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Cyprus and the EU Sanctions on Russia: macroeconomic impacts and policy recipes for a sustained recovery

Project Coordinator & Principal Researcher: Dr Stelios Sakkas

Duration: February 2023 - February 2024


Cyprus is highly exposed to the fallout from the war in Ukraine through trade with Russia. This new challenge comes against the background of the lingering effects of the pandemic and financial vulnerabilities dating from the 2012–13 crisis. The large tourism sector and other contact-intensive activities were affected by Covid-related mobility restrictions. Financial linkages to Russia have been reduced since the financial crisis, but exposures through trade in services—mainly tourism and professional services—is very high since tourism and tourism related services contribute more than 25% of the Cypriot output. 

All this is taking place in an uncertain economic environment where increases in utility and transportation prices, as a result of a pass through from imported energy prices, make households and firms to de-anchor their inflation expectations and will likely dampen consumer confidence. After all these consecutive shocks combined with the tight fiscal space, it is imperative to refuel the economy, this time, on a more sustainable basis by making the best possible use of the Recovery and Resilience package funds. 

In this context, the purpose of this project is to build a micro-founded macroeconomic model for Cyprus in order to address: 

- The macroeconomic impact of the ongoing war in Ukraine through trade with Russia and in particular the impact of the war on export of services (mainly tourism), prices of imported goods and foreign direct investment.

- in turn, given the current situation, policy recipes for a sustained economic recovery from now on and in particular the set of structural policies in the context of the Next Generation EU-Recovery and Resilience Plan.

Research Team

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Project coordinator and Principal Researcher: Stelios Sakkas, Research Economist, Economics Research Centre, University of Cyprus

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Researcher: Konstantinos Mavrigiannakis, Economics Research Centre - University of Cyprus


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Researcher: Elena Andreou, Professor, Department of Economics; Director of the Economics Research Centre, University of Cyprus

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Researcher: George Syrichas, Advisor, Economics Research Centre, University of Cyprus