IMF cuts Cyprus growth forecast for 2026 to 2.9%, raises 2027 outlook

Nicosia, Cyprus. The International Monetary Fund (IMF) has reduced its Cyprus growth projection for 2026 from 3 per cent to 2.9 per cent, but increased its 2027 estimate from 3 per cent to 3.2 per cent. Its latest World Economic Outlook, released on Tuesday, also raises inflation forecasts while lowering estimates for unemployment and the current account deficit.

Growth and inflation projections

The October 2026 report puts inflation in Cyprus at 3.7 per cent for 2026 and 1.9 per cent for 2027. Both figures exceed the IMF’s April 2026 projections, which stood at 2.6 per cent and 1.6 per cent respectively.

The fund’s growth outlook differs from the finance ministry’s estimates. The draft state budget for 2027 forecasts growth of 3.1 per cent in 2026, followed by 2.9 per cent in 2027. Finance Minister Makis Keravnos presented the draft to parliament on October 12.

Lower unemployment and deficit estimates

The IMF now anticipates unemployment declining to 4 per cent in 2026, rather than the 4.6 per cent estimated in April. For 2027, it forecasts a slight rise to 4.4 per cent, still below its earlier projection of 4.7 per cent.

The fund also forecasts a substantially narrower current account deficit, at 7.7 per cent of gross domestic product (GDP) for both 2026 and 2027. Its April estimates had put the deficit at 9.3 per cent for 2026 and 10.3 per cent for 2027.

Global resilience amid continuing pressures

The IMF said the world economy was again proving resilient, but performance varied and the scope for short-term adjustment was shrinking rapidly.

According to the fund, economic activity during the first half of 2026 exceeded expectations despite the continuing Middle East conflict and sustained pressure from trade tensions.