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Next Previous Less growth, higher inflation brought by war HOME • INSIDER • CYPRUS • Less growth, higher inflation brought by war 
& nbsp & nbspΘεανώ Θειοπούλου & nbsp; & nbsp;
The problems and uncertainty caused by the pan-European Russian invasion of Ukraine, culminating in the energy crisis and the sanctions imposed on Russia and Belarus, are reflected in the forecasts of the Cyprus Stability Program 2022-2025, which was sent to the Commission and published yesterday. Revised growth (down) and inflation (up) data.
The new estimates of the Ministry of Finance, which were prepared in the midst of the uncertainty caused by the war and the energy crisis, predict:
● Growth for 2022 has been revised downwards, compared to the projected rate 4 % for 2022, due to the Russian invasion of Ukraine with relative uncertainty as to its duration and economic implications. Real GDP growth is now projected at 2.7% in 2022, 3.8% in 2023, 3.4% in 2024 and 3% in 2025. All this provided there is no further deterioration.
. Inflation, as measured by the consumer price index, is estimated to increase significantly in 2022, due to the high price of oil, energy and gas. The index will increase to 4.5% (average for the whole of 2022) and then is projected to slow to 1.5% in 2023 and then fluctuate around 2% in 2024-2025. However, already in the first months of 2022 the average was over 4.5%.
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Continue to support vulnerable groups due to inflation Precision shock in households – Decade record How consistently high inflation will change our lives Growth for 2022 has been revised downwards, compared to the projected rate of 4% for 2022, due to the Russian invasion of Ukraine with relative uncertainty as to its duration and economic impact. Real GDP growth is now projected at 2.7% in 2022, 3.8% in 2023, 3.4% in 2024 and 3% in 2025. All this provided there is no further deterioration. In 2022, the fiscal balance is expected to improve further, given the withdrawal of the majority of pandemic-related measures, which negatively affected general government accounts by 3.1 percentage points of GDP. The fiscal balance is projected to become positive in 2022, reaching 1.6% of GDP. The Ministry of Finance, taking into account the key macroeconomic scenario and after three consecutive years of budget deficits, expects that the fiscal position will improve further from 2022 onwards, reaching a surplus of about 1.3% of GDP by the end of the program period ( 2025), allowing the public debt to GDP ratio to continue its downward trend in the period 2022-2025 at a satisfactory pace. During the programming period 2023-2025, the debt-to-GDP ratio is projected to continue its downward trend, falling to approximately 88.2%, 81% and 76.7% by the end of 2023, 2024 and 2025 respectively .
Impact of war
The Ministry of Finance notes that Cyprus starts from a strong position in 2022 and growth will be supported by domestic demand, private and public consumption and strengthened by the implementation of a significant number of projects included in the Recovery and Sustainability Plan.
Explains that the impact of the war on commodity prices (oil, gas and other important materials), along with the impact of economic sanctions, varies between EU Member States. Cyprus mainly imports oil from other countries (such as Greece, Italy). , The Netherlands) and not & nbsp; Russia. Therefore, the Ministry of Finance notes, Cyprus is not directly dependent on Russian gas. However, it is indirectly affected by the rise in oil prices. The real economy of Cyprus may be affected by the invasion through the following channels:
Export of services, including tourism and other services (transport, financial and other business services), in which Russia has a significant share. Oil imports due to high international oil prices (Cyprus is heavily dependent on oil). Inflation in all commodities, including commodities, affecting consumption Supply chain disruptions and delays in shipments of raw materials and intermediates. Possible increase in interest rates and therefore borrowing costs (affecting investment and possible creation of new NPLs). Indirect impact through other EU countries (purchasing power of EU citizens, affects tourism from other destinations as well). Consumer and market confidence (Russophobia/anti-Russian sentiment). Of all the possible channels of influence in Cyprus, the Ministry of Finance notes that two are the most important, tourism and inflation.
Russians spend less – It is possible to cover the loss
The Ministry of Finance states that Russia has a significant share in total arrivals, especially in recent years. From 2010 onwards, the arrivals of Russian tourists increased in the years 2015-2019 and the share of arrivals in total amounted to 21.3% and that of Ukrainian tourists to 1.9%. For 2022, about 1.6 million passengers were expected (to and from Cyprus) from Russia and Ukraine (1.3 and 0.3 million respectively), which translates to 800,000 arrivals. Despite the fact that Russia is the second largest market for arrivals, Russian citizens do not come individually but mainly from organized tour operators and their per capita cost is not as high compared to visitors from EU countries. Note the average daily cost (a total of 69.8 euros and for packages 76.6 euros in 2019) is below the daily average (a total of 75 euros and for packages around 92 euros in 2019). Countries such as Switzerland and Israel, for example, have per day per capita expenditures close to 110 euros. This is the main reason why the real impact of lost Russian tourists on GDP is becoming smaller, as shown in terms of revenue. Of the 800,000 arrivals lost, some 200,000 – 300,000 of them can be replaced by other countries (Belgium, Switzerland, Scandinavia, etc.), according to the efforts made by the Ministry of Tourism.
