Clouds are gathering over Cyprus’ economy as sectors such as tourism, consumption and services have started to shrink.
Official forecasts refer to an economic slowdown in the coming years, with the upcoming stricter regulation on shell companies leading to additional concern. Because this will significantly reduce the influx of new business in the services sector.
At the same time, tourism is suffering a blow from prevailing reduced arrivals from the United Kingdom due to uncertainly over Brexit.
The Stability Program 2019-2022 provides for a primary surplus of 5.3%, and government debt to be reduced at 95.8% from 102.5% in 2018. The growth rate is estimated at 3.6%, slightly lower compared to 2018 (3.9%), with unemployment falling to 7% (from 8.4% in 2018).
The Ministry of Finance predicts a slowdown in growth to 3% by 2022 (3.2% in 2020, 3% in 2021). Unemployment is projected to fall at 6% in 2020, 5.5% in 2021 and 5% in 2022.
The budget balance remains positive at +2.6% in 2020, +2.4% in 2021 and +2.2% in 2022, with primary surpluses steady above 4%: 4.6% in 2020, 4.4% in 2021 and 4.1% in 2022. Government debt is set to fall to 95.8% in 2019, 89.1% in 2020, 83% in 2021, and 77.6% in 2022.
However, the latest Economic Outlook of the University of Cyprus Economics Research Centre shows the negative signals accumulating around the island’s economy.
With the exception of the manufacturing and construction sectors, indicators are close to that of last semester which was low. The state of play is particularly negative in consumption, both among consumers and retail trade businesses.
At the same time, the International Monetary Fund has revised downward its forecast for economic growth. It says growth in 2019 will be at 3.5% from 4.2% expected in October and 3.3% in 2020.
The European Commission also forecasts a slowdown. GDP growth, it noted, is expected to reach 3.3% in 2019 and 2.7% in 2020.