The Central Bank of Cyprus revised its projections for growth in 2023 and 2024 on Monday, estimating that GDP growth will amount to 2.4% and 2.7% respectively, compared with 2.6% and 2.8% in its June projections.

In its September macroeconomic projections, the CBC said the downward revisions are attributed “to the impact of the western sanctions against the Russian Federation due to the continued war in Ukraine, on the professional services sector combined with the negative impact of the fragile external environment on the non-tourism services.”

The CBC kept it projection for a 3.1% in 2025 unchanged, recalling that in the first half of this year, Cyprus annual growth rate of 2.7% remained higher than the Euro area average of 0.9%.

In its new projections, the CBC said that economic growth is based mainly on local demand, while large investments underway as well projects on digitalisation and green growth financed by the Recovery and Resilience Facility are also expected to have a significant contribution to GDP growth.

Private consumption, albeit at a slower pace, is expected to continue to be a main driver of economic growth in the coming years, the CBC said.

Furthermore, the CBC revised upwards its projections for harmonised consumer price index, which is estimated to reach 3.9% and 2.7% in 2023 and 2024 respectively, up by 0.6% and 0.4% compared with the June projections, “due to projected higher prices in energy and food.”

Projections for core inflation, inflation excluding energy and food, remained unchanged to 3.7%, 2.5% and 2.4% in 2023, 2024 and 2025 respectively.

Moreover, the CBC reported improved projections for unemployment, projecting unemployment rate of 6.3% and 5.9% in 2023 and 2024, lowering its previous projections by 0.4% and 0.2% respectively. For 2025 the projection remained unchanged to 5.6%.

As the CBC noted, the improved projection for unemployment in the period of 2023 and 2024, despite the lower economic GDP growth, reflects the greater than expected fall in the unemployment rate registered in the second quarter of this year, despite the effects of sanctions on the services sector.

The CBC underlined the continued resilience shown by the Cyprus labour market, despite the war in Ukraine, as manifested by the fall of unemployment to 5.9% in the second quarter from 6.8% in the first quarter of the year.