GDP expected to rise in 2024-2026, unemployment and inflation to fall

The GDP growth rate for 2023 is expected to reach 2.2%, while for the years 2024-2026 GDP is expected to reach 2.6%, 3.1%, and 3.2%, respectively, according to the Macroeconomic Forecasts of the Central Bank of Cyprus in December 2023 for the Cypriot Economy.

CBC points out that unemployment is expected to continue its downward trend in the years 2024-2026 and that inflationary pressures are expected to further fall in the years 2024, 2025, and 2026.

A press release by the Central Bank of Cyprus says that the GDP growth rate for 2023 is expected to rise to 2.2%, compared to 5.1% growth in 2022. In the years 2024-2026, GDP is expected to be 2.6%, 3.1% and 3.2%, respectively.

The CBC says that the labor market continues to support the Cypriot economy and that unemployment is expected to decrease to 6.4% of the workforce in 2023 compared to 6.8% in 2022.

"Despite the impact from the ongoing war in Ukraine, there was a drop in unemployment in the second quarter of the year to 5.9%, compared to 6.8% in the first quarter of 2023", it adds.

It points out that in the years 2024-2026, it is expected that unemployment will continue its downward trend in line with the expected increase in GDP.

Unemployment is expected to reach 6% in 2024, 5.6% in 2025, and 5.3% in 2026, approaching full employment conditions. 

Inflation (Harmonized Index of Consumer Prices, HICP) is projected to drop significantly to 4% in 2023 from 8.1% in 2022, as a result of the course of oil prices compared to the high level recorded in 2022 coupled with the significant impact of the single monetary policy of the euro area.

It notes that the government relief measures, largely related to food and energy prices, also contributed to the slowdown in the HICP in 2023.

The CBC says that inflationary pressures are expected to further drop in 2024, 2025, and 2026, to 2.4%, 2%, and 1.9% respectively, mainly due to the impact of the single monetary policy.

Core inflation, that is inflation excluding energy and food, is expected to reach 3.9% in 2023 from 5% in 2022. In 2024, 2025, and 2026 it is forecast to further slow to 2.6%, 2.4%, and 2.2% respectively, mainly due to the expected impact of the single monetary policy of the euro area.