The Cyprus Economy
In 2021 the credit rating agencies Fitch and S&P rated the Cyprus Economy as “Investment Grade” and Moody’s upgraded its rating to Ba1 in July 2021, just a notch below. According to the European Commission report of Autumn 2021, the key drivers were the decrease in banking sector risks, the economy’s resistance to the pandemic and strong GDP growth prospects for the medium term. The IMF forecasts a 4,8% increase in GDP during 2021 reaching almost pre-crisis levels
According to PWC’s Feb 2022 report, despite the fallout from the pandemic and the suspension of the Citizenship Investment Program in November 2020, the Real Estate & Construction sector remained one of the fastest growing sectors, with GVA output up by 4% in the 12 months to 30 September 2021. Strong signs of recovery were observed, with transaction activity volume and value seeing double-digit growth.
COVID-19 took a heavy toll on Cyprus’ economy during 2020, with real GDP contracting by -5,1%. The IMF’s forecast for GDP increase is mainly driven by domestic demand (aided by Government measures adopted to mitigate the impact of the crisis), as well as a relatively decent performance of the tourism sector prompted by the improved epidemiological situation on the island.
According to IMF, unemployment rate is expected to marginally recover to 7,5% (Euro Area average: 8%) reflecting the economic recovery, particularly in the tourism sector (2020: 7,6%, 2019: 7,1%).
During 2021, a significant increase in new mortgage loan facilities was recorded mainly fuelled by Government interest subsidies and the anticipated recovery of economic activity. New mortgage loan facilities reached €1,3bn, exceeding pre-pandemic level of €972m in 2019.
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