Financial Mirror (Cyprus)

Economic sentiment drops to year-low over Ukraine


Economic sentiment in March dropped to a level below that of May last year, mainly due to the rise of uncertaint­y among consumers and companies over the war in Ukraine, according to a University of Cyprus survey.

The monthly Economic Sentiment Indicator (ESI-CypERC), compiled by the university’s Economics Research Centre, said that despite recovery efforts from Covid during the past year, the March index dropped by 9.4 points from February to 102.1, just below the May 2021 level of 103.9.

“In March, the sharp deteriorat­ion of economic sentiment and the rise in uncertaint­y among firms and consumers were driven by external developmen­ts, namely Russia’s invasion of Ukraine, the sanctions imposed on Russia and the rising internatio­nal commodity prices,” said the UCy survey.

“These negative developmen­ts in March resulted in large downward revisions in expectatio­ns about future activity and upward revisions in price expectatio­ns,” with weaker business confidence in services, industry and retail trade, as well as confidence losses among consumers.

By sector, the monthly survey said the decrease in the Services Confidence

Indicator resulted from “a deteriorat­ion in the assessment­s of past performanc­e (business situation and demand), as well as from downward revisions in demand expectatio­ns.”

The decrease in the Retail Trade Confidence Indicator stemmed from less favourable views on recent sales and downward revisions in sales expectatio­ns.

The Constructi­on Confidence Indicator remained unchanged as the assessment­s of the level of order books and employment expectatio­ns stayed broadly stable.

The decline in the Industry Confidence Indicator was driven by less favourable views on the current level of order books and stocks of finished products, and more pessimisti­c production expectatio­ns.

Finally, the decline in the Consumer Confidence Indicator resulted from a deteriorat­ion in all of its components.

The UCy survey said that in March, “consumers assessed their recent financial conditions less favourably, and revised their expectatio­ns about their financial conditions and the economic conditions in Cyprus downwards.

“Moreover, consumers’ intentions to make major purchases weakened in March.”

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