Inflation in Cyprus is set to further increase to 2.6% in 2022 before moderating to 1.2% in 2023, according to the autumn forecast by the European Commission.
Cyprus which is among the EU’s group with the lowest inflation rates recorded an increase to 4.6% in the last quarter of 2021 pushing the rate for the whole of the year to 2.3% in 2021 compared to -1.1% in 2020.
The latest forecast, released in Brussels on Thursday, noted that the recent surge of coronavirus infections and the erosion of consumers’ purchasing power due to high inflation is expected to somewhat dampen growth in the first quarter of 2022.
The expansion of the economy is expected to resume in the second quarter, supported by the high vaccination rate for the adult population and the expected containment of Covid-related restrictions.
Furthermore, the prospects for the tourism season are positive, based on the planned international flights data. In 2022, real GDP is forecast to grow by 4.1%.
This will be mainly on the back of domestic demand, in particular investment boosted by the Recovery and Resilience Plan, and a small positive contribution from net exports.
