Cyprus’ economic sentiment continued to improve in July 2026, supported by stronger confidence among businesses in the services and retail trade sectors, according to the latest business and consumer surveys published by the Economics Research Centre of the University of Cyprus (CypERC).

The centre said the Economic Sentiment Indicator (ESI-CypERC) increased by 0.7 points compared with June, extending the positive trend seen in recent months despite weaker consumer confidence.

The improvement was driven primarily by stronger business sentiment in the services and retail trade sectors, while confidence weakened slightly in construction and industry.

According to the report, the Services Confidence Indicator increased mainly because firms became more optimistic about their expected turnover in the coming months.

Meanwhile, the Retail Trade Confidence Indicator rose for the second consecutive month, reflecting more favourable assessments of current stock levels as well as stronger expectations for future sales.

By contrast, the Construction Confidence Indicator edged down marginally.

CypERC said the decline in construction confidence mainly reflected less favourable assessments by firms regarding the current level of their overall order books.

Confidence in the industrial sector also weakened during July, the report added.

The report explained that the decline in the Industry Confidence Indicator was largely due to less favourable assessments of finished product stocks and lower expectations for future production.

While businesses generally became more optimistic, consumers grew more cautious, the centre added in its latest update.

The Consumer Confidence Indicator fell primarily because households expressed more negative views about their financial situation.

According to the survey, consumers reported a further deterioration in their assessment of their recent financial circumstances, while expectations regarding their future financial situation also weakened during July.

The report also showed that economic uncertainty in Cyprus declined overall during the month.

CypERC attributed the fall in the Economic Uncertainty Indicator to lower uncertainty among businesses operating in the services, retail trade and construction sectors.

However, consumer uncertainty increased for the second consecutive month.

The centre said low-income households recorded the largest increase in uncertainty over their future financial situation compared with all other income groups.

The latest survey follows updated economic projections released by CypERC last week, which pointed to slower economic growth and higher inflation next year as the continuing conflict in the Middle East weighs on the Cypriot economy.

The centre expects real gross domestic product (GDP) growth to slow from an estimated 3.8 per cent in 2025 to 2.7 per cent in 2026, before strengthening to 3.1 per cent in 2027.

At the same time, inflation is forecast to accelerate from 0.1 per cent in 2025 to 3 per cent in 2026, before easing to 2.1 per cent in 2027.

CypERC said the weaker outlook reflects slower economic activity in both Cyprus and the euro area, rising energy prices, tighter financing conditions and the continuing economic effects of instability in the Middle East.

Despite these pressures, the centre said the Cypriot economy is expected to remain resilient, supported by relatively low unemployment, sound public finances and increased demand for new housing loans.