The Central Bank of Cyprus has marginally revised down its economic growth forecast for 2025 to 3.1%, compared to the 3.2% projected in March, according to its July Economic Bulletin.
Central Bank Governor Christodoulos Patsalides noted that the Cypriot economy continues to demonstrate remarkable resilience and dynamism despite international uncertainties.
Economic growth reached 3.4% in 2024, driven primarily by increased private consumption (3.8%) and net exports. The services sector – including information technology, intellectual property, financial services and tourism – provided further GDP support.
First quarter performance strong
The first quarter of 2025 recorded annual GDP growth of 3%, primarily in trade, transport, tourism, communications and construction sectors.
For 2026-2027, the central bank forecasts annual GDP growth of 3%, with household consumption remaining a key growth driver.
Employment and inflation improve
Unemployment fell to 5% in the first quarter of 2025 from 5.8% in 2024, with stabilisation expected around 4.7% by 2027.
Inflation declined to 1.6% in the first half of 2025 and is expected to fall further to 1.5% for the full year. For 2026 and 2027, slight increases to 2% and 2.4% respectively are forecast, mainly due to energy and food costs.
Strong public finances
The fiscal surplus reached 4.3% of GDP in 2024 and is estimated at 3.5% for 2025. The debt-to-GDP ratio continues declining steadily, with forecasts of 57% this year and 52.6% in 2026, below the Stability Pact threshold.
Banking sector strength
The banking sector shows robust performance, with the CET1 capital ratio at 24.7% – the highest in the EU – and net profits of €1.2 billion for 2024.
Return on equity (RoE) reached 21.1%, whilst the non-performing loans (NPL) ratio decreased to 6.2%.
Enhanced supervision focus
The central bank has strengthened supervision of electronic money and payment institutions, emphasising ESG standards compliance and transparency requirements.
It seeks enhanced technological infrastructure and cybersecurity in the banking sector.
Patsalides stressed the need for continued vigilance due to international uncertainty, highlighting the importance of structural transformation and economic diversification, focusing on technology and attracting high value-added investments.
