Cyprus GDP expansion projection slashed to 2.3%

The European Fee has revised its financial projections for Cyprus, citing a downward development because of the results of Russia’s invasion of Ukraine and the related sanctions in opposition to Moscow on the island’s tourism and companies sector.

In its spring forecasts, issued on Monday, the European Fee mentioned that the Cypriot GDP progress will decelerate to 2.3% in 2022, which is 1.8% lower than its earlier projections, whereas progress will speed up to three.5% the next yr, in step with the earlier projection issued in February 2022.

“The Cypriot economic system began 2022 on a powerful footing, however Russia’s invasion of Ukraine and the associated sanctions are anticipated to influence financial exercise, particularly tourism and companies exports, as Russia is a vital marketplace for each,” the European Fee mentioned in its forecast for Cyprus.

Furthermore, the EU Fee mentioned that headline inflation (HICP) will register a substantial enhance, reaching 5.2% in 2022, doubling its earlier projection of two.6%, and is projected to say no to 2.7% the next yr, which is considerably larger than the earlier estimate.

“That is primarily on account of exceptionally excessive oil costs, as Cyprus relies upon closely on oil merchandise. The costs of non-energy industrial merchandise and meals have additionally elevated because of provide chain disruptions and the secondary influence from larger power costs,” the Fee added.

In keeping with the Fee, the unemployment fee remained broadly secure in 2021 at 7.5%. Employment and vacancies had been on the rise on the finish of 2021, whereas the slowdown of financial exercise “is ready to place brakes on the labor market later this yr.”

In 2022, unemployment is predicted to extend considerably to 7.8%, earlier than resuming its lowering development in 2023 to 7.3%, the Fee added.

The Fee, nonetheless, famous that “important uncertainty and draw back dangers to the expansion outlook stay, because the tourism sector and different export-oriented companies sectors are significantly weak to exterior shocks.”

Moreover, the Fee tasks that, regardless of the financial slowdown, Cyprus’ fiscal deficit will proceed to enhance, as the federal government phases off its pandemic-related help measures. In 2022, the deficit is predicted to additional rise to 0.3% of GDP and enhance marginally to 0.2% in 2023.