The Economics Research Center of the University of Cyprus (CyERC) has revised its forecast for the growth rate of the Cypriot economy in 2024, raising it to 2.6% from 2.4%, and for 2025, to 3.3% from 3.2%, citing the resilience of domestic activity and the labor market. Additionally, the inflation forecast for the current year has been revised downward to 2.0% from the previously estimated 2.1%.

"Economic activity in Cyprus is expected to continue increasing during 2024–2025, maintaining its resilience," stated CyERC in its April issue.

The CyERC predicts that the growth rate of real GDP will reach 2.6% in 2024 and strengthen to 3.3% in 2025.

Compared to the January issue, the growth forecasts have been revised upward by 0.2 percentage points for 2024 and by 0.1 percentage points for 2025. "Despite relatively high interest rates and a significant slowdown in the economies of Cyprus' trading partners, domestic activity and the labor market have remained resilient, driving growth in the coming quarters," CyERC notes.

It also mentions that domestic activity in the last two quarters has benefited from reduced inflation, tight labor market conditions, increased wages, and the country's strong fiscal position.

Regarding inflation (based on the Consumer Price Index), CyERC expects it to remain on a downward trajectory in 2024 and 2025.

The inflation forecast is set at 2.0% for 2024 and 1.9% for 2025.

Compared to the January issue, inflation projections have been revised downward by 0.1 percentage points for each year, primarily due to further slowing of domestic inflation in the first quarter of this year.

CyERC warns that possible deviations in GDP growth and inflation rates from these forecasts could arise due to increased geopolitical tensions, particularly from any escalation of conflict in the Middle East, the economic performance of Cyprus' trading partners, and the future path of interest rates.