A recent, significant study released by the Economics Research Centre (ERC) at the University of Cyprus has revealed alarming long-term repercussions for the Cypriot economy due to escalating global temperatures. The research meticulously quantifies the potential physical risks associated with climate change, projecting substantial contractions in Gross Domestic Product (GDP), investment, and consumption across various future scenarios. These findings suggest a potentially devastating impact on the nation's financial health.
The comprehensive analysis, employing a sophisticated model developed by the ERC, intricately links greenhouse gas emissions to rising temperatures. This process subsequently affects productivity levels and the overall health of various economic sectors. The model incorporates specific modules for the energy sector and climate impacts, offering a detailed understanding of how climatic shifts translate into tangible economic consequences. Three distinct pathways for global emissions, mirroring IPCC scenarios, were meticulously examined: a business-as-usual trajectory, a moderate middle-of-the-road approach, and an ambitious sustainability-focused route.
Under the most pessimistic, business-as-usual scenario, the Cypriot economy could experience a staggering GDP loss of up to €29 billion by 2050. This figure escalates dramatically by the century's end, with potential losses reaching an astronomical €162 billion. Even under a more optimistic sustainability scenario, the economic toll remains considerable. Projected GDP losses stand at €4 billion by 2050 and €23 billion by 2100, underscoring the pervasive nature of climate change's economic threat. The study highlights that climate change fundamentally acts as a productivity shock, impacting supply chains and household demand.
Sectors considered the bedrock of the Cypriot economy are identified as particularly vulnerable. The vital tourism industry, a cornerstone of national revenue, faces considerable headwinds. By 2050, under the business-as-usual scenario, tourism revenues could shrink by approximately €3.8 billion. Even with moderate emissions reduction, losses are projected to reach €2.4 billion. Similarly, the burgeoning financial services sector is not immune, facing potential losses of €2.3 billion by 2050 in the business-as-usual scenario. The agricultural sector, intrinsically tied to environmental conditions, is also anticipated to bear significant burdens.
Beyond direct sectoral losses, the study points to substantial implications for the island's external balance and its capacity to generate tax revenues. The considerable decline in tourism activity translates directly into forgone Value Added Tax (VAT) receipts, further exacerbating fiscal challenges. The ERC’s findings serve as a stark and urgent call to action, emphasizing that proactive mitigation and adaptation strategies are crucial for safeguarding the long-term economic prosperity and stability of Cyprus. The projected declines necessitate a fundamental re-evaluation of economic policies.