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Economic uncertainty remains at summer levels

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The level of economic uncertainty in November remained at the same levels in Cyprus as in the summer months of 2022, considerably below peak when Russia invaded Ukraine earlier this year, according to a quarterly survey conducted by the University of Cyprus.

The Economic Policy Uncertainty (EPU) index compiled by the university’s Economics Research Centre (ERC) rose marginally to 246.88 in November, from 248.28 in August, much lower compared to spring, when economic uncertainty in Cyprus reached unprecedented levels due to the Russia-Ukraine war.

During the autumn quarter of 2022, the EPU index was at 281.22, 256.67 and 246.88 in September, October and November, respectively.

Uncertainty in September had a temporary small peak, partly due to the political instability in the United Kingdom, while in October and November uncertainty fell back to a lower level, the ERC study found.

Higher than pre-pandemic

The Cyprus EPU index shows that uncertainty is still at higher levels compared to those during the pre-pandemic era.

The European EPU index also rose during September. Contrary to the Cyprus EPU, the European EPU peak in September was relatively higher than in March due to the Russia-Ukraine war in spring.

“Uncertainty in Cyprus until 2007 was on average lower and less volatile,” said the authors of the UCy EPU index.

“After 2008 (uncertainty) started increasing, with the higher peaks being recorded in 2012 due to the banking crisis, in 2020 due to the Covid-19 pandemic, and in 2022 due to the Russia-Ukraine war.”

The EPU index, introduced in 2016, is constructed for 30 countries, 11 of which in Europe, including the Cyprus EPU index, and quantifies economic uncertainty with regard to the efficiency of the economic policies applied.

The Economics Research Centre of the University of Cyprus constructs the corresponding EPU index for Cyprus, and analyses the effects of economic uncertainty on the Cypriot economy.