economic momentum — The EU economic momentum cools as seasonally adjusted GDP increased by only 0.1 per cent in both the euro area and the wider EU during the first quarter of 2026. This preliminary flash estimate from Eurostat marks a notable decline compared to the 0.2 per cent growth recorded in the final quarter of 2025 for both regions.
This slowdown aligns with a revised outlook for Cyprus, where researchers are warning of a significant dip following a year of robust economic performance. The Economics Research Centre of the University of Cyprus now predicts real GDP growth in Cyprus will moderate from 3.8 per cent in 2025 to 2.9 per cent in 2026, with a minor recovery to 3.1 per cent expected in 2027. These projections have been adjusted downwards by 0.6 and 0.3 percentage points respectively from earlier forecasts.
According to the research centre, these weaker outlooks are primarily attributed to economic headwinds exacerbated by escalating tensions in the Middle East. This broader context shows that seasonally adjusted GDP in the euro area grew by 0.8 per cent compared to the same quarter of the previous year, while the EU experienced a 1.0 per cent increase. However, both figures represent a sharp deceleration from the 1.3 per cent in the euro area and 1.4 per cent in the EU recorded in late 2025.
Among member states that reported data, Finland led with a quarterly increase of 0.9 per cent, followed closely by Hungary at 0.8 per cent. Estonia and Spain also saw positive growth, both recording increases of 0.6 per cent. Conversely, Ireland faced a significant contraction of 2.0 per cent, while Lithuania and Sweden experienced shrinkage of 0.4 per cent and 0.2 per cent respectively.
The cooling momentum follows a strong performance in Cyprus, where GDP at constant prices reached €30.52 billion in 2025. The previous year’s positive growth was driven by the ICT, hotels, restaurants, construction, and wholesale and retail trade sectors, as noted by the Cyprus Statistical Service (Cystat) earlier this month.
In terms of current prices, public consumption in Cyprus rose by 6.7 per cent to €6.82 billion compared with 2024, while private consumption grew by 3.7 per cent. Gross capital formation saw a 2.3 per cent increase, and exports of goods and services climbed by 5.3 per cent, totalling €35.52 billion. However, imports also rose by 4.9 per cent, exerting downward pressure on the overall GDP figures.
The fourth quarter of 2025 had marked a stronger performance for Cyprus with a growth rate of 1.4 per cent compared to the previous quarter, significantly outpacing the current European average. As the economic landscape shifts, stakeholders will be closely monitoring these developments across the EU and Cyprus.
