Cyprus News | Cost of Living Deflation in the South

Cyprus News | Cost of Living Deflation in the SouthCyprus News – Cost of Living Deflation in the South

You would imagine that having the cost of living actually drop would be a good thing. It would seem that while the cost of living increase in the north is in double figures, in the south costs actually decreased by 0.4% overall in 2013, according to the Cyprus Statistical Service. This is the lowest figure since 1964, after the collapse of the newly formed independent Cyprus.

What is more worrying is that the December 2013 deflation figure was – 2.3% and November 2013 -2.1%, showing a worrying trend downwards. Part of the reason for the drop in the price of goods is the unwillingness, or inability, of consumers to buy. Restriction of money supply after the bank system crash is also a contributing factor.

With the continued trend towards deflation in the south there is a possibility of a deflationary spiral which is a situation where decreases in prices lead to lower production, which in turn leads to lower wages and demand, which leads to further decreases in prices. Obviously, if businesses cannot sell then they cannot survive and consumers without jobs cannot pay their bills, further fuelling economic problems in the south.

However, with the Turkish Lira moving towards 4TL to £1, the north can neither gloat about the south’s problems nor be complacent about their own economy.

 

 

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