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The International Monetary Fund (IMF) has lowered its expectations for how much Cyprus's economy will grow over the next two years. While earlier predictions were a bit more optimistic, the IMF now sees Cyprus's economy expanding by just 2.5% in 2025, instead of the 3.1% it had forecast last autumn. For 2026, the growth estimate is slightly better at 2.7%.
That’s a noticeable downgrade and doesn’t align with the Cyprus Finance Ministry’s own forecast, which still expects a stronger performance, 3.1% in 2025 and 3.2% in 2026.
Why the shift?
In its latest World Economic Outlook, the IMF blames a lot of the slowdown on rising global tariffs (taxes on imported goods) and the uncertainty they create. These trade tensions are making businesses more cautious, especially when it comes to investing, hiring, and expanding. The result? A general cooling of economic activity, not just in Cyprus but globally.
What does this mean for you?
If you’re running a small business, especially one involved in imports or exports, expect continued caution in the markets. Uncertainty in global trade policy may lead to fewer orders, slower deliveries, or price fluctuations. For everyday people, it could mean slower wage growth, cautious hiring, and tighter credit if banks become more careful with lending.
However, there’s some good news. Inflation, how fast prices are rising, is expected to hold steady at 2.3% in 2025 and drop to 2% in 2026. That means the cost of living shouldn’t spiral out of control, which will be a relief for families watching their budgets.
The IMF also sees unemployment staying relatively low. It predicts joblessness will drop to 4.8% in 2025 (down from earlier forecasts of 5.1%), though it may tick back up slightly to 5% in 2026. So, while the economy may not be growing as fast, it’s not expected to shed jobs at a dramatic rate either.
A global domino effect
The IMF isn’t just revising Cyprus’s figures. Countries across the board are seeing growth downgrades. The U.S., Eurozone, UK, China, and India are all now expected to grow more slowly in 2025. Countries like Austria and Mexico are even forecast to enter mild recessions.
Part of the problem lies in how countries are using tariffs to protect their own industries. While this may sound like a good idea in theory, the IMF warns it actually hurts productivity and raises prices. Plus, when businesses don’t know whether they’ll be able to access key markets tomorrow, they tend to freeze investments and slow down operations. The ripple effects are being felt everywhere—from oil prices to consumer spending.
