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Economy and Finance

Economic forecast for Cyprus

The latest macroeconomic forecast for Cyprus. 

Indicators 2023 2024 2025
GDP growth (%. yoy) 2.4 2.8 3.0
Inflation (%. yoy) 3.9 2.4 2.1

Real GDP growth in Cyprus slowed down to 2.5% in the first three quarters of 2023 (y-o-y) compared to 5.8% for the same period of 2022, mainly due to a lower external demand for non-tourism services. Still, demand for tourism services continued its rebound in 2023, with arrivals increasing by 20.1%, almost reaching pre-pandemic levels. Private consumption remained robust, supported by real wage increases and continued employment growth, 1.6%. For the whole of 2023, economic activity is expected to have grown by 2.4%, slightly higher than in the Autumn 2023 Forecast, following 5.1% in 2022. 

In 2024 and 2025, real GDP is expected to grow by 2.8% and 3% respectively, slightly stronger than forecast in autumn for both years. Economic sentiment among consumers and businesses slightly improved in January 2024. Domestic demand is expected to continue being the main driver for real GDP growth in 2024 and 2025, as automatic wage indexation for around half of the employees (covered by collective agreements in the public and private sector) holds up their purchasing power. Large investment projects in real estate, healthcare, transport and tourism, partly supported by the Recovery and Resilience Facility, are also set to boost growth. By contrast, the contribution of net exports is expected to remain weak due to the ongoing economic uncertainty in Cyprus’ main trading partners and to the strong import demand induced by investments.

HICP inflation slowed down to 3.9% in 2023, from 8.1% in 2022, mainly reflecting lower energy prices. HICP inflation is set to moderate to 2.4% in 2024 and to 2.1% in 2025, in line with an assumed continued expected decline in prices for energy and other commodities. By contrast, wage indexation is expected to exert some upward pressure on HICP inflation excluding energy and food. Compared to autumn, the forecast for HICP inflation is revised down for 2024, but is broadly unchanged for 2025.