Cypriot economy to recover output lost during 2020, Central Bank says

January 17, 2022

The Cypriot economy in 2021 recovered the output lost during the 2020 COVID crisis and will continue to grow with an average of 3.7 per cent in the years 2022 – 2024, the Central Bank of Cyprus expects, according to its economic bulletin, stressing that risks to the baseline scenario are balanced albeit slightly upside concerning inflation.

The Central Bank said that following the downturn of 5.2 per cent in 2020, the Cypriot economy is projected to bounce back with 5.6 per cent in 2021 followed by a growth rate of 3.6 per cent, 3.7 per cent and 3.8 per cent in 2022, 2023 and 2024 respectively.

The growth drivers will be the recovery of domestic consumption and net exports, the CBC said, forecasting a continued reduction of unemployment which is estimated to decline to 5.6 per cent by 2024.

Furthermore, the CBC projects a significant rise in inflation, estimated to reach 2.2 per cent in 2021 and 2.5 per cent in 2022, mainly due to the sizeable price increases in energy and supply bottlenecks.

According to the CBC, inflation is expected to moderate in the coming years, with the CPI estimated to decline to 1.2 per cent in 2023 and 1.5 per cent in 2024.

On tourism, the CBC said that the industry’s performance in 2021 is better than initially anticipated with tourist arrivals in the first ten months of 2021 amounting to 46 per cent of the pre-COVID levels.

“The challenge for the coming years and especially for 2022 is great amidst the uncertainty associated with the course of the pandemic, although a steady recovery is projected with tourism estimated to return to the pre-COVID levels in 2024,” the CBC said.

Concerning non-performing loans, the CBC said that their outstanding amount remained steady at around €5 billion in the first eight months of 2021 following the decline observed in 2020 amidst the COVID pandemic.

However, the CBC pointed out that the NPLs that have been transferred off the banks’ balance sheets continue to weigh on the real economy noting “the reduction of private debt is considered as particularly important.”


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