The Central Bank of Cyprus (CBC) expects GDP growth to reach 3.5% in 2025, compared with 3.9% in 2024, while for the period 2026–2028 it forecasts annual GDP growth of 3%. The Governor of the Central Bank, Christodoulos Patsalides, noted that the momentum of the Cypriot economy indicates that the country has strong foundations and shows flexibility and adaptability in addressing external pressures.
The public debt-to-GDP ratio declined to 56.2% in November 2025, from 65.8% in November 2024, while unemployment stands at 4.5% and core inflation at 1.9% for the years 2025–2028.
Inflation (based on the HICP) is projected to fall further to 0.8% in 2025 from 2.3% in 2024, while it is expected to rise to 1.7% in 2026, 2.2% in 2027, and 1.9% in 2028.
Core inflation is forecast to average around 1.9% during 2025–2028, compared with 2.6% in 2024.
As stated in the CBC’s December Economic Bulletin, published on Friday, “the projected GDP path is mainly due to the expected further increase in domestic demand throughout the forecast horizon, and, to a relatively lesser extent, to the anticipated course of external demand.”
Compared with the CBC’s September 2025 forecast, a “small downward revision of 0.2 percentage points in GDP growth is recorded for 2025, while no change is projected for the period 2026–2027.”
The revision for 2025 is due to the better-than-expected performance of the technology, trade, tourism, and financial services sectors in the third quarter of the current year, it adds.
With regard to the baseline scenario, the CBC expects “balanced risks” to GDP for 2025 and “slightly downside risks” for the period 2026–2028, while for inflation, risks are balanced for 2025 and slightly upside for 2026–2028.
In his introductory remarks in the Bulletin, CBC Governor Christodoulos Patsalides stresses that “the Cypriot economy continues to demonstrate resilience and positive prospects, despite the continuously changing international environment, which is characterized by ongoing geopolitical tensions and trade uncertainties.”
“The momentum of the Cypriot economy suggests that the country has strong foundations and shows flexibility and adaptability in addressing external pressures, a fact that is also reflected in the reports of credit rating agencies,” he underlines.
Furthermore, the CBC Governor notes that “the positive picture of the economy is also reflected in public finances,” pointing out that during the first eleven months of 2025, the fiscal surplus reached 3.2% of GDP.
Regarding the Cypriot banking sector, Patsalides notes that it has entered a phase of substantial maturity, reflecting and at the same time supporting the overall momentum of the domestic economy.
After a period of intense turbulence in the past, the domestic banking system is now fundamentally stronger, having undergone both qualitative and quantitative transformation, he says. He adds that “the strengthening of balance sheets, the improvement of business models, and the upgrading of banks’ risk management create an environment of increased resilience, capable of responding to complex and changing conditions.”
In his concluding remarks, the CBC Governor notes that “maintaining this course requires prudent economic policy, strengthening competitiveness, and investments in sectors that create long-term value” and "enhanced flexibility and adaptability, due to rapid technological development and the rapidly changing environment.”
CNA/CST/MCH/EPH/2026
ENDS, CYPRUS NEWS AGENCY
