to boost public and private investment, the Finance Ministry said.
Headline inflation turned positive in the first five months after falling by 1.1% in 2020.
Inflation is forecast to increase to 1.4% in 2021 and 1.3% in 2022, underpinned by higher prices for energy, non-energy industrial goods, and services.