Insider / ΚΥΠΕ
The Commission estimates an increase of 4.1% in the real GDP of Cyprus in 2022 and 3.5% in 2023 in its Winter Forecasts for the European economy, which were published on Thursday. With regard to inflation, the Commission expects it to grow further in 2022 to 2.6%, before easing to 1.2% in 2023.
More generally for the EU economy, the Winter Forecasts note that the EU economy expanded significantly by 5.3% in 2021 and is expected to grow by 4.0% in 2022 and 2.8% in 2023. In the euro area, growth is also expected to reach 4.0% in 2022 and to moderate to 2.7% in 2023.
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Following the significant recovery that started in Europe last spring and continued until the beginning of autumn, the growth outlook in the EU is estimated to have slowed to 0.4% in the last quarter of 2021, compared to 2.2% in the previous quarter. .
However, the EU as a whole has reached pre-pandemic GDP levels in the third quarter of 2021, and all Member States are expected to cross this milestone before the end of 2022.
The Commission has also revised upwards its inflation forecasts in relation to the Autumn Forecasts.
Specifically for Cyprus, as mentioned in the relevant chapter of the Winter Forecast, the country's GDP “recorded a significant recovery after the sharp contraction of 2020”, but growth in the third quarter of 2021 was slightly lower than estimates recorded in the autumn forecasts, reaching 1.5% from one quarter to the next.
Regarding the course of real GDP in the first three quarters of 2021, the Commission notes an increase of 5.3% compared to the same period last year.
The main driver of economic growth, according to the data, was “domestic demand, which was supported by fiscal stimulus as well as exports of services, including in the field of tourism.”
In particular, in the period from January to October 2021 “revenues from tourism continued to recover lost ground and reached 53% of 2019 levels for the same period.”
The Commission also notes that despite the large increase in cases in late 2021 and early 2022, the economic climate remained high among consumers and businesses, with real GDP growth expected to increase by 5.3% in 2021 on an annual basis. base.
Growth is expected to slow in the first quarter of 2022 due to the recent wave of infections and the erosion of consumer purchasing power caused by high inflation.
The expansion of the economy is expected to resume in the second quarter of 2022, “with the support of high vaccination coverage in the adult population and the expected reduction of pandemic-related bans” as noted.
The outlook for the tourism sector is also considered positive on the basis of data on scheduled international flights.
The Commission forecasts a 4.1% increase in the real GDP of Cyprus in 2022, an increase that is expected to be based “mainly on domestic demand, and in particular investments supported by the Recovery and Sustainability Plan, and a small contribution from net exports”. In 2023 growth is expected to moderate to 3.5%.
Regarding the increase in inflation due to high energy prices, the Commission notes that inflation (HICP) increased to 4.6% in the last quarter of 2021, increasing full-year inflation to 2.3% in 2021 , compared to -1.1% in 2020. Inflation is expected to rise further to 2.6% in 2022 before holding to 1.2% in 2023, it added.
General forecasts
According to the Commission statement, although the Fall Forecast was expected to slow the EU economy, it was higher than expected due to rising obstacles such as the new pandemic wave, high energy prices and ongoing supply disruptions.
Several countries continue to face difficulties due to growing health system pressures and the effects of the pandemic on the labor market, while energy prices are expected to remain high for longer than forecast in the Autumn Forecasts.
However, the Commission emphasizes that beyond the short-term turmoil, the foundations of ongoing growth remain strong due to improvements in the labor market, household savings, positive financial conditions and the full development of the Recovery and Sustainability Fund.
Presenting the winter forecast, Economy Commissioner Paolo Gentiloni referred to the four main messages regarding the overall European economy.
In particular, he pointed out that the growth outlook has slowed down, while the expansion of GDP is projected to regain its momentum.
The Commission also revised upwards its inflation forecast due to rising energy prices.
Regarding the future risks and prospects, Mr. Gentiloni referred to the risk of inflation rising more than forecasts as well as the risk of continuing disruptions in supply chains.
On the other hand, he added, at the moment there is a possibility to record higher demand from households than expected, but also to boost economic activity due to investments promoted with the help of the Recovery and Sustainability Fund.
To these factors is added the uncertainty about the evolution of the pandemic, as well as the political situation in Eastern Europe.
