Middle East Tensions Cloud Cyprus Growth Outlook As Inflation Pressures Build

Cyprus’ economic growth is expected to slow in 2026 while inflation accelerates, according to updated forecasts from the Economics Research Centre of the University of Cyprus (CypERC), which cited weaker momentum and higher uncertainty linked to the conflict in the Middle East.

Growth Forecast Revised Lower

CypERC expects real GDP growth to slow to 2.7% in 2026 from an estimated 3.8% in 2025 before recovering to 3.1% in 2027.

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The 2026 forecast was revised down by 0.2 percentage points from the centre’s April projections, while the 2027 estimate was unchanged.

According to CypERC, the downgrade reflects weaker economic activity during the first quarter of 2026 in Cyprus and the euro area, together with signals from leading indicators between April and June. The centre said the conflict in the Middle East has contributed to weaker regional and international economic conditions.

Inflation Expected To Accelerate

The research centre forecasts inflation will rise from 0.1% in 2025 to 3% in 2026 before easing to 2.1% in 2027.

The 2026 and 2027 inflation forecasts were both revised up by 0.3 percentage points from April. CypERC attributed the higher projections mainly to rising international oil prices in April and May, as well as stronger domestic inflation during the second quarter.

“The continuing tensions in the Middle East have intensified upward pressure on international commodity prices, particularly oil, and have increased uncertainty regarding the outlook for economic growth and inflation,” the centre said.

Domestic Fundamentals Remain Supportive

Despite the weaker outlook, CypERC said low unemployment, strong public finances and higher new housing lending should continue to support economic activity.

However, the centre warned that weaker external demand, stronger inflationary pressures and tighter financing conditions could weigh further on growth.

“As the effects of the conflict continue to spread through the Cypriot economy, leading to weaker external demand, stronger inflationary pressures and tighter financing conditions, the risks are tilted towards even lower economic growth than forecast, as well as even higher or more persistent inflation,” the report said.

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Retail’s AI Push Faces A Cybersecurity And Regulatory Reality Check

by THEFUTURE.TEAM

October 19, 2026

Artificial intelligence is becoming a strategic priority for retailers, with 80% of retail leaders planning to increase investment in the technology, according to EY’s latest CEO Outlook Survey. However, growing concerns over cybersecurity, customer privacy and regulation could complicate adoption across an industry already facing inflation, geopolitical uncertainty and changing consumer expectations.

Confidence In AI Comes With Risks

The survey found that 80% of retail leaders are confident in their ability to expand the responsible use of AI and customer data. Retailers are increasingly applying the technology to demand forecasting, inventory management, customer service and personalised marketing, seeking to improve efficiency and respond more quickly to market changes.

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Yet adoption brings new vulnerabilities. EY found that 24% of retail leaders identified cybersecurity and data privacy as a leading business risk for the year ahead. Retailers manage sensitive customer information, payment systems and complex supply chains, making effective security and governance essential as AI becomes more deeply embedded in their operations.

The World Economic Forum’s Global Cybersecurity Outlook 2026 highlights the wider challenge: 87% of organisations reported rising cyber risks linked to AI vulnerabilities, while 94% expected malicious AI to have a significant impact on cybersecurity in 2026.

Regulation Will Shape AI Adoption

Regulatory frameworks are also influencing how quickly retailers can expand their use of AI. The European Union’s AI Act, China’s state-led governance model and measures introduced by individual US states are shaping the rules around the technology.

For retailers, compliance is becoming a strategic consideration, particularly for customer-facing applications that use personal data to personalise offers, automate interactions or analyse consumer behaviour. Regulatory missteps could carry significant costs in a sector where customer trust is critical.

EY Outlines Four Possible Futures

EY recommends that retailers plan for multiple outcomes rather than assume the current investment boom will continue uninterrupted. Its analysis draws on a four-scenario framework developed by Jim Dator of the University of Hawaii.

One scenario envisages constrained AI adoption as economic pressures, regulation, cyberattacks, legacy systems and poor data quality limit progress. Retailers in this environment may prioritise lower-risk back-office applications, such as finance, procurement, inventory and logistics, while customer-facing tools face resistance.

A second scenario anticipates continued growth, with sustained investment and widespread adoption. A third envisages deeper economic and social transformation as technology reshapes business operations. The fourth considers systemic breakdown, in which a small number of technology platforms control access to AI models and charge premium prices, potentially making advanced capabilities less accessible even to large retailers.

Governance Will Determine Competitive Advantage

EY’s findings suggest that investment alone will not determine which retailers benefit most from AI. Companies will also need robust cybersecurity, effective governance and strategies that can adapt to different economic, technological and regulatory conditions.

For a sector operating on tight margins, the challenge is to turn AI investment into lasting business value while managing the risks that come with greater dependence on the technology.

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