The International Monetary Fund (IMF) on Tuesday revised down its forecast for Cyprus’ economic growth, projecting a rate of 2.5 per cent of GDP in 2025.

This is significantly lower than its previous estimate of 3.1 per cent. For 2026, the IMF expects a modest rebound to 2.7 per cent. These projections diverge from those of the Cypriot Finance Ministry, which has forecast growth of 3.1 per cent in 2025 and 3.2 per cent in 2026 in its draft budget.

In its April edition of the World Economic Outlook, the IMF warned that a sharp increase in global tariffs, along with rising uncertainty, is expected to lead to a marked deceleration in global growth in the near term. The updated forecasts indicate lower growth across most developed and emerging economies compared to the fund’s October estimates.

Cyprus’ inflation is now projected to remain at 2.3 per cent for both 2024 and 2025—an upward revision from the October estimate of 2 per cent—but is expected to fall to 2 per cent by 2026. The IMF was more optimistic about Cyprus’ current account balance, revising the expected deficit for 2025 down from 8.3 per cent to 7.3 per cent of GDP.

Central Bank of Cyprus (CBC) governor Christodoulos Patsalides has warned that the United States’ decision to impose high tariffs on imports globally is exacerbating international economic uncertainty, with potential medium-term consequences for Cyprus.

In an interview with Philenews, Patsalides said that “the Global Uncertainty Indices have surged to levels higher even than those recorded during the pandemic.” He pointed out that this environment is increasing the likelihood of deviations from the central bank’s baseline macroeconomic scenario for both the eurozone and Cyprus.

While Cyprus currently faces limited direct impact due to the low volume of goods trade with the US, Patsalides cautioned that secondary effects could emerge. “There may be consequences for Cypriot exports of goods and services due to reduced economic activity among our trading partners,” he explained.

These effects could escalate further if tariffs or retaliatory measures extend into the services sector, a crucial component of the Cypriot economy. Patsalides stressed that tariffs run counter to free trade principles and are “inflationary from the supply side, increasing prices through higher costs of imported products and raw materials”.

Cyprus recorded the second highest budget surplus among European Union member states in 2024, according to data released by Eurostat on Tuesday.

The island tied with Ireland, with both countries reporting a surplus of 4.3 per cent of GDP, just behind Denmark, which led with a surplus of 4.5 per cent.

Eurostat reported that 21 of the EU’s 27 member states recorded budget deficits during the year. Of these, 12 posted deficits equal to or exceeding 3 per cent of their gross domestic product.

Across the euro area, the overall public deficit decreased from 3.5 per cent of GDP in 2023 to 3.1 per cent in 2024. In the broader European Union, the deficit fell from 3.5 per cent to 3.2 per cent.

In addition to its strong surplus performance, Cyprus also achieved a robust reduction in public debt. By the end of 2024, public debt fell to 65 per cent of GDP, down from 73.6 per cent in 2023. In absolute terms, this amounted to a drop from €23.08 billion to €21.82 billion.

Plum CEO and founder Victor Trokoudes has welcomed the European Central Bank’s (ECB) decision to cut interest rates, calling it a “strong signal” that the bank is delivering on its strategy of accommodative monetary policy aimed at supporting growth.

The ECB last week announced it would lower all three of its key interest rates by 25 basis points, bringing the deposit facility rate—the rate that guides the ECB’s monetary stance—to 2.25 per cent.

This marks the seventh rate cut in the current easing cycle and places rates at their lowest since 2022.

“This was a highly anticipated move,” said Trokoudes. “It’s a strong signal that the ECB is carrying out its strategy of an accommodative monetary policy.”

The ECB cited falling inflation as a key reason behind the rate reduction. In March, annual inflation in the eurozone eased to 2.2 per cent, edging closer to the ECB’s 2 per cent target, while core inflation fell to 2.4 per cent.

Trokoudes praised the ECB’s progress, noting that “price pressures across the economy are finally starting to ease.” He added, “It is to the ECB’s credit that they’re on track to achieve this when some other major central banks are still grappling with this challenge.”

Cyprus is seeing a strong flow of tourist arrivals this spring, with Paphos enjoying robust bookings from key foreign markets and a noticeable uptick in domestic travel over Holy Week.

Speaking to Philenews, Cyprus Hoteliers Association (Pasyxe) president Thanos Michaelides said the first half of 2025 is shaping up to surpass the same period last year, with current booking trends suggesting a potential new record, even if by a small margin.

He noted that, barring any unforeseen international developments, the outlook for the summer season remains very positive.

Michaelides added that the timing of Catholic and Orthodox Easter coinciding this year has played to Cyprus’ advantage.

With both falling in late April, foreign visitors are more likely to travel, expecting summer-like weather.

Workplace equality, support for vulnerable groups, and social enterprises are becoming key priorities under ESG’s social pillar, according to Andreas Alexi of the Cyprus Chamber of Commerce and Industry (Keve).

Alexi said the concept of ESG, Environmental, Social and Governance criteria, is becoming increasingly embedded in the business world, as companies recognise that long-term sustainability depends on this threefold framework. 

While environmental and governance issues have traditionally dominated the ESG agenda, he mentioned the social pillar is now, “fortunately”, gaining more ground.  

This part, he said, focuses on the societal impact of business activity, such as community engagement, employee well-being, inclusion, diversity and philanthropy. 

“Corporate responsibility towards society is not just an ethical commitment,” Alexi said, “but a strategic advantage.”  

The Federation of Employers and Industrialists (Oev), celebrating 65 years of activity in Cyprus, continues to champion internationalisation as key to enhancing the competitiveness of Cypriot businesses.

Marcos Kallis, an Oev official, stressed that access to international markets is now a necessity, not a choice. Oev actively supports entrepreneurship and sustainable growth by encouraging participation in international exhibitions and trade missions.

These efforts promote Cypriot products, attract investment, foster strategic partnerships, and generate employment opportunities.

A recent example includes a delegation of Cypriot IT companies to Greece, organised with CITEA, with a similar mission planned for Qatar in late 2025.

Kallis also urged the Ministry of Finance to maintain and enhance the sponsorship scheme supporting Cypriot participation in trade fairs, without additional burdens on businesses. Notably, 14 Cypriot firms showcased cutting-edge tech at a major 2024 exhibition in Dubai.

Consumer spending during the Easter period showed encouraging signs, particularly in essential goods, according to the head of the small shopkeepers’ association (Povek) Stefanos Koursaris and supermarkets’ association director Andreas Hadjiadamou.

Speaking to CNA, Koursaris noted that, as is typical during the Easter holidays, demand for essential items rose significantly, despite price increases in some categories. “The market performed reasonably well, considering that people allocated much of their budget to the festive table,” he said, highlighting that a large portion of household spending focused on necessities.

He pointed out, however, that higher prices for basic goods likely impacted spending in other areas, such as clothing and footwear, which did not see the usual festive boost. “Consumer behaviour has changed,” he said. “Although there was some movement, it wasn’t the strong increase we typically expect during Easter.”

Koursaris also suggested that the early payment of April pensions, on the 12th of the month, may have supported spending to some degree. “It gave people a bit of a push, but many were cautious with their purchases, knowing they’d need to stretch that money for another month and a half,” he explained.