cyprus gdp — cyprus gdp — The Central Bank of Cyprus has projected that the GDP growth will reach 3.3 per cent in 2025, highlighting a steady recovery for the Cypriot economy. This forecast, released on Tuesday as part of the bank’s September 2025 macroeconomic projections, indicates a gradual improvement in key economic indicators.
Cyprus gdp: Positive Trends in Employment and Inflation
Alongside the GDP growth forecast, the Central Bank anticipates a reduction in unemployment to 4.6 per cent, down from 4.9 per cent in 2024. This positive trend in employment aligns with observations from the European Commission’s economic sentiment surveys, which suggest an ongoing decline in registered unemployment. The central bank foresees unemployment stabilising at approximately 4.7 per cent in both 2026 and 2027.
Inflation is also expected to decrease significantly, forecasted at 1 per cent for 2025, a notable drop from 2.3 per cent in 2024. The decline in inflation is attributed to decreasing energy prices and lower costs for non-energy industrial goods.
Revised Economic Projections
The latest forecast includes a slight upward revision of the GDP growth estimate by 0.2 percentage points compared to the bank’s June 2025 projections, reflecting a stronger-than-anticipated performance in the tourism sector. The Central Bank’s projections for the following years, 2026 and 2027, remain unchanged at a moderated growth rate of 3 per cent annually.
In terms of inflation, the bank revised its expectations downwards: a reduction of 0.4 percentage points for 2025 and 0.2 percentage points for 2027. Core inflation, which excludes energy and food prices, is also adjusted slightly lower.
Domestic Demand as a Growth Driver
The Central Bank attributes the anticipated GDP growth primarily to increases in domestic demand. This demand is expected to be driven by higher private consumption, bolstered by a rise in real disposable household income as inflationary pressures ease. Despite a normalisation in private consumption growth in the coming years, it is projected to remain a significant contributor to economic activity.
Large-scale private non-residential investments, particularly in infrastructure projects aimed at promoting digital and green development, are also expected to enhance domestic demand. Additionally, reform-related projects under the Recovery and Resilience Plan will contribute to this growth, although residential investment is anticipated to play a smaller role.
Tourism and Net Exports Strengthening the Economy
The Central Bank predicts that net exports will significantly boost growth, supported by a resurgence in tourism. Notably, arrivals from the United Kingdom, Israel, and other EU countries are expected to increase. The ongoing diversification of the tourism sector towards higher-spending markets is anticipated to further bolster its development.
Moreover, the export of technology-related services and intellectual property is expected to sustain net exports, while exports from financial and professional services are projected to contribute positively, albeit to a lesser extent. The shipping sector is also likely to maintain a beneficial impact on growth, despite potential challenges posed by fragile external demand.
Risks and Challenges Ahead
While the Central Bank’s outlook is largely optimistic, it acknowledges that downside risks to GDP projections for 2025 to 2027 slightly outweigh the upside risks. These downside risks are associated with potential indirect effects on Cypriot services exports from a deteriorating external environment, primarily due to uncertainties surrounding global trade policy.
Conversely, upside risks include the positive impact of upcoming tax reforms on private consumption starting in 2026, stronger-than-expected wage growth, and lower-than-expected energy prices. The bank assesses the balance of risks for inflation as slightly tilted towards the upside for the same period, with factors such as stronger wage growth and increased profit margins in play.
Concluding Thoughts on Economic Outlook
As the Central Bank of Cyprus forecasts steady growth for 2025, the overarching narrative is one of cautious optimism. The anticipated improvements in GDP, employment, and inflation reflect a resilient economy that is adapting to both domestic and global challenges. With strategic investments and a focus on diversifying economic activities, Cyprus is positioning itself for a sustainable recovery in the coming years.
