cyprus growth — The IMF has upgraded its economic growth forecast for Cyprus, anticipating a GDP increase of 2.9% in 2025. This is a revision from the previous estimate of 2.5% made in April.
- cyprus growth — The IMF has upgraded its economic growth forecast for Cyprus, anticipating a GDP increase of 2.9% in 2025. This is a revision from the previous estimate of 2.5% made in April.
Cyprus growth: Revised Growth Projections for Cyprus
In its latest World Economic Outlook published in October, the International Monetary Fund (IMF) forecasted that Cyprus’s economy is set to grow by 2.9% in 2025 and by 2.8% in 2026. This marks an increase from earlier projections of 2.5% and 2.7% respectively for those years.
Positive Economic Indicators
The IMF’s optimistic outlook reflects a stronger-than-expected performance from the Cypriot economy, even amid global challenges such as trade tensions and a slowdown in external demand. Notably, inflation in Cyprus is expected to decrease significantly, with consumer prices projected to rise by just 0.7% in 2025, the lowest rate in the euro area. This is a substantial drop from the April forecast, which had estimated inflation at 2.3% for the same year.
Current Account Deficit and Labour Market
However, the IMF has also indicated that the current account deficit is expected to widen, reaching 8.5% of GDP in 2025 and 9.1% in 2026, up from earlier estimates of 7.3% and 7.8%. This change is attributed to an increase in import growth driven by domestic demand and a rise in service sector activity.
On the employment front, the IMF predicts that unemployment will remain low, with a jobless rate forecasted to average 4.5% in 2025, slightly increasing to 4.7% in 2026. These figures are also better than those projected in April, which were 4.8% and 5% respectively.
Global Economic Context
The IMF’s updated projections for Cyprus coincide with a general upward revision of global economic forecasts. The IMF now expects global growth to reach 3.2% in 2025 and 3.1% in 2026, an improvement from April’s estimates of 2.8% and 3%. Despite this positive shift, the IMF cautioned that global growth remains below the pre-pandemic average of 3.7%.
Advanced Economies and Emerging Markets
Growth in advanced economies is anticipated to slow to 1.6% in both 2025 and 2026, a decline of approximately 0.2 percentage points compared to 2024. In the United States, growth is forecasted to ease to 2% in 2025 and 2.1% in 2026. The euro area is expected to experience a slight recovery, with growth of 1.2% in 2025 and 1.1% in 2026.
Meanwhile, in emerging markets, China is projected to grow by 4.8% in 2025, slowing to 4.2% in 2026, while India is expected to maintain strong growth rates of 6.6% and 6.2% respectively for those years.
Challenges Ahead
Despite the optimistic outlook, the IMF highlighted various risks that could impact future growth. These include prolonged trade policy uncertainty, intensifying protectionism, demographic challenges due to an ageing population, fiscal vulnerabilities, and potential financial instability.
Inflation and Economic Stability
The IMF noted that while global growth has shown resilience, inflationary pressures remain a concern. In the United States, core inflation has increased, and unemployment rates have slightly risen. In several other economies, inflation continues to exceed central bank targets, complicating monetary policy amidst growing uncertainty.
Trade policy uncertainty was emphasised as a significant risk factor, with the IMF stating, “The uncertainty surrounding trade policy remains elevated in the absence of clear, transparent and stable agreements among trade partners.” They pointed out that the focus is shifting from the level of tariffs to their impact on prices, investment, and consumption.
Future Outlook
The IMF remains cautiously optimistic, suggesting that global growth could benefit from progress in trade negotiations, rapid structural reforms, and advancements in technology, particularly artificial intelligence, which may lead to a new wave of productivity improvements worldwide.
