Cyprus GDP slowing, but leaving EU behind

The Cypriot economy maintained strong momentum in the first quarter of 2023, with real GDP registering an annual growth rate of 3.4%, the second highest in the EU.

There are signs of slowing down on the backdrop of the uncertain external environment and the restrictive monetary policy by the European Central Bank in a bid to place inflation under control.

According to a flash estimate released by the Statistical Service (Cystat), GDP growth in real terms during Q1 2023 is positive and estimated at 3.4% compared with last year.

GDP growth is also estimated at 3.4% on a seasonally adjusted basis. Compared with the previous quarter, Cypriot GDP expanded by 0.8% (seasonally adjusted).

The positive GDP growth rate is mainly attributed to the sectors Hotels and Restaurants, Transport and Storage, Information and Communication, Wholesale and Retail Trade, Arts, Entertainment and Recreation, and Financial Activities.

According to Eurostat, Cyprus in Q1 marked the second highest annual GDP growth rate behind Spain (3.8%).

Amid the continuing war in Ukraine, high inflation and consecutive rate hikes by the ECB, the Finance Ministry estimates that GDP growth this year will decelerate to 2.8% from 5.6% in 2022.

In its summer forecast, the European Commission said Cyprus’ GDP is estimated to grow by 2.3% this year.

In Q1 2023, seasonally adjusted GDP increased by 0.1% in the euro area and by 0.3% in the EU, compared with the previous quarter, according to a preliminary flash estimate by Eurostat.

In Q4 2022, GDP had remained stable in the euro area and had decreased by 0.1% in the EU.