The Cypriot economy in 2021 recovered the output lost during the COVID crisis and will continue to grow at an average of 3.7% GDP in 2022 – 2024, the Central Bank of Cyprus predicts.
According to its economic bulletin, risks to the baseline scenario are balanced albeit slightly upside concerning inflation.
The Central Bank said after the downturn of 5.2% GDP in 2020, the economy is projected to bounce back with 5.6% growth in 2021, followed by an expansion rate of 3.6%, 3.7% and 3.8% GDP in 2022, 2023, and 2024, respectively.
It said the growth drivers of the recovery is domestic consumption and net exports, forecasting a continued reduction of unemployment, which is estimated to decline to 5.6% by 2024.
Furthermore, the CBC projects a significant rise in inflation, estimated to reach 2.2% in 2021 and 2.5% in 2022, mainly due to the sizeable price increases in energy and supply bottlenecks.
Inflation is expected to moderate in the coming years, with the CPI estimated to decline to 1.2% in 2023 and 1.5% in 2024.
On tourism, the CBC said the sector’s performance in 2021 is better than initially anticipated, with tourist arrivals in the first ten months of 2021 reaching 46% of the pre-COVID levels.
“The challenge for the coming years and especially for 2022 is great amid the uncertainty associated with the course of the pandemic, although a steady recovery is projected with tourism estimated to return to the pre-COVID levels in 2024.”
Concerning non-performing loans, the CBC said they remain steady at around €5 bln in the first eight months of 2021, following the decline observed in 2020 during the COVID pandemic.
However, the CBC pointed out that NPLs transferred off the banks’ balance sheets continue to weigh on the real economy noting “the reduction of private debt is considered particularly important.”