UCy sees real GDP growth at 3.5%

Economic growth in Cyprus is expected to accelerate this year and to remain robust in 2025, supported by favourable labour market conditions, the return of inflation to around-target rates, and gradual declines in interest rates, according to a University of Cyprus report.

The quarterly economic outlook, prepared by the university’s Economics Research Centre, real GDP growth is forecast at 3.5% in 2024 and at 3.3% in 2025.

Relative to the July outlook, the forecast for 2024 has been revised up by 0.5 percentage points, as the growth momentum strengthened in the first half of 2024 and domestic economic conditions in the third quarter of the year remained favourable according to monthly data.

The forecast for 2025 has stayed the same as in the July issue, the ERC said in its October report.

Inflation (based on the consumer price index) is forecast at 2.1% in 2024, unchanged from the July report.

Inflation is projected to remain at 2.1% in 2025, higher by 0.1 percentage point compared to the previous forecast. The upward revision was driven by robust growth in the first half of 2024, higher food inflation in the third quarter and elevated inflation in some services categories.

The main risks to the outlook for growth and inflation stem from the external economic environment, (particularly the growth momentum in trading partner economies), the pace of monetary policy easing (especially the path of domestic borrowing costs), as well as from geopolitical tensions, cyberattacks and climate risks.

Moreover, fiscal risks owing to pending infrastructure projects and incomplete reforms could lead to lower-than-projected growth.

On the other hand, a stronger reform drive, new investments, and targeted measures to address cost-of-living pressures may result in better-than-forecast growth rates.