Cyprus will boast a stronger than expected recovery of 5.5% GDP growth this year following the coronavirus pandemic, according to European Commission forecasts.
The Finance Ministry noted the strong recovery recorded in the island’s GDP growth in 2021 and the dynamics of the coming years, which were acknowledged in the Commission’s latest autumn forecast bulletin for member states.
The ministry pointed out the Commission has revised the island’s GDP growth rate for 2021 by 1.1%, from 4.3% to 5.4%.
“It is now in line with the Finance Ministry’s estimate of a GDP growth rate close to 5.5% for 2021, reaching pre-pandemic levels in the fourth quarter of the year.”
Cyprus’ GDP growth rate is higher than the Eurozone and the EU average, estimated at 5%.
The Commission also said that Cyprus should expect a 4.2% and 3.5% growth rate for 2022 and 2023.
“Although the forecast for 2021 is close to the forecast of the Ministry of Finance for a growth rate of 5.5%, the EU forecast for the years 2022-2023 is even higher than that of the ministry.
“This fact shows the forecasts of the Ministry were more conservative, and the economy maintains its strong momentum in the medium term,” said a ministry announcement.
“The decline recorded in the tourism sector seems to be reversed, as it has shown signs of recovery, although it is still far from pre-pandemic levels”.
Employment is projected to increase due to economic growth and the implementation of the Recovery and Resilience Program.
In 2021, the unemployment rate is projected to drop to 7.5% and even further in 2022 and 2023, to 7.1% and 6.6%, respectively.
“The unemployment rate in Cyprus for 2021 is estimated to be lower than the average Eurozone rate, estimated at 7.9%.”
According to the Finance Ministry, inflation is projected to rise to 1.9% in 2021 due to higher energy prices, services, and non-energy related industrial goods.
It is expected to slow slightly next year to 1.7% and fall to 1.2% in 2023, mainly due to the expected normalization of energy prices.