Real GDP growth in Cyprus is projected at -5.7% in 2020 as a result of the coronavirus pandemic, according to the Economic Outlook issued on Monday by the Economics Research Centre of the University of Cyprus.
The contraction of GDP in 2020 is estimated to be smaller than the forecast in the previous issue due to the stronger-than anticipated rebound in economic activity in Cyprus and abroad following the lockdowns in the spring.
In 2021, the Cypriot economy is expected to recover as real GDP growth is projected at 3.7%.
The growth forecast for 2021 is revised downwards relative to the forecast in the previous issue, due to the resurgence of the pandemic in the last months of 2020 and the renewed containment measures.
The balance of risks to the outlook is tilted to the downside. Downside risks arise from the introduction of stricter measures to curb the spread of the pandemic, especially the new lockdown in January.
Additional risks stem from delays in the vaccine rollout and vaccinations in Cyprus and the EU, as well as from a new wave of infections due to new variants of the virus.
Slower-than-anticipated progress with vaccinations and/or a new surge in infections will cause setbacks to the reopening of economic sectors and slow down the recovery of domestic activity and external demand, particularly demand for tourist services.
Other risks relate to pressures on public finances and a possible re-escalation in NPLs as the pandemic persists.