Republic of Cyprus
Federation of Euro-Asian Stock Exchanges
48
Economic Development
The Cypriot economy is continuing the stable growth by attracting investments, supporting businesses and stimulating trades. In 2019 GDP growth was 3.4% compared to the corresponding period of 2018. Real economic activity in Cyprus is expected to continue to increase at robust rates in 2020, albeit at a slower pace compared to 2019. The growth rate of real GDP is estimated to have slowed from 4.1% in 2018 to 3.4% in 2019. The drivers of the outlook include the recent robust economic performance in Cyprus, low inflation and supportive financial conditions.
Nevertheless, the forecasts have been revised downwards compared to those in the November issue. The downward revisions reflect the moderation of the growth momentum in Cyprus and the EU, particularly after the second quarter of 2018, and the faltering of some leading indicators, especially domestic and European economic confidence indicators. Business sentiment remained strong in services and manufacturing, but deteriorated in construction. Consumer sentiment and business sentiment in retail trade stabilised suggesting that growth might moderate in the months to come.
It is noted that the unemployment rate fell rapidly to 7.2% in the third quarter of 2019, the lowest level since 2011. The high level of public debt together with the strong link between bank and sovereign risk,
and potential pressures to public finances continue to pose risks to the outlook. Fiscal pressures could
be associated with court rulings on the reversal of past public sector pay cuts, rapid growth in the public sector wage bill and the newly introduced General Health System.
The outlook revision of the economy reflects the significant impact of the global COVID-19 pandemic on Cyprus’ economy and on the sovereign’s fiscal position. The recession and the economic policy response to the COVID-19 pandemic, will result in a sizeable deterioration of the budget balance this year and influence negatively the stock market as well as the economy as a whole.
Download data