The Cypriot economy in 2021 recovered the output lost during the 2020 COVID crisis and will continue to grow with an average 3.7% in the years 2022 – 2024, the Central Bank of Cyprus expects, according to its economic bulletin, stressing that risks to the baseline scenario are balanced albeit slightly upside concerning inflation.
The Central Bank said that following the downturn of 5.2% in 2020, the Cypriot economy is projected to bounce back with 5.6% in 2021 followed by a growth rate of 3.6%, 3.7% and 3.8% in 2022, 2023 and 2024 respectively.
The growth drivers will be the recovery of domestic consumption and net exports, the CBC said, forecasting a continued reduction of unemployment which is estimated to decline to 5.6% by 2024.
Furthermore, the CBC projects a significant rise in inflation, estimated to reach 2.2% in 2021 and 2.5% in 2022, mainly due to the sizeable price increases in energy and supply bottlenecks.
According to the CBC, inflation is expected to moderate in the coming years, with the CPI estimated to decline to 1.2% in 2023 and 1.5% in 2024.
On tourism, the CBC said that the industry’s performance in 2021 is better than initially anticipated with tourist arrivals in the first ten months of 2021 amounting to 46% of the pre-COVID levels.
“The challenge for the coming years and especially for 2022 is great amidst the uncertainty associated with the course of the pandemic, although a steady recovery is projected with tourism estimated to return to the pre-COVID levels in 2024,” the CBC said.
Concerning non-performing loans, the CBC said that their outstanding amount remained steady around €5 billion in the first eight months of 2021 following the decline observed in 2020 amidst the COVID pandemic.
However, the CBC pointed out that the NPLs that have been transferred off the banks’ balance sheets continue to weigh on the real economy noting “the reduction of private debt is considered as particularly important.”