Cyprus unemployment hits record low as CBC warns of longer-term labour constraints

Nicosia, Cyprus. Unemployment in Cyprus reached a record low of 3.6 per cent during the second quarter of 2026, according to the Central Bank of Cyprus (CBC). Its analysis cautioned that demographic shifts, housing costs and skills shortages could increasingly restrict the labour market and longer-term economic growth.

Resilience despite external pressures

Writing in the CBC’s October 2026 Economic Brief, Marios Polemidiotis, a member of its Economic Analysis and Monetary Policy Division, described the labour market as an important measure of economic resilience and prospects because of its close relationship with growth, productivity and social welfare.

He said Cyprus had sustained a resilient labour market through repeated external shocks since the pandemic, including the energy crisis, inflation pressures, tighter financing conditions and continuing geopolitical uncertainty.

Polemidiotis reported that unemployment had fallen to 3.6 per cent of the labour force, while employment was still expanding. Foreign worker inflows remained substantial, he said, and participation in the labour force among Cypriots had stayed high.

Productivity gains become more important

The analysis warned that opportunities to expand employment by drawing on unused labour resources were narrowing. Polemidiotis said sustaining growth would depend increasingly on further employment expansion and higher labour productivity.

He attributed the labour market’s resilience to the economy’s structure, robust demand for labour, international investment and adaptable labour market institutions.

Services and investment underpin demand

Polemidiotis said tourism, professional services, information technology, financial services, shipping, healthcare and education continued to create substantial demand for workers. Together, these sectors represented almost 80 per cent of employment.

Despite temporary disruption during the pandemic, he said, those sectors had adapted considerably and recovered relatively quickly.

The analysis also linked job creation to continued foreign investment and international companies establishing operations. This support was particularly evident in technology, including financial technology and gaming, as well as investment firms and other professional services.