Growth forecast raised to 3.4 per cent

Finance Minister Makis Keravnos has welcomed the European Commission’s autumn 2025 economic forecast, saying that the findings confirm the economy’s “steady progress, resilience and dynamics” despite geopolitical pressures.

In a written statement, he said it was “particularly encouraging” that Brussels now expects Cyprus’ economy to grow by 3.4 per cent in 2025, revising its projection upward by 0.4 percentage points from the spring.  

Growth for 2026 was also raised by 0.1 percentage point to 2.6 per cent, placing Cyprus third in the Eurozone for expected performance. 

According to Keravnos, the report “confirms the continued confidence of the European Institutions in the Cypriot economy” and reflects the government’s “consistent economic policy, which forms solid foundations for a sustainable, extroverted and socially fair development model”.  

He added that Cyprus is “moving forward with stability, planning, responsibility and prudent fiscal policy”.

Keravnos also mentioned that the government continues with reforms, including the upcoming tax reform, aimed at “boosting incomes, attracting quality investments and building a modern, competitive and resilient economy”.

The Finance Ministry issued a similar statement, again expressing satisfaction with the commission’s revised outlook.

The ministry said the update was “a vote of confidence once again in the Cypriot economy”, noting that the projections remained broadly aligned with its own. 

It also stressed that Cyprus is expected to post the third-highest growth rate in the Eurozone in 2025, behind Ireland and Malta.

The ministry added that Cyprus’ growth is forecast to exceed the Eurozone and EU averages by around 2 percentage points in 2025 and 1.4-1.2 percentage points in 2026, a difference it said “confirms the resilience and flexibility of the Cypriot economy”.

Moreover, the commission’s latest assessment shows growth “driven mainly by domestic demand”, with household consumption expected to soften as real wage growth slows.

At the same time, investment is projected to strengthen through the completion of Recovery and Resilience Plan (RRP) projects in 2026. Services exports are also expected to remain robust.

Headline inflation is set to ease to 0.9 per cent in 2025, before gradually edging back towards 1.9 per cent by 2027.

Core inflation, excluding energy and food, is expected to remain slightly higher.

Even so, the ministry said inflation should stay “slightly below 2 per cent over the medium term”.

At the same time, labour market conditions are projected to remain strong. Unemployment, which recently fell to a record 4.3 per cent, is forecast to stabilise at 4.7 per cent in 2025, then ease to 4.5 per cent in 2026 and 4.3 per cent in 2027. 

Meanwhile, public finances are set to remain firmly in surplus. The government balance is projected at 3.3 per cent of GDP in 2025, followed by 3 per cent in 2026 and 3.2 per cent in 2027.

Public debt is expected to continue its downward path to 56.4 per cent of GDP this year, 51 per cent in 2026 and 45.7 per cent in 2027.

Finally, the commission reported that the Cypriot economy is expected to remain on a steady track in the second half of 2025, leading to full-year growth of 3.4 per cent, before growth eases to 2.6 per cent in 2026 and 2.4 per cent in 2027.