Central Bank of Cyprus revises up 2024 GDP forecast to 3.5%

The Central Bank of Cyprus (CBC) has revised GDP growth rate up by 0.5 percentage points for 2024, to 3.5%, compared to its forecasts last June, stressing that there does not seem to be any significant negative impact on investments from the conflict in the Middle East.

Τhe CBC adds that the probability of a deviation from the baseline scenario for GDP forecasts "broadly tends to be balanced for 2024" and "tends to be slightly downward" for 2025-2026.

In its September 2024 forecasts for the main macroeconomic indicators of Cyprus for the years 2024-2026,  published on Wednesday, the Bank significantly revised downwards the unemployment rate for the period 2024-2026, by 0.6 percentage points, each year, expecting unemployment to fall to 5.1% of the labour force in 2024.

Moreover, the CBC revised inflation for 2024 slightly up by 0.1 percentage point to 2.2%, while it revised downwards by 0.1 percentage point the structural inflation, i.e. inflation excluding energy and food, in 2025 and 2026, to 2.0% and 1.9%, respectively.

In relation to inflation, it notes that risks for a deviation from the base scenario of the forecasts are overall assessed as balanced for 2024 and slightly upward for the years 2025 and 2026.

It says that in the September 2024 forecasts for the main macroeconomic indicators of Cyprus for the years 2024-2026,  the GDP growth rate for 2024 is expected to reach 3.5%, compared to 2.5% in 2023, while in the years 2025 and 2026 a rise in GDP is expected by 3.1% and 3.2%, respectively.

Based on the latest available data, it says, "there is no sign of a significant negative impact on investment from the conflict in the Middle East through a reduction in demand, nor from the impact of the current tight monetary policy, with the construction sector being a major driver of the economic growth in the first half of 2024".

It adds that continued support to the GDP is also expected from the expansion of the turnover of companies with foreign interests in the technology and shipping sectors that have grown significantly in recent years.

In relation to the June 2024 forecasts, the CBC notes that there is an upward revision in the GDP growth rate of 0.5 percentage point for 2024, which is mainly due to the upward revision of tourism prospects and the dynamics of exports of financial and professional services.

To a lesser extent, it continues, it is due to the upward revision of domestic demand, due to a more positive than expected course of private consumption.

It notes that the 2024 GDP revision is conservative despite the significantly improved figures of the first semester of 2024, and the latest monthly figures, and reflects the high economic uncertainty due to the fragile external environment.

(Source: CNA)