Signs of recovery of the Cypriot economy following the strong effects of the pandemic”
The Cyprus Composite Leading Economic Inde (CCLEI) recorded a year-over-year increase of 3.9% in Apri 2021 reaching a level of 101.5, after the year-over-year reductions of 2.5% in March and 8.8% in February (based on the latest and revised data).
The strong increase of the CCLEI in April 2021 reflects the extensive vaccination campaigns against the COVID-19 pandemic, which helped improved economic growth expectations and conditions. More specifically, both the Economic Sentiment Indicator (ESI) in the euro area, and the Economic Sentiment Indicator in Cyprus significantly strengthened in April 2021. It is worth mentioning that, the deterioration of the business climate in Cyprus recorded in March 2021 subsided and strengthening significantly in April 2021. At the same time, despite their low levels, tourist arrivals, as well as a number of domestic variables, have a positive effect on the CCLEI and the growth of the domestic economy. In particular, preliminary data indicate the recording of a positive year-over-year growth rate in March and especially April 2021 for both the volume of electricity production and the volume of retail sales. In addition, the significant year-over-year increase in the total number of property sales contracts continues in April 2021, as well as the recording of positive year-over-year growth rates of credit card transactions. On the other hand, the formation of oil prices (Brent Crude) at pre-pandemic levels contributes negatively to the year-over-year growth rate of the CCLEI. It worth noting that, the rise of most components of the CCLEI reflects not only the extensive vaccination campaigns, but also the improvement of the economy from the strong effects suffered from the pandemic.
In summary, the strong rise of the CCLEI in April 2021 suggests that the Cypriot economy is on the road to recovery following the strong effects suffered from the pandemic. However, the short-term growth prospects of the Cypriot economy still depend on the evolution of the COVID-19 pandemic, and in particular on the speed of vaccination campaigns. Further information regarding the methodology of constructing the CCLEI can be found at: Cyprus Composite Leading Economic Index (CCLEI)
Notes:
- The CCLEI Index was estimated based on the econometric model of Aruoba, Diebold and Scotti (ADS) (2009).
- The CCLEI for April 2021 is constructed based on the availability of the Brent Crude oil price, the euro area Economic Sentiment Indicator, the total number of property sales contracts, as well as the high frequency data of the passengers’ arrivals and the volume of electricity production for April, while its other components are estimated based on the latest available information in a series of various economic indicators.
