Economic activity in Cyprus is expected to recover in 2021 with real GDP growth projected at 4.2%, according to the economic outlook published by the Economics Research Centre of the University of Cyprus.
The Centre also notes that real GDP growth in Cyprus is projected at -6.5% in 2020 as a result of the COVID-19 pandemic.
And that the negative growth forecast for 2020 incorporates the disruption in economic activity due to the lockdown in Cyprus in the spring, captured by published data.
Also, the growth forecasts for 2020 and 2021 reflect (through leading indicators) the resumption of economic activity with reopening, and, to a smaller extent, challenges to recovery due to ongoing or new measures and restrictions.
For example, social distancing, movement restrictions, partial lockdowns so as to curb new outbreaks of COVID-19.
The contraction in real activity projected for 2020 is less severe than the forecast in the August issue. The upward revision is driven by the rebound in domestic activity and improvements in external economic conditions in the third quarter of the year as the economies reopened.
Furthermore, the CPI inflation forecast for 2020 has remained unchanged from the previous issue, at -0.7%. In 2021, CPI inflation is forecast at 1.0% as demand is expected to pick up.
The forecasts at this juncture are accompanied by elevated uncertainty as economic outcomes largely depend on the evolution of the pandemic, in particular controlling the new wave of infections in Cyprus and abroad.