Cyprus’ investment position is facing challenges as the external debt rises by €1.5 billion, as reported by the Central Bank of Cyprus (CBC). In the first quarter of 2026, the current account deficit widened to €1.27 billion, a significant increase from €1.01 billion during the same period in 2025.
The CBC’s preliminary external sector data indicates a deterioration of €263 million in the current account deficit. When special purpose entities (SPEs) are adjusted to be treated as non-residents, the deficit expands further to €1.37 billion, up from €1.12 billion in the first quarter of the previous year.
Several factors contributed to this decline, with the CBC highlighting a larger secondary income deficit and reduced net exports of services, particularly in the financial and telecom sectors. However, there was a slight offset from improvements in the goods balance and a smaller primary income deficit.
Despite the challenging current account position, Cyprus recorded net financial inflows of €1.14 billion in the first quarter, surpassing levels seen a year earlier. This increase is attributed to a smaller net outflow in portfolio investments and stronger inflows under other investment categories.
The country’s international investment position (IIP) also showed signs of weakening, with net liabilities widening to €28.31 billion at the end of the first quarter, compared to €28.17 billion at the end of 2025. Adjusting for SPEs, the net liability position increased to €10.03 billion, rising from €8.93 billion in the previous quarter.
Gross external debt rose to €226.66 billion, an increase from €225.19 billion three months earlier. In contrast, external debt assets decreased slightly to €223.53 billion. This resulted in a net external debt increase of €1.57 billion, bringing the total to €3.14 billion for the quarter.
When accounting for SPEs, Cyprus’ gross external debt stood at €59.94 billion, up from €59.18 billion at the end of 2025. The corresponding net external debt, adjusted for SPEs, increased to minus €30.46 billion, compared to minus €30.95 billion in the previous quarter.
During this period, Cyprus experienced bilateral current account surpluses with Germany and Russia. Conversely, the country registered current account deficits with Greece, the United Kingdom, and the United States. Nonetheless, the CBC noted a narrowing of current account deficits with both the European Union and the euro area.
