Cyprus’ GDP growth to hold above 3 per cent despite global uncertainty

Cyprus’ economic growth rate is expected to remain broadly stable in the coming years, the University of Cyprus’ Economics Research Centre said in its January outlook.

According to the centre’s latest report, growth is forecast to reach 3.5 per cent in 2026 and 3.4 per cent in 2027.

In the January issue, it said the growth rate of real GDP in Cyprus is estimated to have slowed from 3.9 per cent in 2024 to 3.5 per cent in 2025.

It added that growth is projected to remain broadly stable at 3.5 per cent in 2026 and 3.4 per cent in 2027.

The centre said the forecasts for 2025 and 2026 remained unchanged compared with the October issue.

It said the favourable economic outlook mainly reflects positive domestic developments during 2025.

These include a strong labour market, easing inflation, high economic confidence, and an increase in new lending supported by lower interest rates.

Despite heightened global uncertainty and volatility in international markets during 2025, the centre said external factors supporting Cyprus’ outlook include steady, though somewhat subdued, growth rates in the economies of trade partners.

It also pointed to strong performance in international equity markets, which it said indicates the resilience of global economic prospects.

Inflation based on the consumer price index is forecast to rise from 0.1 per cent in 2025 to 0.8 per cent in 2026 and 1.4 per cent in 2027.

The inflation forecast for 2026 has been revised down by 1.2 percentage points compared with the October issue.

The centre said this downward revision reflects lower than expected inflation and further declines in international oil prices during the fourth quarter of 2025.

It said the inflation outlook is influenced by developments during 2025, particularly in the fourth quarter.

These include significant falls in international oil prices, easing global food prices, and an appreciation of the euro against the dollar.

The centre said the forecasts presented in the January issue are accompanied by significant external risks of lower than expected growth and higher than anticipated inflation.

It added that risks to growth continue to stem mainly from the external environment, specifically the possibility of slower than expected growth in the economies of Cyprus’ trade partners.

Finally, the centre also reported that inflation risks largely arise from strong domestic activity and tight conditions in the labour market.