Cyprus has recorded negative inflation, with lower energy costs and cheaper fruit and vegetable prices driving the trend, according to data released by Eurostat and the Statistical Service. Cyprus is currently the only EU country showing negative inflation.
Economist Yiannis Telonis, speaking to Economy Today, explained that the development is largely due to favourable circumstances. “We are in a good position at the moment. We managed to control inflation better than any other country, thanks to lower energy costs and contained prices in basic consumer goods such as fruit and vegetables,” he said.
Energy and transport
The sharp fall in energy prices played a decisive role. Despite rising airfares, overall transport costs declined due to lower oil prices, to which Cyprus is particularly exposed. Telonis noted that a global oil surplus is expected in the coming months, but warned that prices remain uncertain and could still affect costs across the economy.
Agricultural products and imports
Lower agricultural product prices also contributed. With drought conditions limiting local production and record tourism boosting demand, Cyprus turned to cheaper imported goods. “It is unusual to see fruit and vegetable prices drop during a period of reduced domestic production,” Telonis said, adding that Cypriot farmers face higher production costs compared to imports. “We must either help producers reduce costs per unit or strike a balance between local and imported products, so consumers benefit from fair prices.”
Prospects and risks
Telonis underlined that while a small monthly decrease in the Consumer Price Index is normal, long-term deflation could harm the economy. “Negative inflation means prices are starting to fall. At the moment, the drop is barely noticeable, but if it continues, it could signal economic stagnation and lower demand, as seen in Japan,” he cautioned.
Also read: Inflation dips again but prices still bite Cyprus households
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