these incentives are offered in the context of the so - called " international headquartering " policy. according to the latest central bank of cyprus forecasts of december 2022, the growth of the cypriot economy is expected at 2, 5 % this year which compares well to the euro area average of 0, 5 %. inflation is expected to decelerate in 2023, levelling at 3. 3 %, from 8. 1 % in 2022. foreign investment in cyprus, as i mentioned before, constitutes a significant driver for development. in recent years, major multinational firms in the information, communication and technology industry ( ict ), have relocated or expanded their activities in cyprus, supporting cypriot gdp and reinforcing the vision to transform cyprus into an emerging technology hub in the mediterranean. cyprus'importance as a foreign investment hub is also reflected in the greenfield fdi performance index1, created by fdi intelligence, according to which in 2021, cyprus was ranked in 18th place out of 84 countries included in this index ( climbing by 50 places compared to 2020 ). undoubtedly, the shipping sector is another important pillar of cyprus'economic success. limassol, cyprus'maritime capital, is the home of influential names in the shipping industry, which boosted the country to the top ranks of the sector. indicatively, cyprus is the largest third - party ship management centre in the european union, one of the largest in the world2 and is primed for further growth. the importance of the sector is evident in the balance of payments data where it ranks third in terms of its contribution to the total value of exports of services at 19 % for 2021, after the financial services and ict sectors, with contributions of 32 % and 23 %, respectively. concluding remarks let me conclude by underlining the challenges for policy makers : the global inflation dynamics are currently being addressed by central banks, but the fight is far from over. monetary policy is being utilised at a different pace in different regions, due to the differences in economic fundamentals. however, we should not forget that other policies also play a role. for instance, state support should avoid horizontal measures and instead use targeted fiscal measures, 3 / 4 bis - central bankers'speeches which focus on the economically vulnerable, in order to support social cohesion but avoid undermining monetary policy measures against inflation. finally, regarding the shipping sector, it is and will continue to be the backbone of the global economy. in fact, when talking about the

constantinos herodotou : economic trends and outlook for euro area, impact of ecb monetary policy and outlook for cyprus economy keynote address by mr constantinos herodotou, governor of the central bank of cyprus, at the annual cyprus maritime forum, limassol, 7 march 2023. * * * i would like to thank capital link for organizing the annual cyprus maritime forum and for offering me the opportunity to talk about current economic issues. i will discuss inflation developments by contrasting the euro area with the us, in order to give a clearer focus on the dynamics and differences of the economic trends and inflation. i will also talk about the cyprus economy, focusing on the reasons that kept our economy strong and the factors that will help safeguard its future path. overview of international and euro area economic developments let me start with contrasting economic and inflation developments in the us and the euro area. even though both economies were hit by rising inflation, the factors behind it have been different. in the united states, demand factors have been the main determinants of the upward inflation trend, while in the euro area, price increases were, initially, mostly driven by the supply shock caused by the energy crisis. the post - covid demand recovery in the us was faster and stronger than in the euro area. as a result, the federal reserve moved earlier with actions to curb the accelerating inflationary pressures and in particular it started raising interest rates in march 2022. by contrast, the euro area was more exposed to the energy crisis than the us, given its proximity and higher energy dependence to russia and especially russian gas. as long as inflation is largely caused by supply side factors such as energy prices, interest rate hikes cannot address the problem. hence the ecb reacted when the inflation rate in the projected horizon breached its 2 % target and saw signs of infiltration of inflation into demand side factors of the economy. consequently, the ecb started raising interest rates in july 2022. however, it had started normalising its monetary policy much earlier in 2022 by terminating the pepp and app bond purchases. the second main difference relates to the labour market dynamics of the two economies. the us labour market exhibited at a relatively early stage, a greater degree of tightness, evidenced by stronger wage growth in the us than in the euro area. this higher degree of us labour market tightness was another key factor in explaining the medium - term inflationary pressures. by contrast, in the euro area, the pick - up