Nicosia, Cyprus. Renewed tensions in the Middle East have added uncertainty for Cyprus, with economist Tassos Yiasemides warning that a prolonged crisis could slow the island’s economic growth. He said rising geopolitical risk has returned to the centre of the global economic outlook as markets were beginning to stabilise after years of trade tensions and inflationary pressure.
IMF outlook highlights geopolitical risks
Speaking to the Cyprus News Agency, Yiasemides referred to the International Monetary Fund’s latest forecasts, released on Wednesday, which limit expected global economic growth to 3 per cent for 2026. He said the forecasts emphasise that geopolitical conflicts now constitute one of the greatest risks to international economic stability.
Energy, transport and trade under pressure
According to Yiasemides, the renewed instability is already creating risks through energy, transport and international trade. He said geopolitical instability in the Middle East is creating new risks mainly through those channels at a time when markets were trying to regain stability after recent trade tensions and inflationary pressures.
Inflation concerns and impact on Cyprus
He also said the IMF has revised its global inflation forecasts upwards, mainly because of higher energy costs and uncertainty in oil markets. For Cyprus, he said, the concern is not only the crisis itself but also how long it lasts and how strongly it feeds into prices, business costs and global demand.
Potential effects on growth and key sectors
Yiasemides said that if the crisis is prolonged and accompanied by persistently high energy prices and a general slowdown in the global economy, there will be a negative impact on the growth rate of the Cypriot economy. He said pressure would come through several channels, including higher production and transport costs, weaker economic activity in Cyprus’ main European markets and greater investor caution, which could result in growth in the coming months falling below initial expectations.
Cyprus is especially exposed because of its dependence on imported energy and fuel, he said. Higher international oil prices are gradually passed on to electricity, transport and business expenses before reaching consumers through the prices of goods and services. He added that the uncertainty could also affect key sectors of the economy, including tourism, shipping and investment.
