Nicosia, Cyprus. Cyprus’ economic growth slowed to its weakest pace in ten quarters in the first quarter of 2026, with Eurobank Research attributing the deceleration mainly to a rebound in imports. The bank said construction is expected to remain a key pillar of economic activity for the rest of the year.
Growth slows in first quarter
According to Eurobank Research’s latest economic analysis, gross domestic product expanded by 3.0 per cent year-on-year in the first quarter of 2026, down from 4.3 per cent in the fourth quarter of 2025 and 3.6 per cent in the first quarter of 2025.
Net exports weigh on performance
Eurobank Research said the slowdown was mainly the result of a less favourable contribution from net exports, despite continued strong trade growth.
Exports increased by 10.5 per cent year-on-year, while imports rose by 10.4 per cent, marking a significant shift from the previous quarter when exports grew by 3.4 per cent and imports contracted by 3.9 per cent.
The report said the sharp rebound in imports largely reflected base effects linked to unusually low investment in transport equipment, including ships and aircraft, a year earlier.
Domestic demand remains firm
Despite weaker external trade, domestic demand strengthened across most components of the economy.
Private consumption accelerated to 4.9 per cent year-on-year, compared with 3.6 per cent in the previous quarter, supported by favourable labour market conditions.
The analysis said unemployment fell to a record low of 4.0 per cent for a first quarter, helping to sustain household spending.
Government consumption also strengthened modestly, expanding by 4.6 per cent year-on-year, compared with 4.3 per cent in the final quarter of 2025.
Investment contracts again
Gross fixed capital formation declined for a second consecutive quarter, although the pace of contraction eased considerably to 6.9 per cent year-on-year, from 21.7 per cent previously.
