UCY: 2023 GDP growth, inflation at 3%

GDP growth and inflation will drop to 3% in 2023, according to forecasts of the University of Cyprus’ Economic Research Centre.

The ERC noted the projection for 2023 remains unchanged compared to the projection in the May issue.

Real GDP growth in Cyprus is forecast to decelerate from 5.6% in 2022 to 3% in 2023, with the forecast remaining unchanged since the May issue.

Growth in 2024 is projected at 2.9% GDP, down by 0.2 percentage points compared to the May forecast.

“The effects of monetary tightening, high inflation rates registered in previous quarters, and the recent growth slowdown in the euro area are expected to weigh on the growth outlook for Cyprus,” ERC said.

“Recent positive developments in Cyprus (e.g. resilient activity and labour market, strong fiscal performance, declining uncertainty) and in international markets (e.g. further declines in commodity prices, improvements in stock market indices) are expected to support growth, particularly in 2023.

“Nevertheless, the risks to the growth outlook have remained tilted to the downside, as in the May issue”.

Inflation (based on the Consumer Price Index) is forecast to decrease from 8.4% in 2022 to 3% in 2023 and 2% in 2024, mainly as a result of the recent declines in international commodity prices, the deceleration of domestic inflation, and the tightening of financial conditions.

“The inflation forecast for 2023 has remained unchanged compared to May, while the inflation forecast for 2024 has been revised downwards by 0.4 percentage points.

“Mostly because of the significant moderation in domestic inflation and the decline in international commodity prices during the year’s second quarter.

“The risks to the inflation outlook are skewed to the upside.”