Economist Tassos Yiasemides has attributed Cyprus’ latest rise in inflation, which reached 3.5% in August, primarily to imported energy costs rather than domestic demand or fiscal policy looseness. He highlighted that the inflation increase was largely concentrated in energy, with petroleum products prices soaring by 20.3% year on year, while prices of industrial products remained stable. Yiasemides warned that the impact of these rising energy costs is gradually spreading through the broader economy, affecting electricity bills, transport costs, and shop prices.

Yiasemides pointed to Cyprus’ heavy reliance on fossil fuel imports, a widening trade deficit, and a lack of renewable energy infrastructure as key factors exposing the country to international price shocks. He criticized the slow progress in renewable energy development and stressed that government measures like VAT reductions on energy provide only short-term relief and could become unsustainable if extended indefinitely.

For a long-term solution, Yiasemides called for accelerated development of renewable energy with storage capacity, completion of a competitive electricity market, and efforts to boost local production, especially in the primary sector. He also emphasized improving energy efficiency and adopting a gradual strategy to reduce Cyprus’ energy dependence. Additionally, the renewed inflationary pressures could prompt central banks to raise interest rates, potentially increasing the financial burden on households amid rising mortgage lending.