Real GDP growth in Cyprus is projected to slow from 3.9% in 2024 to 3.5% in 2025, and to hold steady at 3.5% in 2026, the Economics Research Centre of the University of Cyprus (CypERC) says in its Economic Outlook issue for October 2025
The forecasts for 2025 and 2026, it notes, are higher by 0.3 and 0.2 percentage points, respectively, compared with those in the July issue, reflecting the upward revisions in the national accounts data published in October.
Moreover, it adds that the outlook benefits from positive developments in both Cyprus and the external economic environment, especially in the third quarter of 2025.
"On the domestic front, these developments include further declines in inflation, strong economic confidence, and credit expansion supported by reductions in interest rates. On the international front, the decrease in trade policy uncertainty and market volatility during the third quarter of 2025 (from the high levels recorded in the first half of the year) suggests an improved outlook relative to the July issue" it says.
CypERC points out that the growth forecasts are accompanied by substantial downside risks.
"These risks mainly arise from the external environment, particularly the possibility of slower-than-expected growth in trading partner economies, as economic sentiment and other leading indicators have remained subdued. In addition, fiscal pressures, climate-related events, and geopolitical tensions continue to pose downside risks to the growth outlook for Cyprus".
Regarding inflation, as measured by the Consumer Price Index (CPI), is forecast to fall from 1.8% in 2024 to 0.3% in 2025, and to pick up to 2.0% in 2026.
The forecast for 2025, it says, has been revised down by 0.7 percentage points compared with that in the July issue, as a result of lower-than-expected inflation in the third quarter and new declines in international oil prices.
The upward revision in the 2026 inflation forecast, by 0.5 percentage points, was driven by the strong economic performance in Cyprus during the first three quarters of 2025, as reflected in quarterly and monthly data, it concludes.
(Source: CNA)
