cyprus economy — The Cyprus economy is experiencing a slowdown due to rising energy prices and a dip in tourism, according to the International Monetary Fund (IMF). This assessment, released during an Article IV Consultation, indicates that while Cyprus has shown resilience to geopolitical pressures, its economic growth is expected to moderate this year.
- As Cyprus navigates these economic challenges, the focus will remain on ensuring stability and growth while adapting to the changing global landscape.
As the IMF noted, the anticipated GDP growth for 2023 is around 2.6 per cent, a decrease from 3.8 per cent in 2025. In a more adverse scenario, where geopolitical tensions persist, growth could fall to just 1.7 per cent. These predictions highlight the significant impact of external factors on the economy.
Cyprus economy: Inflation and Energy Prices
Inflation, which had decreased last year due to favourable energy prices, is starting to rise again. The IMF attributes this uptick to the ongoing war in the Middle East, which has driven energy prices higher. It is projected that inflation will increase to 3.5 per cent this year, before settling at 1.5 per cent by 2027.
Tourism Trends
Tourism in Cyprus, a vital sector for the economy, is showing signs of softening. This decline is concerning, as tourism significantly contributes to the country’s income and employment. Despite these challenges, fiscal performance has remained strong, with surpluses and a reduction in public debt below 60 per cent of GDP.
Resilience Amidst Challenges
Despite the current challenges, the IMF commended Cyprus for its robust economic performance. The country has rebounded remarkably since the banking crisis of 2013, with per capita GDP returning to pre-crisis levels relative to the EU average. Strong domestic demand and impressive services exports, particularly in the ICT and tourism sectors, continue to support the economy.
Looking Ahead
The IMF has also emphasised the importance of maintaining disciplined public spending and taxation. It suggests that measures to support households should be temporary and well-targeted. Recent reforms, including a comprehensive tax overhaul and plans to enhance financial assets within the social security fund, have been welcomed as steps in the right direction.
As Cyprus navigates these economic challenges, the focus will remain on ensuring stability and growth while adapting to the changing global landscape.
