Data released by the Statistical Service of Cyprus on Thursday reveals a substantial decrease in the number of unemployed individuals registered at the District Labour Offices. As of the end of July 2023, the number of jobless persons stood at 13,187, marking a reduction of 958 persons or 6.8% compared to the same period in the previous year.

This decrease in unemployment is primarily attributed to significant hiring activities within several sectors. The sectors of trade, accommodation and food service, construction, and administrative and support services reported a significant uptake in employment. Additionally, a decline in new entries into the labour market contributed to the overall drop in unemployment.

Upon assessing the seasonally adjusted data, which provides a clearer understanding of unemployment trends, the number of registered jobless individuals for July 2023 was marginally lower than the previous month. The figure dropped from 13,205 in June to 13,180 in July, continuing the positive trend of decreasing unemployment in Cyprus.

The inflation rate in Cyprus continued to decelerate in July 2023, marking a rise of 1.5%, the slowest increase since March 2021, while the Consumer Prices Index (CPI) for July 2023 climbed 0.92 points to 115.30 compared to 114.38 units in June 2023.

In the period from January to July 2023, the CPI saw an overall increase of 4.2% compared to the corresponding timeframe of the previous year.

A closer look at the data shows significant sector-specific variations. Agricultural goods recorded the largest positive year-on-year change for July 2023, witnessing a rise of 12.9%. Conversely, Petroleum products saw the most considerable negative change, declining by 20.3%. Comparing with the previous month's index, Electricity experienced the largest change with a surge of 13.5%.

A category-wise analysis of percentage changes showed that, compared to July 2022, the Food and Non-Alcoholic Beverages category observed the most significant positive change, with a 9.9% increase. On the other hand, the Transport category witnessed the largest downturn, declining by 9.2%. When compared to the CPI of the preceding month, the Clothing and Footwear category recorded the most significant change, registering a decrease of 10.8%.

Between January and July 2023, when compared to the same period in 2022, the most considerable changes were observed in the categories of Food and Non-Alcoholic Beverages (8.9% increase) and Housing, Water, Electricity, Gas and Other Fuels (7.8% increase).

In terms of the effect on the CPI's overall change, the Food and Non-Alcoholic Beverages category had the largest positive impact compared to July 2022, contributing 2.06 units to the CPI. In contrast, the Transport category demonstrated the most significant negative impact, decreasing the CPI by 1.83 units.

When comparing changes from the previous month, the Transport and Housing, Water, Electricity, Gas and Other Fuels categories both had the most significant positive effects, contributing 0.73 and 0.72 units to the CPI, respectively. The Clothing and Footwear category, on the other hand, had the most significant negative impact, with a reduction of 0.84 units.

Industrial producer prices in Cyprus displayed an upward trend in June 2023, increasing by 0.1% compared to May 2023, according to the latest estimates from Eurostat, the European Union's statistical office. In contrast, the eurozone and the EU recorded a decrease of 0.4% in industrial producer prices during the same period.

When compared to June 2022, Cyprus saw a significant increase in industrial producer prices by 4.7%, in contrast to the eurozone and EU, where these prices dropped by 3.4% and 2.4% respectively.

The previous month, May 2023, had seen a slight increase in producer prices in Cyprus by 0.3%, whereas the eurozone and EU witnessed a decrease of 1.9%.

Diving into sector-specific changes in the eurozone in June 2023, industrial producer prices compared to May 2023 fell by 0.7% for intermediate goods and by 0.5% in the energy sector. Prices for durable and non-durable consumer goods remained stable, while capital goods saw a minor increase of 0.1%. In the industry sector excluding energy, prices decreased by 0.3%.

In the EU, similar trends were noticed, with prices decreasing by 0.8% for intermediate goods, 0.4% in the energy sector, and by 0.1% for both durable and non-durable consumer goods. Like the eurozone, the EU saw a minor 0.1% increase in prices for capital goods, and a 0.4% decrease in the total industry excluding energy.

Country-wise, the largest monthly decreases in industrial producer prices were reported in Hungary (-2.5%), Bulgaria and Latvia (both -2.4%), and Belgium (-2.2%). In contrast, the highest increases were noted in Ireland (+4.0%), Croatia (+1.3%), and Sweden (+1.2%).

Compared to June 2022, the eurozone saw a significant decrease in industrial producer prices in June 2023 by 16.5% in the energy sector and 2.7% for intermediate goods. However, an increase was observed in capital goods (5.2%), durable consumer goods (5.9%), and non-durable consumer goods (8.9%). Prices in total industry excluding energy saw a rise of 2.5%.

Similar trends were observed in the EU, with prices decreasing by 14.0% in the energy sector and 2.7% for intermediate goods, but increasing for capital goods (5.1%), durable consumer goods (5.5%), and non-durable consumer goods (9.0%). The industry sector excluding energy witnessed a price increase of 2.6%.

The most significant annual decreases in industrial producer prices were seen in Ireland (-17.1%), Belgium (-12.4%), and Bulgaria (-11.4%), while the highest increases were recorded in Hungary (+29.5%), Slovakia (+18.2%), and Slovenia (+7.4%).

The 2024 state budget, the inaugural under the administration of Nikos Christodoulides, is scheduled to be presented for approval to the Council of Ministers by mid-September, according to a senior official from the Finance Ministry.

Melina Katsounotou, Director of the Directorate of Budget and Fiscal Control within the Finance Ministry, told the Cyprus News Agency (CNA) that the Ministry had recently evaluated the proposed budgets of other Ministries, Deputy Ministries, and various government Units. She also noted that semi-governmental organizations are currently in the process of submitting their respective budgets.

In line with expectations, the state budget for 2024 is set to be delivered to the Cabinet for approval by mid-September, following which it will be submitted to the Parliament by the end of the month, Katsounotou confirmed.

The 2024-2026 Strategic Fiscal Police Framework (SPSF) establishes the Central Government's public expenditure limit for 2024 at €9.38 billion, not including loan and interest payments. The expenditure ceilings for Ministries, Deputy Ministries, and government Units are defined after considering projections of government revenue, fiscal targets, and policy priorities.

Katsounotou noted that there would be some deviations from the expenditure ceiling, primarily due to the agreement over the escalated Cost-of-Living Adjustment at 66.7% of last year’s inflation and price surges in raw materials for electricity.

As per the baseline macroeconomic scenario outlined in the SPSF, Cyprus's GDP growth is projected to hit 3% in 2024, up from an estimated 2.8% this year. Concurrently, the harmonized inflation rate is anticipated to dip to 2.5% from the current estimate of 3.2%. Unemployment is expected to drop to 5.8%, down from a projected 6.5% this year.

Additionally, the fiscal balance is projected to be 2.3% of GDP in 2024, up from an estimated 2% this year. The primary balance, excluding debt servicing expenditure, is anticipated to record a surplus of 3.7% of GDP, compared to 3.2% this year. Public debt, as a percentage of GDP, is expected to continue its decline, falling to 73% in 2024 from an estimated 81% this year.