Despite highs, economic uncertainty declines slightly

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The level of economic uncertainty in Cyprus fluctuated during the period from December 2023 to February 2024, with a temporary increase noted in January, according to a University of Cyprus survey.

Specifically, the Economic Policy Uncertainty (EPU) index, as compiled by the Economics Research Centre (ERC) of the university’s Department of Economics, varied from 223.04 in December to 279.76 in January and dropped to 221.14 in February.

The peak of the EPU index in January stemmed from the increased geopolitical turmoil – the crisis in the Middle East and the Red Sea – which raised concerns about global trade disruption and economic consequences.

Similar temporary increases were observed in the European EPU index in January.

However, in February, the University of Cyprus observed a decline in economic uncertainty both in Cyprus and Europe, close to December levels, a fact that indicates a relative de-escalation of economic uncertainty, which still remains at historically high levels.

The ERC constructs the corresponding EPU index for Cyprus and analyses the effects of economic uncertainty on the economy.

The authors of the survey found that, “uncertainty in Cyprus until 2007 was on average lower and less volatile, while after 2008 it 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.”