Cyprus flag Cyprus: Economic outline

Economic Outline

Economic Indicators

Cyprus is an open free-market economy primarily based on services. After enduring the impact of the global financial crisis and the exposure of the national banking system, the country's economy underwent a recovery in recent years, largely driven by domestic demand and tourism until the abrupt halt caused by the COVID-19 pandemic. However, Cyprus’ GDP rebounded to its pre-pandemic level as early as 2021, with continued growth observed in 2022 and 2023 (at 5.6% and 2.2%, respectively). While private consumption remained robust last year, supported by real wage increases and sustained employment expansion, non-tourism services experienced lower external demand. In 2024 and 2025, real GDP is forecasted to increase by 2.7% and 3%, respectively. Domestic demand is expected to persist as the primary driver of real GDP growth, bolstered by automatic wage indexation for approximately half of the employees covered by collective agreements in both the public and private sectors, thereby maintaining their purchasing power. Moreover, significant investment initiatives in real estate, healthcare, transport, and tourism, partially backed by the Recovery and Resilience Facility, will contribute to growth. However, the contribution of net exports is projected to remain subdued due to economic uncertainty in Cyprus' primary trading partners and heightened import demand driven by investments.

Regarding public finances, the IMF estimated a general government budget surplus of 1.3% of GDP in 2023. Despite extending support measures to mitigate the effects of high prices and anticipated fiscal costs from the Mortgage-to-Rent scheme, the IMF anticipates a continued surplus for this year and 2025, slightly exceeding 1% of GDP. The public debt-to-GDP ratio, standing at 78.6% in 2023, has benefited from ongoing economic expansion and is expected to follow a downward trend, decreasing to 66.8% by 2025. HICP inflation decelerated to 3.9% in 2023, down from 8.1% in 2022, primarily due to reduced energy prices. HICP inflation is forecasted to ease to 2.4% in 2024 and further to 2.1% in 2025, reflecting the anticipated ongoing decline in energy and other commodity prices. Conversely, wage indexation is expected to exert upward pressure on HICP inflation excluding energy and food.

The unemployment rate stood at 6.7% in 2023 (down from 6.8% one year earlier) and is anticipated to gradually decrease in 2024 and 2025, driven by economic expansion and the implementation of the EU’s RRP (to 6.4% and 6.1%, respectively – IMF). Despite recent improvements in the service, skilled industry, and agricultural sectors, 16.7% of the population remains at risk of poverty or social exclusion (CyStat). The World Bank estimated Cyprus’ GDP per capita (PPP) at USD 49,931 in 2022.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 29.2732.1934.2235.9437.81
GDP (Constant Prices, Annual % Change) 5.12.52.72.93.0
GDP per Capita (USD) 32,35734,95737,14938,66540,356
General Government Balance (in % of GDP) 1.31.81.71.71.7
General Government Gross Debt (in % of GDP) 85.677.470.765.160.0
Inflation Rate (%) 8.13.92.32.02.0
Unemployment Rate (% of the Labour Force) 6.86.15.95.75.5
Current Account (billions USD) -2.32-2.99-2.93-3.07-3.22
Current Account (in % of GDP) -7.9-9.3-8.6-8.5-8.5

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 2024