cyprus growth — cyprus growth — Cyprus’s growth outlook is set to reflect the steady economic conditions across the European Union, with the euro area and EU both experiencing a GDP increase of 0.3 per cent in the fourth quarter of 2025, as reported by Eurostat.
- Inflation risks are primarily linked to strong domestic activity and a tight labour market, indicating that while Cyprus is poised for growth, it must navigate potential challenges ahead.
This growth trend mirrors the 0.3 per cent rise recorded in the euro area during the third quarter of 2025, while the EU slightly outperformed this figure with a 0.4 per cent increase. Annual GDP growth for 2025 is estimated at 1.5 per cent for the euro area and 1.6 per cent for the EU.
Eurostat has cautioned that these preliminary estimates are based on incomplete data, meaning they are subject to future revisions. Year-on-year comparisons reveal a 1.3 per cent growth in the euro area and a 1.4 per cent growth in the EU for the fourth quarter, although these figures indicate a slowdown from the previous quarter.
Among EU member states, Lithuania saw the highest quarterly growth at 1.7 per cent, with Spain and Portugal following at 0.8 per cent. Conversely, Ireland experienced a contraction, with GDP declining by 0.6 per cent from the previous quarter.
Against this backdrop, the University of Cyprus Economics Research Centre has issued a positive growth forecast for Cyprus, predicting GDP growth will reach 3.5 per cent in 2026, tapering slightly to 3.4 per cent in 2027. The centre noted a decline in the growth rate from 3.9 per cent in 2024 to 3.5 per cent in 2025, but emphasised that the outlook remains broadly stable.
The positive projections for Cyprus are influenced by a robust domestic environment, characterised by a strong labour market, easing inflation, heightened economic confidence, and increased lending, bolstered by lower interest rates. These factors are expected to sustain economic momentum despite the global uncertainties impacting international markets.
Furthermore, the centre highlighted the resilience of global economic prospects, underpinned by a strong performance in international equity markets. Although inflation is projected to rise from 0.1 per cent in 2025 to 0.8 per cent in 2026 and 1.4 per cent in 2027, the forecast for 2026 has been adjusted down by 1.2 percentage points, reflecting lower-than-expected inflation rates and declines in international oil prices.
The centre attributed the inflation outlook to several factors, including falling oil prices, easing global food prices, and a stronger euro. However, it also warned of significant external risks that could affect growth, particularly the potential for weaker economic performance in Cyprus’s primary trading partners.
Inflation risks are primarily linked to strong domestic activity and a tight labour market, indicating that while Cyprus is poised for growth, it must navigate potential challenges ahead.
