The GDP growth rate for 2025 is forecast to rise to 3.5%, compared to the revised rate of 3.9% for 2024, the Central Bank of Cyprus (CBC) says, adding that in the period 2026-28, GDP is forecast to grow by 3% per year.
The CBC has published the December 2025 forecasts for the main macroeconomics of Cyprus for the years 2025-28, specifically for Gross Domestic Product (GDP), unemployment, inflation and inflation excluding energy and food.
The publication also includes an analysis of the potential deviations from the baseline scenario of the GDP and inflation forecasts, respectively.
"The projected path of GDP is mainly due to the expected further increase in domestic demand throughout the forecast horizon. Domestic demand is expected to be supported by the increase in private consumption due to the increase in real disposable income of households and the resilience that the labor market continues to record," it notes.
The labour market continues to support the Cypriot economy and is showing significant resilience, the CBC says, adding that unemployment in the third quarter of this year is forecast to fall to 4.5% of the labour force in 2025, compared to 4.9% in 2024.
"This is consistent with the positive trend recorded in the European Commission's Economic Surveys in terms of employment expectations over the next three months, as well as the continued decline in registered unemployed. In line with the expected strong GDP growth, unemployment is projected to stabilise at around 4.5% in 2026-28, reflecting full employment conditions," the CBC continues.
Inflation (based on the Harmonized Index of Consumer Prices, HICP) is projected to decline to 0.8% in 2025 from 2.3% in 2024. The CBC states that the significant decline in inflation in 2025 is mainly due to deflationary pressures in non-energy industrial prices and energy prices, and, to a lesser extent, to the slowdown in food price increases.
"These deflationary pressures are linked to the impact of the appreciation of the euro against the US dollar, as well as the trade diversion of cheaper Chinese imports to EU countries and Cyprus. The projected rise in inflation to 1.7% in 2026, 2.2% in 2027 and 1.9% in 2028 is due to the expected rise in food prices, as well as the gradual weakening of deflationary pressures in energy prices and non-energy industrial goods prices," it concludes.
(Source: CNA)
