In July 2024, total deposits in the Cypriot financial system saw a net increase of €164.7 million, reversing the decline from the previous month. The annual growth rate of deposits rose to 2.9%, with the total amount reaching €53.4 billion. Notably, deposits from non-financial corporations increased by €217.4 million, offsetting a €59.9 million decline in household deposits.
On the other hand, total loans decreased by €7.2 million, with a notable drop of €136.5 million in loans to non-financial corporations, despite a small increase in household loans. The total outstanding loans amounted to €25.0 billion, with an annual growth rate of 2.0%.
Overall, the financial sector in Cyprus may need to adapt to these shifts by exploring new ways to engage with customers, such as offering more attractive loan products or alternative investment opportunities to encourage more active participation in the economy. Consumers and businesses appear to be anticipating a potential interest rate cut within the next 12 months, leading them to adopt a more cautious financial stance. As a result, they are choosing to hold onto more cash rather than committing to long-term investments or taking on new debt. This behavior is likely driven by the expectation that lower interest rates in the near future will offer more favorable conditions for borrowing and spending. By preserving liquidity now, they aim to take advantage of these expected lower rates when they materialize. This cautious approach reflects a strategic financial planning mindset, where both businesses and consumers are positioning themselves to benefit from future economic shifts.
