Cyprus: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Cyprus

IMF Staff Country Reports, May 28, 2024

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Canonical URL: Cyprus: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Cyprus

Cyprus recovered swiftly from the pandemic and has proven resilient to multiple adverse shocks.
Growth moderated in 2023 with:
- slowing consumption growth,
- lower services exports to Russia,
- fading post-pandemic base effects.
Despite moderation, growth has remained above the euro area average, supported by:
- a continued recovery in tourism,
- expanding financial services and information and communication technology activity,
- strong investments.
Growth is expected to stabilize in 2024 and rise to 3 percent in the medium term.

Labor markets are tight, with unemployment at a near two-decade low.
Headline inflation dipped below 2 percent, but core inflation has been more persistent.

Driven by robust revenue growth, the primary surplus increased further in 2023.
The increase in the primary surplus contributed to a large decline in public debt.
The authorities’ planned neutral fiscal stance in 2024 is appropriate.
Recommendation: Further primary surpluses should be maintained until debt falls comfortably below 60 percent of gross domestic product.

Further judicial and labor market reforms are necessary to:
- streamline the business environment,
- reduce skill mismatches.
These reforms will support the ongoing diversification of Cyprus’ growth model.

Source: Cyprus: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Cyprus, May 28, 2024.