According to the Cypriot Statistical Office, the annual growth rate of Cyprus' GDP in the second quarter of 2021 exceeded all expectations at 12.9%, which is an excellent result compared to a decrease of 2.1% in the previous three months.
Despite the restrictive measures at the beginning of the year, real GDP increased in the second quarter of 2021. The revival of activity, which began in the second half of 2020, was driven by domestic demand, supported by tax incentives, the export of services other than tourism, and the resumption of activity in the construction sector, experts say.
It should be noted that for the first time in 15 months since 2020, there has been a positive trend.
Cyprus's real GDP is expected to grow by 4% in 2022, given the favorable outlook for domestic and external demand and thanks to a recovery and resilience plan that aims to strengthen private and public investment. Inflation in Cyprus is projected to remain low at 1.3% this year and 2% next.
The revision of previous forecasts in favor of more growth is associated with better-than-expected performance in the first quarter of this year and a significant improvement in economic sentiment in the second quarter of 2021.
The accelerating pace of vaccinations and the improvement in the epidemiological situation in Cyprus, as well as in the rest of the EU, have resulted in a significant relaxation of local quarantine measures and travel restrictions since mid-May, laying the foundation for sustained growth in the coming months. However, the tourism sector is expected to recover gradually as uncertainty persists and international travel, especially from the UK, an important market for Cyprus, has not yet fully resumed. A slight increase in employment in the second quarter of 2021 on an annualized basis will also contribute to the growth of private consumption, analysts are confident.
As for the EU as a whole and the Eurozone, in 2022 the growth rate will be 4.5%. Growth is projected to accelerate due to several factors. First, activity in the second quarter of the year exceeded expectations. Second, effective virus containment strategies and progress in vaccination have led to a decrease in new infections and hospitalizations, which in turn allowed EU states to reopen their economies in the next quarter. This discovery has benefited, in particular, service industries.