Cyprus's current account deficit deteriorated in the third quarter of 2023, reaching €517 million, compared to a deficit of €399 million in the same period last year.

However, according to preliminary data released today by the Central Bank of Cyprus, after adjusting for the impact of Special Purpose Entities (SPEs) - classifying SPEs as non-residents - the deficit was €408.9 million in Q3 2023, compared to a deficit of €548.8 million in Q3 2022.

The current account deficit of Cyprus reflects the surplus of the value of imports of goods and services, returns on investments from non-residents in Cyprus, and current transfers from residents to the rest of the world, against the value of exports of goods and services, returns on investments of residents abroad, and current transfers from the rest of the world to Cyprus.

Meanwhile, the International Investment Position (IIP) in Q3 2023 improved, showing a net liability position of €28,267.5 million, compared to €28,658.3 million in Q2 2023.

As reported by the Central Bank of Cyprus, after adjusting for the impact of SPEs, the IIP recorded a net liability position of €10,130.7 million in Q3 2023, compared to €10,710.7 million in Q2 2023.

Additionally, the gross external debt decreased to €162,317.2 million in Q3 2023, from €169,614.3 million in Q2 2023. Conversely, external assets in debt instruments increased to €152,975.5 million from €146,830.5 million in Q2 2023. Consequently, the net external debt decreased by €13,441.7 million to €9,342.13 million in Q3 2023.

Adjusted for the impact of SPEs, the gross external debt was €58,261.2 million in Q3 2023, compared to €58,513.4 million in Q2 2023, while the corresponding index for net external debt decreased to -€14,534.8 million in Q3 2023, from -€12,822.1 million in Q2 2023.

Changing gears, in October 2023, the Business Turnover Index in the Industrial sector of Cyprus recorded a significant increase of 9.1% compared to October 2022, according to data from the Cyprus Statistical Service.

The Statistical Service announced that for the period from January to October 2023, the index saw a rise of 6.7% compared to the same period in the previous year.

The manufacturing sector played a pivotal role in driving this overall increase. In October 2023, the Index reached 193.7 points, marking a 13.7% rise compared to the same period last year.

There was also an upward trend in other sectors, with the mining and quarrying sectors experiencing a 23.1% increase and the water supply and material recovery sectors seeing a 13.4% rise.

However, a decrease was observed in the electricity supply sector, which fell by 9.6%.

Tourism revenue in Cyprus saw an 8.3% increase in October 2023 compared to October 2022, reaching €346.5 million, up from €319.8 million in the same month of the previous year, according to the Statistical Service.

Based on the Travel Survey results, for the period January to October 2023, tourism revenue is estimated at €2.802,6 million compared to €2.285,2 million in the same period in 2022, marking a 22.6% increase.

Furthermore, the Statistical Service reports that the average per capita expenditure of tourists in October 2023 was €812.95, compared to €798.20 in October 2022, showing a 1.8% increase.

British tourists, constituting the largest tourist market at 36.2% of the total in October 2023, spent an average of €91.61 per day. German tourists, the second-largest market for the month, accounting for 7.1% of the total, spent an average of €106.70 per day.

Tourists from Poland, the third-largest market with 6.7%, spent €86.50 per day.

In November 2023, Cyprus banks issued net new loans totaling €258 million. For the period from January to November, the total new loans approached €3 billion, marking a slight increase despite consecutive interest rate hikes.

According to data published by the Central Bank of Cyprus, net new loans in November amounted to €257.8 million, slightly down by 0.2% compared to €258.3 million in the same month of the previous year.

The largest category, business loans over €1 million, accounted for €99.7 million, showing a 12.4% decrease year-on-year.

Housing loans saw a 5.9% increase, totaling €87.8 million in November, compared to €82.9 million in November 2022.

Business loans up to €1 million experienced a 2.97% annual decrease, totaling €42.4 million, compared to €43.9 million in November 2022.

New consumer loans surged nearly 72%, reaching €21.3 million compared to €12.4 million in the same month last year. The category of 'other loans' saw a 22% annual increase, totaling €6.6 million compared to €5.4 million in November 2022.

Based on the Central Bank's data, the total net new loans granted from January to November were €2.98 billion, a 4.94% increase compared to €2.84 billion in the same period last year. This rise was primarily driven by large business loans.

Business loans above €1 million held the largest share, almost 43%, totaling €1.28 billion in the eleven months of 2023, compared to €1.07 billion in the same period last year.

Housing loans constituted 31% of the total, decreasing to €0.93 billion compared to €1.08 billion in the same period of 2022.

Small business loans up to €1 million showed a slight decrease, amounting to €468 million in 2023, compared to €470 million in the previous year, representing 15.7% of the total loans.

Consumer loans increased, totaling €215 million from January to November, compared to €142 million, accounting for 7.2% of the total.

Overall, 'other loans' amounted to €97 million in the same period, compared to €72 million last year, representing 3.2% of the total new loans.

In November, Cyprus's banking system reported the lowest acceptance interest rate for corporate deposits and the third lowest for household deposits in the eurozone, despite increases compared to the previous month.

Data from the Central Bank of Cyprus indicates a slight increase in the interest rate for term deposits of up to one year from households to 2.01%, up from 1.58% the previous month. According to the ECB data, this rate is the third lowest in the eurozone, trailing only Greece and Slovenia, with the European average at 3.43%.

A similar increase of three basis points was observed in the interest rate for deposits from non-financial corporations, rising to 2.29% in November from 2.26% in the previous month. This rate is the lowest across all banking systems in the eurozone, with the European average at 3.70%, per ECB data.

The Central Bank of Cyprus also reports that the interest rate for consumer loans (new lending) decreased marginally in November to 6.26%, compared to 6.27% in the previous month. The interest rate for housing purchase loans increased by 13 basis points to 5.04%, up from 4.91% in the previous month.

For business loans, the interest rate for new loans to non-financial corporations for amounts up to €1 million rose to 6.00% in November, compared to 5.77% the previous month.

A significant decrease was observed in November in the interest rate for new loans to non-financial corporations for amounts over €1 million, which fell to 5.59%, compared to 6.26% in the previous month.

The cost of living allowance (COLA) in Cyprus is set to increase by 2.4% for the entire year of 2024, following the publication of final data on inflation for 2023.

According to a circular by the Director-General of the Ministry of Finance, Giorgos Pantelis, the Consumer Price Index's arithmetic mean for 2023, excluding the impact of consumption tax increases, stood at 113.38 points, compared to 107.45 points in the previous year, registering an annual increase of 3.66%.

It is noted that the salaries of officials and employees, as well as state service pensions, are adjusted by paying 66.7% of the increase in the underlying index for the calculation of the COLA from the preceding year, provided there is a positive growth rate in the second and third quarters of the preceding year. The rate for this period was 2.2%.

Therefore, the cost of living allowance from January 1, 2024, for a twelve-month period will increase by 2.44%, from 344.5% on the basic salaries, with a minimum allowance limit of €13,368.

It is mentioned that this allowance will be taken into account for calculating the remuneration of officials, employees, and wage earners whose COLA has not been incorporated into their salary.

Furthermore, the circular notes that the salaries of officials and employees of the state service, in which a percentage of the COLA of 27.99% (down from 28.35% effective in the first half of January – June 2018) has been incorporated under the provisions of Law No. 56 (I) of 2018, along with general wage increases of 6.656%, will see the COLA increase from 8.52% to 11.17% on the new basic salaries as of January 1, 2024, for a twelve-month period, with a minimum such allowance of €1,721.