The Economics Research Centre (ERC) of the University of Cyprus has revised its GDP growth forecast for 2024 upward by 0.2 percentage points, now projecting a 3.7% expansion, compared to its October 2023 estimate.

This adjustment is attributed to the higher-than-expected 3.8% GDP growth in Q3 2024 and further improvements in domestic economic activity and the labor market.

Despite the upward revision for 2024, the ERC maintains its GDP growth forecasts for 2025 and 2026 at 3.3% and 3.0%, respectively.

According to its January report, the ERC estimates that real GDP growth accelerated from 2.6% in 2023 to 3.7% in 2024.

“The economic outlook is supported by the recent growth momentum, a significant reduction in inflation, favorable labor market conditions, and monetary easing in the eurozone,” the report highlights.

Compared to its October edition, the ERC notes that its 2024 projection has been revised upward due to:

• Stronger-than-expected Q3 GDP growth

• Continued improvements in domestic economic activity and the labor market

The ERC also projects lower inflation, expecting it to remain stable in the coming years.

• Inflation in 2024: 1.8%

• Inflation in 2025: 1.7% (0.4 percentage points lower than October’s forecast)

• Inflation in 2026: 1.6%

The revised inflation estimate for 2025 reflects a slower-than-expected price increase in late 2024.

According to the ERC, inflation trends are shaped by:

• Declining global oil prices

• Slowing inflationary pressures

• Relatively high borrowing costs in Cyprus

• Weaker business expectations for price increases, especially in the services sector

The report also warns of risks to economic growth and inflation, citing global trade policy uncertainties and persistent geopolitical risks that could lead to lower-than-expected growth or higher-than-anticipated inflation.