Filenews 27 March 2024
According to the EU report on the Cypriot economy, the observed economic growth and the reduction in inflation puts the Cypriot economy on a healthy footing, while at the same time the correction of macroeconomic imbalances continues.
Specifically, the European Commission (EU) published on 25 March 2024 its In Depth Review on the Cypriot economy. In-depth reviews (IDRs) are prepared annually as part of the European Semester process for economic policy coordination and aim to identify and assess the severity of Member States' macroeconomic risk imbalances.
Specifically, for Cyprus in 2024, macroeconomic imbalances are identified in the areas of public, private and external debt. The net international investment position remains negative, but has improved and is approaching sustainable levels. The current account deficit in 2023 is expected to widen, mainly on account of a significant increase in energy prices, but the normalisation of energy prices and a recovery in foreign demand will contribute to an improvement in the current account. Both public and private debt have declined significantly and are projected to continue declining in the coming years. Moreover, the stock of non-performing loans in the banking sector has continued to decline, while the possibility of new non-performing loans is remote. Going forward, the country's vulnerabilities are projected to continue to be corrected, supported by economic growth.
The In-depth Review also analyzes the trade ties that Cyprus has and stresses that Cyprus' dependence on European economies and mainly on third country economies, make the Cypriot economy vulnerable to geopolitical developments and create turbulence in its trade relations.
The IDR is based on the EU winter forecast, which is largely in line with the Ministry of Finance's forecasts. Specifically, the EU estimates that the growth rate for 2023 will reach 2.4% and increase close to 3% in 2024 and 2025, while inflation and unemployment are also forecast to decrease. Cyprus' fiscal position is expected to remain in surplus and debt to continue its downward path.
The Ministry of Finance welcomes the results of the In-depth Review, which demonstrate the sound economic policy of the Government and the efforts made to correct macroeconomic imbalances in the Cypriot economy.
The Government's concern remains to implement policies that ensure the further correction of imbalances and the strengthening of the competitiveness of the Cypriot economy, placing particular emphasis on the green and digital transitions. At the same time, as rightly noted in the IDR, the Cyprus Recovery and Resilience Plan includes a number of important reforms that will contribute to further reducing the macroeconomic vulnerabilities faced by the Cypriot economy and broadening its productive base, ensuring macroeconomic stability and sustainability of public finances.
