Inflation in Cyprus

A short history of inflation in Cyprus

Partition and Recovery (1974 to 1990)

The Cypriot economy was cut in half by the events of 1974, which displaced a third of the population and cost the south most of its tourist infrastructure and its main port. Rebuilding was rapid, and inflation through the following decade was moderate by the standards of southern Europe at the time, held down by a currency managed against a basket and by a small open economy's dependence on imported goods priced in other currencies.

The Euro and the Banking Crisis (2008 to 2015)

Cyprus adopted the euro on 1 January 2008. Its banks, which had grown to many times the size of the economy, failed in 2013 after heavy losses on Greek government debt, and the rescue imposed losses on large depositors for the first time in the euro area. The recession that followed produced several years of falling prices rather than inflation.

Post-Covid Inflation (2021 to 2023)

In Cyprus, prices rose fastest in July 2022, at 10.6%. The causes of the post-Covid inflation were global in nature, beginning with the lockdowns: factories and ports closed and the shipping between them fell out of sequence, so goods took longer to make and longer to arrive. Governments had spent heavily supporting household incomes through those closures, so when restrictions lifted there was money waiting to be spent and not enough on the shelves to spend it on. Then in February 2022 Russia invaded Ukraine, disrupting two of the world's largest suppliers of wheat, fertiliser, oil and gas at once, and the cost of everything grown, heated or transported rose with them.

Because the causes were shared, so was the timing: most countries peaked within a few months of one another in late 2022. The major inflation events covers this episode and the others in more detail.