Cyprus flag Cyprus: Economic outline

Economic Outline

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Cyprus is an open, free-market economy, mainly based on services. After being severely hit by the global financial crisis and the exposure of the national banking system, the country's economy had recovered in recent years, thanks to domestic demand and tourism. Nevertheless, the outbreak of the COVID-19 pandemic and the restrictive measures that followed prompted a drastic reduction of GDP in 2020 (-5.1). Underpinned by both private and public consumption, the economy rebounded in 2021, marking a 4.8% growth (IMF). The tourism sector also recorded a relatively good performance (tourism revenues more than doubled in January-July 2021 compared to the same period of 2020, but remained at around 35% of the pre-pandemic levels), as well as the construction sector. Over the forecast horizon, government spending is expected to decelerate, whereas internal demand should continue expanding, contributing to forecast growth of 3.6% this year and 3.2% in 2023 according to the IMF.

After reaching a surplus in 2019, the fiscal measures adopted to fight the pandemic (including increased social payments related to the roll-out of the second phase of the National Health System reform, wage subsidisation and liquidity support to businesses), partially offset by an increase in revenues (+9.9%), led to a budget deficit of 3.6% in 2021. The deficit is forecast to decline to 1% of GDP in 2022 and 0.4% in 2023, helped by the continuing economic expansion and the withdrawal of COVID-19 measures. The public debt-to-GDP ratio is expected to follow a similar trend: after reaching 111% in 2021 (from a pre-pandemic level of 94%), it should gradually decrease to 103.7% this year and 99.3% in 2023 (IMF). After experiencing deflation following the outbreak of the crisis, headline inflation returned positive in 2021 (+1.7%), driven by higher prices for energy, services and non-energy industrial goods. The rate is expected to slightly decelerate to 1.1% in 2022 amid the normalization of energy prices.

The impact of the COVID-19-led crisis on the labour market has been mitigated by temporary income support measures, which targeted especially employees in the tourism sector. As a result, unemployment stood at 7.5% in 2021 (from 7.1% before the pandemic), and is expected to gradually decrease this year and in 2023 on the back of the economic expansion and the implementation of the EU’s RRP (to 6.9% and 6.4%, respectively - IMF). In recent years, a strong focus on the service and skilled industry, along with industrial and agricultural growth, has allowed the country to improve its already high standard of living; however, 17.6% of the population is at risk of poverty or social exclusion (below the EU average of 21.9% - Eurostat).

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 24.9523.79e26.5528.2930.42
GDP (Constant Prices, Annual % Change) 3.1-5.1e4.83.63.2
GDP per Capita (USD) 28,48826,785e29,48630,99632,876
General Government Balance (in % of GDP) -0.0-3.8e-3.6-1.0-0.4
General Government Gross Debt (in % of GDP) 94.0119.1e111.0103.799.3
Inflation Rate (%) 0.6-1.1e1.71.11.2
Unemployment Rate (% of the Labour Force) 7.17.6e7.56.96.4
Current Account (billions USD) -1.57-2.83e-2.47-2.10-2.13
Current Account (in % of GDP) -6.3-11.9e-9.3-7.4-7.0

Source: IMF – World Economic Outlook Database, 2016

Note: (e) Estimated Data

 
Monetary Indicators 20162017201820192020
Euro (EUR) - Average Annual Exchange Rate For 1 GHS 0.240.200.180.170.16

Source: World Bank, 2015

 

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Latest Update: April 2022