public debt increased rapidly during the economic crisis of 2012 - 2013, going from 65. 8 % of gdp at the end of 2011 to 112 % in june 2014. since 2016, it follows a downward trend with the exception of the second half of 2018, due to the fiscal impact of the measures related to the cyprus cooperative bank, and in 2020 due to the outbreak of the pandemic. the public debt - to - gdp ratio dropped below 90 percent at the end of 2022 due the reopening of the economy and the recovery that followed. however, risks remain elevated due to russia's war in ukraine and the deterioration in the global economic environment. at the current juncture, preserving fiscal space is crucial, as government intervention is important to support the digital and green transition, improve competitiveness and promote social cohesion. the nextgenerationeu, which allocates around eur 1. 2 billion to cyprus in grants and loans, can support these goals and will have a favourable impact on real growth. the successful implementation of structural reforms and the green and digital agenda will be key for transforming our economy to a sustainable and more resilient one. turning now on the private sector debt in cyprus, this includes both legacy loans built up prior to the domestic financial crisis in 2013 and new origination loans thereafter, granted to households and non - financial corporations. the granting of new loans after the financial crisis in 2013 was done in adherence to stricter supervisory guidelines and tighter credit standards, and as data shows, the default rate of these new loans is quite low. however, the domestic private debt levels are still burdened with legacy loans that are more difficult to tackle and require special attention. as regards the private debt trajectory in cyprus, the private non - financial debt, that is the sum of households and non - financial corporations'debt - to - gdp ratio has exhibited a decline of about 33 % since reaching its peak level of 353 % in the first quarter of 2015. based on latest data, the ratio now stands at 236 % in 2022q2. this decline is evident in both non - financial corporations and households. specifically, the domestic non - financial corporations'debt fell to 157 % of gdp in 2022q2 from 226 % in 2015q1, whilst about 60 percentage points of this is attributed to debt held by special purpose entities. these entities in the case of cyprus are mostly shipping companies with no physical presence in cyprus and limited impact on the cyprus real

broad measures to targeted ones and in a concerted manner. any fiscal expansion falling short of these principles is likely to increase medium - term inflationary pressures, which would necessitate a stronger monetary policy response through higher interest rates. euro area projections the euro aoof the rea latest available projections of december 2022, show that the annual average real gdp growth is anticipated to slow down significantly from 3. 5 % in 2022 to 0. 5 % this year, before rebounding to 1. 9 % in 2024 and 1. 8 % in 2025. average annual inflation is expected to fall, from an average of 8. 4 % last year to 6. 3 % this year, with inflation projected to fall from 10 % in the last quarter of 2022 to 3. 6 % in the last quarter of 2023. headline inflation is then expected to fall to an average of 3. 4 % in 2024 and 2. 3 % in 2025. the reduction in headline inflation over the projection horizon, reflects strong energy - related downward base effects throughout the course of 2023, the gradual impact of the normalisation of the ecb's monetary policy which started early in 2022, the weaker economic growth outlook and the assumed decline in energy and food commodity prices, in line with futures prices. the underlying assumption in all this is that long - term inflation expectations will continue to remain anchored. the cyprus economy 2 / 4 bis - central bankers'speeches as regards cyprus, the economy showed notable resilience in 2022, recording significant growth of 5, 6 %, despite the negative international environment. this is in part due to the higher than expected activity in the tourism industry, the nondependence of the cypriot economy on russian gas, as well as the reality that the cypriot banking sector has very limited exposure to the russian economy and therefore has not been affected by the sanctions on russia. in particular, according to the latest available data, deposits from russian federation citizens amount to only 2, 17 % of total deposits of the cyprus banking sector at the end of january 2023, while loans amount to only 0, 2 % of total loans. economic growth in cyprus was supported by new lending by the cyprus banking sector and by foreign direct investment. for example, largely owing to the enactment of new incentives, including the facilitation of a fast - tract process for incoming firms, a large number of high value - adding foreign companies have been attracted to cyprus.