Economic growth slows, to pick up from 2025

Real GDP growth in Cyprus is estimated to have slowed from 5.1% in 2022 to 2.4% in 2023, with economic growth projected to stay at 2.4% this year and to improve to 3.2% in 2025, according to the University of Cyprus.

Compared to the October issue of the Economic Outlook, compiled by the university’s Economics Research Centre, the growth forecast for 2023 has remained unchanged, while the forecast for 2024 has been revised down by 0.4 percentage points.

Real GDP growth in Cyprus is estimated to have slowed from 5.1% in 2022 to 2.4% in 2023. Growth is projected to stay at 2.4% in 2024 and to improve to 3.2% in 2025.

“The tightening of monetary policy that led to slowing growth during 2023, as well as geopolitical turmoil – conflict in the Middle East, ship attacks in the Red Sea, the war in Ukraine – are expected to weigh on growth in 2024,” the ERC’s January outlook said.

“Despite the slowdown in 2023, economic activity and the labour market in Cyprus have remained resilient, while inflation has gradually decelerated, supporting growth prospects. In addition, the growth outlook benefits from robust economic sentiment and strong public finances during 2023.”

The UCy-ERC outlook added that inflation (based on the Consumer Price Index) is projected to decelerate further in 2024 and 2025, mainly driven by the recent easing of price pressures and the tight financing conditions.

“Inflation is forecast to decrease from 3.5% in 2023 to 2.1% in 2024 and 2.0% in 2025. Compared to the October issue, the inflation forecast for 2024 has been revised down by 0.5 percentage points, as international commodity prices eased in the final quarter of 2023 and domestic inflation decelerated substantially in November and December.

“Risks to the growth outlook are tilted to the downside, while risks to the inflation outlook are skewed to the upside, mainly owing to increased geopolitical turmoil,” the report concluded.