GDP growth and inflation at 3% in 2023 Economic Research Centre of UCY projects

GDP growth and inflation will be at 3% in 2023, according to forecasts of the Economic Research Centre of the University of Cyprus, in the July issue. ERC notes that the projection for 2023 remains unchanged, compared to the projection in the May issue.

Real GDP growth in Cyprus is forecast to decelerate from 5.6% in 2022 to 3% in 2023, according to ERC, with the forecast remaining unchanged in relation to the May issue. Growth in 2024 is projected at 2.9%, down by 0.2 percentage points compared to the May issue.

The effects of monetary tightening, high inflation rates registered in previous quarters, and the recent growth slowdown in the euro area are expected to weigh on the growth outlook for Cyprus, ERC notes. On the other hand, recent positive developments in Cyprus (e.g. resilient activity and labour market, strong fiscal performance, declining uncertainty) and in international markets (e.g. further declines in commodity prices, improvements in stock market indices) are expected to support growth, particularly in 2023.

"Nevertheless, the risks to the growth outlook have remained tilted to the downside, as in the May issue," ERC underlines.

Inflation (based on the Consumer Price Index) is forecast to decrease from 8.4% in 2022 to 3% in 2023 and to 2% in 2024, mainly as a result of the recent declines in international commodity prices, the deceleration of domestic inflation, and the tightening of financial conditions.

ERC notes that the inflation forecast for 2023 has remained unchanged compared to that in the May issue, while the inflation forecast for 2024 has been revised downwards by 0.4 percentage points relative to that in the May issue, mostly because of the significant moderation in domestic inflation and the declines in international commodity prices during the second quarter of the year. However, ERC concludes, the risks to the inflation outlook are skewed to the upside.

(Source: CNA)