By 2020, Cyprus may see a 6.2% drop in GDP due to the effects of the coronavirus and risk a prolonged economic downturn due to high pre-crisis public and private sector debt – these are the data of the European Commission’s autumn forecast.

The relatively restrained overall epidemiological situation on the island allowed for a gradual relaxation of restrictive measures, which led to a gradual recovery in domestic demand over the summer. However, growth should slow down in the fourth quarter due to worsening epidemics amid low consumer confidence and general economic sentiment; as a result, GDP should fall.

The Commission does not rule out that growth will accelerate in subsequent years: 3.7% in 2021 and 3% in 2022 (output is expected to slightly exceed the dopandemic level).

The recovery is expected to be driven by domestic demand. Investments will partly recover from current tourism-related projects, although demand for luxury housing will decline due to the cancellation of the citizenship scheme for investments.

The Commission warned that Cyprus’ high pre-crisis public and private debt increases the risks of a prolonged economic downturn.