Nicosia, Cyprus. Cyprus’ economy is projected to grow by 2.7 per cent in 2026, while inflation is expected to rise to 3 per cent, according to updated forecasts by the University of Cyprus Economics Research Centre.
The centre cited the continuing conflict in the Middle East as a key source of uncertainty affecting regional and international economic conditions.
Growth outlook revised down
The Economics Research Centre of the University of Cyprus, known as CypERC, expects real gross domestic product growth to slow from an estimated 3.8 per cent in 2025 to 2.7 per cent in 2026. Growth is forecast to strengthen to 3.1 per cent in 2027.
The 2026 growth forecast was revised down by 0.2 percentage points from the centre’s April outlook, while the forecast for 2027 remained unchanged.
CypERC said the revision reflects slower GDP growth in the first quarter of 2026 in Cyprus and the euro area, as well as developments recorded by leading economic indicators between April and June.
Inflation expected to accelerate
The consumer price index is forecast to rise from 0.1 per cent in 2025 to 3 per cent in 2026, before easing to 2.1 per cent in 2027.
Inflation forecasts for both 2026 and 2027 were revised upwards by 0.3 percentage points compared with the April projections.
Economic pressures and resilience
According to the centre, developments related to the Middle East conflict indicate increasing price pressures, weaker labour demand in some sectors, lower business and consumer confidence, greater economic uncertainty and tighter financing conditions.
Despite these pressures, CypERC said the Cypriot economy is expected to remain resilient, supported by relatively low unemployment, sound public finances and a recent increase in new housing loans.