Cyprus Growth Forecast Has Been Revised Up
Cyprus growth forecast has been revised up, with real GDP projected to reach 3.2% in 2025 and 3.3% in 2026, slightly lower than last year’s growth rate of approximately 3.5%. This adjustment comes from the July Economic Outlook released by the University of Cyprus Economics Research Centre.
The new forecasts indicate an increase of 0.4 and 0.1 percentage points for 2025 and 2026, respectively, compared to the figures presented in the April edition of the ERC Economic Outlook. The revision is underpinned by stronger-than-expected growth in the first quarter of 2025, alongside encouraging trends in domestic activity and the labour market.
The New Forecasts Indicate An Increase Of
Leading indicators for the period of April to June have shown positive signs, suggesting that the Cypriot economy is on a strengthening trajectory. Additionally, recent declines in inflation and reduced policy rates within the euro area have lowered domestic borrowing costs, further bolstering the optimistic outlook.
Despite these positive developments, challenges remain. Growth in Cyprus continues to be affected by the muted performance of trading partner economies, and economic sentiment across the EU has fluctuated below its long-term average. These factors contribute to a cautious economic outlook for the island.
The growth forecasts are accompanied by several downside risks. Higher tariffs may negatively influence economic growth within the EU, while geopolitical conflicts and climate-related events pose further threats. However, there are also potential upside risks. A stronger-than-expected global demand, driven by reduced uncertainty from international trade agreements and new investments, could enhance growth prospects for Cyprus.
In terms of inflation, the Consumer Price Index (CPI) is forecasted to be at 1.0% in 2025 and 1.5% in 2026. These figures reflect downward adjustments of 0.5 and 0.3 percentage points, respectively, from the previous projections in April. The decrease in inflation rates is attributed to a significant slowdown in price increases during the second quarter, aided by year-on-year declines in international oil prices.
Moreover, the reduction in food inflation and the easing of business expectations regarding selling prices have contributed to this muted inflation outlook, indicating a more stable economic environment moving forward.
