Despite ongoing global economic challenges, Cyprus continues to demonstrate strong economic growth, according to Central Bank of Cyprus (CBC) Governor Christodoulos Patsalides. Speaking at the Cyprus Shipping Chamber’s (CSC) monthly members’ meeting, Patsalides highlighted the nation’s ability to navigate external pressures while maintaining stability and fiscal discipline.
Credit Rating Boost and Fiscal Performance
Patsalides emphasized that Cyprus’ economic resilience is evident in its recent credit rating upgrades to the “A” category, reinforcing confidence in the country’s financial and economic policies. These upgrades, he noted, reflect the government’s prudent fiscal management, leading to significant reductions in public debt—from 114% of GDP in 2020 to 74% in 2023. Further projections suggest a continued decline, with public debt expected to drop below 50% of GDP by 2028.
Economic Growth and Key Sectors
The Cypriot economy is forecast to expand by 3.7% in 2024, far outpacing the projected Eurozone growth rate of 0.7%. Patsalides attributed this positive outlook to key sectors such as technology, trade, tourism, financial and professional services, shipping, and construction. Between 2025 and 2027, GDP is expected to grow at an annual rate of approximately 3%, primarily driven by increased domestic demand and private sector investments.
Moreover, the country’s economic transformation is being fueled by large-scale infrastructure projects focused on digital and green development, many of which are supported by the Recovery and Resilience Plan.
Shipping Industry: A Pillar of Growth
Discussing Cyprus’ shipping sector, Patsalides described it as a crucial pillar of the economy, contributing 17.2% of total service exports in 2023—ranking third after ICT (30.2%) and financial services (20.3%). Despite global challenges, including the COVID-19 pandemic, conflicts in Ukraine and Gaza, and disruptions in the Red Sea, the shipping industry has maintained its strength and adaptability.
Labor Market and Inflation Trends
The unemployment rate in Cyprus dropped to 5% in the first nine months of 2024, down from 5.8% in 2023, and is expected to decline further to 4.6% by 2027—approaching full employment levels. By comparison, the Eurozone unemployment rate is projected to stabilize at 6.1%.
On the inflation front, price pressures have eased significantly, with inflation declining from 4.1% in 2023 to 2.2% in 2024. The CBC projects inflation to stabilize near 2% in the coming years, reaching 1.9% in 2025, 2.1% in 2026, and 2.0% in 2027.
Banking Sector: Strengthening Financial Stability
Patsalides also pointed to substantial progress in Cyprus’ banking sector, with key indicators showcasing a strong and stable financial system:
While progress has been made, Patsalides acknowledged that certain banks are lagging and need to accelerate their efforts to align with sector-wide improvements.
Future Challenges and Opportunities
Looking ahead, Patsalides emphasized that Cyprus must navigate several challenges, including the adoption of AI, cyber risks, geopolitical uncertainties, and the transition to a greener economy. Despite these hurdles, he remains optimistic about Cyprus’ ability to sustain growth, thanks to strategic policymaking, economic adaptability, and a well-capitalized banking system.
“As a key driver of our economy, the shipping industry continues to be a global leader in competitiveness and innovation,” he noted. “With a solid economic foundation, Cyprus is well-prepared to face future challenges and maintain its long-term growth trajectory.”
Source: Stockwatch Cyprus