Cyprus Economy Grows 3.3 Per Cent in Second Quarter of 2026, Eurobank Research Says

Nicosia, Cyprus. The Cypriot economy expanded by 3.3 per cent year-on-year in the second quarter of 2026, up from 3 per cent in the first quarter, according to Eurobank Research. This was the fourth-best performance among euro area countries.

Resilient demand despite global conditions

Household spending and investment stayed strong even though the global economic backdrop worsened after the US-Iran war began. Eurobank Research’s latest analysis of the Cypriot economy highlights resilient domestic demand, a robust labour market and sustained investment. It also warns that higher inflation and weaker external balances pose risks to the outlook.

Consumption and investment lead growth

Household consumption rose by 5.4 per cent year-on-year and gross fixed capital formation by 9.4 per cent, making these two components the main engines of growth. Investment in transport equipment jumped by 151.9 per cent, while residential investment grew more modestly, by 4.3 per cent. Government consumption also contributed, rising by 4.5 per cent year-on-year.

Labour market and credit

Household spending was helped by favourable employment conditions. Unemployment stood at 3.6 per cent in the second quarter, not far from the historical low of 3.2 per cent registered in the same quarter of 2008. Consumer credit expanded by 12 per cent year-on-year, and hourly wage costs climbed by 3.9 per cent, the sharpest increase in five quarters. Eurobank Research observed that private consumption has long been a stable and important source of growth in Cyprus, and that the latest data match earlier periods of expansion.

External sector weighs on growth

Exports increased by 9.6 per cent, mainly on the strength of services. Imports grew faster, by 12.9 per cent, largely because of greater investment in transport equipment. As a result, the external surplus shrank by 45.1 per cent, and the rise in imports outweighed the contribution of exports, leaving the external sector as a drag on growth.