The Cypriot economy, which grew 2.8% in 2016, is expected to grow at a 3.2% pace over 2018 and 2019, the central bank said in its June economic bulletin on its website on Friday.

“Private consumption is expected to further grow 2.3% against a 2.9% growth in 2016, reflecting mainly the increased disposable income, low interest rates, property-tax reduction, as well as improvements on the labour market and increased salaries,” the central bank said. Public spending is expected to increase 2.8% after rising half as much last year mainly on the hiring of professional soldiers and salary rises in the public sector.

Fixed capital formation, already at historical lows, are expected to drop 15% this year mainly on non-recurring investment in transport equipment such as vessels, offsetting the effect of various other private and public investment projects, the central bank said.

The Ministry of Finance forecast in April that the economy is expected to grow 2.9% in 2017 and 2018 and 2.7% in 2019.

The harmonised consumer price index is expected to increase 1.2% this year after falling as much last year before it increases 1.3% and 1.5% in 2018 and 2019 respectively, the bank supervisor said.

Source: Cyprus Mail