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Cyprus Economy Update - March and April 2018

Cyprus Economy Update -March and April 2018

This alert covers updates regarding Cyprus’ economy, the increase in tourist arrivals and revenue, the construction and housing industry, the GDP growth rate, the trade deficit, the productivity, the unemployment, the inflation, the vehicle registrations and the price index of construction materials.


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On the basis of the results of the Passengers Survey, arrivals of tourists reached 192.090 in March 2018 compared to 140.873 in March 2017, recording an increase of 36,4%. March 2018 had the highest volume of tourist arrivals ever recorded in Cyprus during the specific month.

For the period of January – March 2018 arrivals of tourists totaled 369.438 compared to 285.693 in the corresponding period of 2017, recording an increase of 29,3% and outnumbering the total arrivals ever recorded in Cyprus during the first three months of the year.


On the basis of the results of the Passenger Survey, revenue from tourism reached €38,4 mn in January 2018 compared to €35,4 mn in the corresponding 

Cyprus upgraded by Fitch

Fitch Ratings has upgraded Cyprus`s Long-Term Foreign-Currency Issuer Default Rating (IDR) to `BB+` from BB` with a positive outlook. The rating is just one step before the investment scale.

Fitch said that future developments that may individually or collectively lead to an upgrade, include the reduction in banking sector NPEs, which materially reduces the sovereign`s contingent liabilities and tracks record of declining GGGD/GDP ratio and continued deleveraging of the private sector. 

It notes that it does not currently anticipate developments with a high likelihood of leading to a downgrade. However, it says that future developments that may individually or collectively lead to negative rating action include failure to improve asset quality in the banking sector and deterioration of budget balances or further materialisation of contingent liabilities that results in the stalling of the decline in the government debt-to-GDP ratio.

In its key assumptions, it notes that gross government debt-reducing operations such as future privatisations are not considered in Fitch`s baseline scenario. The projections also do not include the impact of potential future gas reserves off the southern shores of Cyprus, the benefits from which are several years into the future.

It says that Cyprus`s external financing flexibility has improved substantially since the country exited the macroeconomic adjustment programme in March 2016 (Source:

GDP Growth rate

Τhe GDP growth rate in real terms during the fourth quarter of 2017 is positive and estimated at +3.9% over the corresponding quarter of 2016. Based on seasonally and working day adjusted data, GDP growth rate in real terms is estimated at +3.9%. The increase of the GDP growth rate is mainly attributed to the sectors: "Hotels and Restaurants", "Retail anand Wholesale Trade", "Construction", and "Manufacturing" (Source: CYSTAT).

Construction Market and House Prices

Construction in Cyprus increased by 6.3% in the last quarter of 2017 compared to the third quarter and by 12.0% compared to the last quarter of 2016, according to first estimates from Eurostat.

House prices, as measured by the House Price Index, rose by 4.2% in the euro area and by 4.5% in the EU in the fourth quarter of 2017 compared with the same quarter of the previous year. Compared with the third quarter of 2017, house prices rose by 0.9% in the euro area and by 0.7% in the EU in the fourth quarter of 2017.

According to Eurostat, house prices in Cyprus increased by 2.7% compared to the third quarter and by 2.5% compared to the fourth quarter of 2016. (Source:

Preliminary Fiscal Results Of General Government

The Statistical Service hereby announces the preliminary fiscal results for 2017, which have been audited and verified within the Excessive Deficit Procedure framework of the European Commission. The results for 2017 indicate a fiscal surplus of €343,5 mn, which corresponds to 1,8% of GDP and a fiscal debt of €18.724,8 mn, which corresponds to 97,5% of GDP (Source: CYSTAT).

Trade deficit shows annual decrease in January

The trade deficit declined to €412,9 mn in January 2018 compared to €453,0 mn in the corresponding period of 2017, the Statistical Service of Cyprus reported on Monday. Total imports in January 2018 were down to €616,4 mn compared to €633,6 mn in January 2017, while total exports increased to €203,6mn compared to €180,6 mn in the same month last year.

Total exports of domestically produced goods, excluding stores and provisions, in January 2018 grew to €114,7 mn compared to €98,3 mn in January 2017. Total domestic exports of industrial products in the first month of the year stood at €106,0 mn compared to €89,6 mn in the corresponding month of 2017. Total domestic exports of agricultural products in January 2018 increased to €7,8 mn compared to €6,9 mn in January 2017 (Source:


Productivity in Cyprus rose in 2017, according to preliminary data published by the Cyprus Productivity Centre (CPC). According to the CPC, productivity measured as GDP per employee rose by 0,5% in 2017 compared with 2016, while productivity measured as GDP per working hour increased by 0.6% compared with 2016.

The rise in labour productivity is mainly due to the GDP increase by 3.9%, employment increase by 3.4% and the numbers of employees by 3,4% and working hours by 3.3%, the CPC said. For the period of 2015-2017 labour productivity in Cyprus rose by 0.4% measured as GDP per employee and by 0.5% measured as GDP per working hour.

The secondary sector in Cyprus marked the highest increase with 7.0%, due to a 12.9% rise in Gross Value Added per working hour and an increase of 5.5% in total working hours.

The primary sector, where Gross Value Added increased but working hours remained the same, registered an increase of 2.5% compared with 2016. In construction, productivity spiked by 14.9% due to GVA which rose by 25% and employment by 8.8%, the CPC added.

The sectors of hotels and restaurants, manufacturing industries and wholesale and retail trade also increased with GVA per working hour increase of 5.7%, 3.7% and 2.6% respectively, owing to increase in GVA and an increase in employment to a smaller extend.

According to the CPC, productivity in the financial and insurance services sector marked a negative change, due to a reduced GVA in the sector, combined with an increase in employment. Productivity in transport and storage also declined compared with 2016.

In 2017 labour productivity for the whole of the Cypriot economy is calculated in constant prices at €48,847 per employee and at €27,38 per working hour, the CPC noted. (Source: 


The unemployed persons registered at the District Labour Offices on the last day of March 2018 reached 30.616 persons. Based on the seasonally adjusted data that show the trend of unemployment, the number of registered unemployed for March 2018 decreased to 27.816 persons in comparison to 28.530 in the previous month (Source: CYSTAT).


The Harmonized Price Index for March 2018 decreased by 0,4% when compared to March 2017, while compared to February of 2018 increased by 0,9%. For the period January-March 2018 the HICP recorded a decrease of -0,8% compared to the corresponding period of the previous year (Source: CYSTAT).

Vehicle Registrations

Vehicle registrations were significantly up by 25.8% in the first quarter of 2018, data released by the Cyprus Statistical Service. According to the data, the total registrations of motor vehicles increased by 25.8% to 13,002 in January-March 2018, up from 10,334 vehicles in the same period of 2017 (Source:

Price index of construction materials

The Price Index of Construction Materials for March 2018 reached 99,96 units (base year 2015=100,00), recording an increase of 0,10% compared to February 2018. For the period January - March 2018, the index recorded an increase of 0,88% compared to the same period of 2017 (Source: CYSTAT).

© 2020 KPMG Limited, a Cyprus limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

KPMG International Cooperative (“KPMG International”) is a Swiss entity.  Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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