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Cyprus’s economy is expected to expand by 3.3% in 2025, with unemployment dropping to 4.6% and inflation easing to 1%, the Central Bank of Cyprus said Tuesday in its latest projections.
The outlook, contained in the bank’s September forecast, points to slightly stronger growth than anticipated earlier this year. The revision, up 0.2 percentage points from June’s estimate, reflects robust tourism numbers. Forecasts for 2026 and 2027 remain unchanged at around 3% growth annually.
Unemployment is now expected to fall more than previously thought, with the central bank lowering its jobless estimates by 0.2 points for 2025 and 0.1 points for 2026. Inflation projections were also trimmed, with consumer prices seen easing faster than forecast in June, largely due to weaker energy and industrial goods prices.
The economy is on track to cool slightly from last year, when GDP expanded by 3.4%. Growth will continue to rely heavily on domestic demand, supported by rising household spending and investments tied to the EU-backed Recovery and Resilience Plan. Tourism and technology exports are expected to bolster external demand, although geopolitical uncertainty and global trade tensions remain a drag.
The labor market remains resilient, with unemployment edging toward what economists consider full-employment levels. Joblessness is forecast to hold steady at around 4.7% through 2027.
Inflation is projected to dip sharply next year from 2.3% in 2024 to 1%, before climbing back to 2% in 2026 and 2.2% in 2027 as energy costs rise. Core inflation, which excludes food and energy, is seen moderating to 2% in 2025 and falling further in subsequent years.
The central bank cautioned that risks to growth lean slightly to the downside, citing global trade uncertainty and weaker external demand. Inflation risks, however, are tilted upward, with stronger wage growth, high profit margins and future tax reforms likely to keep upward pressure on prices.
