Cyprus economy slows down in fourth quarter amid regional tension

Cyprus’ Composite Leading Economic Index (CLEI), a key economic indicator compiled by the University of Cyprus’ Economic Research Centre (CypERC), remained positive in the fourth quarter of 2023, albeit while experiencing a slowdown during this period.

The centre noted that the ongoing deceleration of the index underscores the challenges posed by a geopolitical environment rife with tension, combined with a broader sense of economic instability, on the growth prospects of the Cypriot economy.

According to a statement from CypERC, the escalating military conflicts in Israel since October have further worsened the already unfavourable international geopolitical conditions, inevitably exerting a negative impact on the CLEI throughout the last quarter of 2023.

In particular, the intensification of geopolitical tensions negatively affected the Economic Climate Index (ECI) in the eurozone, which continued to see a negative annual growth rate in December 2023.

Conversely, the positive annual growth rate of the CLEI in December can be attributed to both the decline in the international oil price and the expansion of various domestic sectors, including real estate, tourism, retail trade, and electricity production.

What is more, in December 2023, Cyprus’ CLEI recorded a 1.5 per cent annual increase, following annual increases of 1.8 per cent and 1.9 per cent in November and October 2023, respectively, according to the most recent and revised data.

Moreover, it should be noted that the CLEI is designed to provide timely warning signals for turning points in economic cycles, indicating the moments of transition in economic activity.

This index consists of a set of leading economic indicators, whose changes tend to precede overall changes in economic activity and are regularly evaluated.

Cyprus’ CLEI includes variables selected from a wide range of domestic and international leading indicators, such as the Brent Crude oil price, the Economic Climate Index (ECI) in Cyprus and the eurozone, total property sales documents, tourist arrivals, the value of credit card transactions, the retail sales volume index, and the electricity production volume index.