Cyprus Sees Significant Reduction in Household Debt, Improved Financial Health

The Central Bank of Cyprus (CBC) has reported that household debt in Cyprus has experienced a substantial reduction, declining to 69% of the Gross Domestic Product (GDP) for the period ending June 2023.

This represents a positive development, indicating improved financial health for Cypriot households. The report by the CBC also highlights that the total financial assets of Cypriot households amounted to €57 billion. Of this total, a significant portion, 58%, was held in the form of cash, deposits, and loans, while 2% was allocated to securities, 21% to stocks, and 19% to other financial assets. This reduction in household debt is largely attributed to the increase in the country's GDP during the previous quarter.

Comparing the current household debt figures to those of December 2016 reveals a substantial decrease, as household debt has fallen to approximately 46% over the past years. This positive trend underscores the economic improvements in Cyprus and the strengthening financial positions of its households.

Non-financial corporations in Cyprus have also exhibited more robust financial positions. These corporations collectively hold €66 billion in financial assets. Among these assets, the largest proportion, 45%, is invested in stocks, followed by 31% in other financial assets, and smaller allocations in cash and deposits, loans, and securities. The debt of non-financial corporations reached €40.4 billion at the end of June 2023, resulting in a debt-to-GDP ratio of 140%. While this ratio remains relatively high, it has shown a slight decrease compared to the previous quarter, a development attributed to GDP growth.

Comparing these corporate financial figures to those of December 2016 shows a significant improvement, with the debt-to-GDP ratio nearly halving to around 70%. This transformation indicates that businesses in Cyprus have become more financially resilient over the years, contributing to the overall economic well-being of the country.

In a broader financial context, Cyprus experienced notable changes in its government debt-to-GDP ratio. According to a Eurostat report, the government debt-to-GDP ratio increased during the second quarter of 2023, rising by 2.2 percentage points compared to the previous quarter, reaching 85.3%. Despite this increase, Cyprus demonstrated a significant improvement compared to the same period in 2022, with an 8.1 percentage point reduction. This decrease was the third most substantial among EU member states, indicating that Cyprus has been actively managing its finances more efficiently.

Overall, Cyprus is on a path toward improved financial stability, with both households and non-financial corporations experiencing healthier financial positions. These trends contribute to a more robust economic environment in the country, showcasing Cyprus's commitment to managing its financial health effectively.

By fLEXI tEAM