Cyprus Labour Costs

Labour costs climb in Cyprus as inflationary pressures persist

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In the fourth quarter of 2021, the hourly labour costs (total cost) in Cyprus increased by 1.6%, compared with the same quarter of the previous year, the island’s Statistical Services’ (CyStat) provisional data showed.

In the third quarter of 2021, the hourly labour cost increased by 7.8%. The two main components of labour costs, wages and salaries per hour worked and non-wage costs per hour worked increased by 1.7% and 0.9% respectively, compared with the same quarter of the previous year.

In the third quarter of 2021, the annual changes were 4.3% for the wages and salaries per hour worked and 26.0% for the non-wage cost per hour worked.

The hourly labour cost (total cost), seasonally adjusted, decreased by 0.1% compared to the previous quarter. The hourly labour cost that refers to wages and salaries, seasonally adjusted, increased by 1.0%, while the non-wage cost decreased by 4.7%.

CyStat’s report follows an earlier release showing that the annual inflation rate accelerated to 6.6% in February of 2022 from 5.4% in the previous month. It was the highest inflation rate since November of 1992.

Prices advanced for food & non-alcoholic beverages (8.04% vs 3.5% in January), transport (14.84% vs 13.3%), housing & utilities (13.32% vs 14%), and clothing & footwear (4.64% vs 3.6%). On a monthly basis, consumer prices rose 1.21%, following a 0.5% downtick in the previous month

Earlier this month, Fitch Ratings affirmed Cyprus’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BBB-‘ with a Stable Outlook.

According to the agency’s statement, Cyprus’s rating is underpinned by governance indicators and GDP per capita levels well above the median of its ‘BBB’ category peers. Institutional strengths and policy credibility are backed by eurozone membership. These strengths are balanced by high levels of private and public sector indebtedness, large external imbalances, and vulnerabilities in the banking sector.

“The Stable Outlook reflects our view that while the Cypriot economy is highly exposed to Russia through its tourism and investment linkages, near-term risks are mitigated by a strengthened government fiscal position, and continued normalisation of spending after the pandemic shock. Meanwhile, medium-term growth prospects remain positive on the back of the government’s Recovery and Resilience Plan (RRP)” Fitch said.