EU Commission: Gradual recovery in economic activity for Cyprus in 2021 & 2022

Economic activity in Cyprus contracted sharply in 2020, due to the COVID-19 crisis, albeit less than the EU average. The tourism sector has been severely affected, while the impact on domestic demand and the labour market has been cushioned by temporary income support measures. A gradual recovery in economic activity is forecast for 2021 and 2022, driven mainly by domestic demand. Public finances worsened significantly in 2020 due to the crisis but are set to improve in 2021 and 2022.

A severe economic recession in 2020
Economic activity declined sizeably by 5.1% in 2020 as a result of the COVID-19 crisis and accompanying lockdown measures. The impact on domestic demand has been only partially mitigated by the temporary income support measures as
private consumption fell by 3.9% in 2020 and investment by 2%. Exports of goods and services dropped by 12.4%, the latter reflecting the impact of travel restrictions on tourism.

Gradual recovery in 2021 and 2022
A moderate recovery is forecast in 2021, with real GDP growth expected at 3.1%. Lockdown measures in Cyprus during the first half of 2021, as
well as ongoing restrictive measures in the rest of the EU affecting tourism flows, imply that a durable recovery is expected to take place in the second half of 2021. Domestic demand is expected to be the main driver of the recovery notably private consumption as a result of pent up demand.

Investment in construction is also expected to rebound as large-scale infrastructure projects continue and new lending for housing has picked up since the third quarter of 2020. By contrast, demand for high-end residences is set to slow down, following the abolition of the investor citizenship scheme. The forecast for public investment in 2021 takes into account Cyprus’ Recovery and Resilience Plan (RRP), which will start to have a gradual impact this year.

You can read the full EU Commission Spring Forecast on Cyprus by clicking the link below:
European Economic Forecast. Spring 2021 /CYPRUS