The Ministry of Finance predicts a further rise in fuel prices and new problems in supply chains as a result of the war in Israel and the Gaza Strip.
According to the Economic Developments 2023 and the Economic Outlook 2024-2026 report, the latest developments increase uncertainty in the region and are expected to exacerbate an already strained situation about international energy prices and supply chains.
As the Ministry of Finance points out, at this stage, it is impossible to predict the duration of the conflict and the extent of the destruction it may cause, so it is not possible to quantify any risks to the Cypriot economy. Therefore, he stresses, that at this stage, the impact is uncertain.
At the same time, the report notes that the risks surrounding the revised forecasts for the Cypriot economy are mainly negative and characterized by significant uncertainty, stemming from the external environment, amid a situation of high inflation and lending rates, extreme weather conditions and geopolitical instability, both due to the ongoing war between Russia and Ukraine and the recent military conflict in the Middle East.
In addition, the main risks to the baseline macroeconomic scenario also arise from lower-than-expected export performance, not related to tourism, but due to sanctions. On the other hand, factors that could lead to a higher-than-projected growth rate are, according to the Economic Developments Report, a higher-than-projected implementation of private investment projects and a better performance of the tourism sector.
The economic developments and the impact on the Cypriot economy of the war in the Middle East will be the subject of a discussion tomorrow, Monday, in the parliamentary Finance Committee, before which the curtain will be raised on the debate on the 2024 state budget.