Economic Overview
For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.
Cyprus is an open free-market economy mainly based on services. After being severely hit by the global financial crisis and the exposure of the national banking system, the country's economy recovered in recent years, thanks to domestic demand and tourism, until the abrupt halt caused by the COVID-19 pandemic. Nevertheless, Cyprus’ GDP returned to its pre-pandemic level already in 2021, with continued growth in 2022 when robust private consumption, the revival of the tourism sector and increased services exports contributed to a 3.5% growth (data IMF; 5.8% according to the EU Commission estimates). A 50% wage indexation was implemented in January 2023 and is expected to support private consumption over the course of the year, with the IMF forecasting growth at 2.5% on the back of a full recovery of the tourism sector (although rising interest rates are set to negatively affect corporate investments and residential construction). The growth rate should remain relatively stable in 2024, at 2.6%.
Concerning public finances, Cyprus’ recorded a general government budget surplus of EUR 587 million (2.2% of GD) during the first nine months of 2022, compared to a deficit of EUR 453.3 million in the corresponding period one year earlier, thanks to a EUR 1.15 billion in revenues (+16.2% - data Statistics Cyprus). The 2023 budget provides for general government expenditures of EUR 11.29 billion and revenues of EUR 11.76 billion, projecting a surplus at around 1.7% of GDP (although the IMF projections are more conservative, at 0.7%). The public debt-to-GDP ratio – at 93.6% in 2022 – has been helped by the continued economic expansion and is expected to follow a downward trend over the forecast horizon, decreasing to 80.2% by 2024. Inflation reached 8% in 2022 fuelled by high energy prices and supply bottlenecks. As falling gas and oil prices ease energy inflation and supply disruptions attenuate further, the IMF sees the inflation rate returning closer to the target, at 3.8% this year and 2.1% in 2024, although wage indexation may exert some upward pressure on core inflation.
The unemployment rate stood at 6.1% in 2022 (from 7.5% one year earlier), and is expected to gradually decrease in 2023 and 2024 on the back of the economic expansion and the implementation of the EU’s RRP (to 6.5% and 6.3%, respectively – IMF). In recent years, a strong focus on the service and skilled industry, along with industrial and agricultural growth, has allowed the country to improve its already high standard of living; however, 17.3% of the population is at risk of poverty or social exclusion (below the EU average of 21.7% - Eurostat). Overall, the IMF estimated Cyprus’ GDP per capita (PPP) at USD 49,504 in 2022.
| Main Indicators | 2020 | 2021 | 2022 (E) | 2023 (E) | 2024 (E) |
| GDP (billions USD) | 24.99 | 28.43 | 28.47 | 30.86 | 32.34 |
| GDP (Constant Prices, Annual % Change) | -4.4 | 6.6 | 5.6 | 2.5 | 2.8 |
| GDP per Capita (USD) | 28,140 | 31,726 | 31,466 | 33,807 | 35,104 |
| General Government Balance (in % of GDP) | -3.8 | -1.3 | 1.3 | 1.3 | 1.2 |
| General Government Gross Debt (in % of GDP) | 113.5 | 101.1 | 86.5 | 79.6 | 71.9 |
| Inflation Rate (%) | -1.1 | 2.2 | 8.1 | 3.9 | 2.5 |
| Unemployment Rate (% of the Labour Force) | 7.6 | 7.5 | 6.7 | 6.5 | 6.2 |
| Current Account (billions USD) | -2.51 | -1.94 | -2.51 | -2.42 | -2.34 |
| Current Account (in % of GDP) | -10.1 | -6.8 | -8.8 | -7.8 | -7.2 |
Source: IMF – World Economic Outlook Database , October 2021
Country Risk
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