Businesses In Trade, Tourism And Real Estate Face The Greatest Risks

Businesses in trade, tourism and real estate, together with lower-income households, remain the most exposed parts of the Cypriot economy as geopolitical tensions, inflationary pressures and elevated energy prices continue to weigh on the outlook.

In its latest Financial Stability Report, the Central Bank of Cyprus said stronger corporate and household balance sheets and continued lending growth have improved resilience, but companies in these sectors remain particularly vulnerable to weaker external demand, higher energy costs and any further escalation of tensions in the Middle East.

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Lending Continues To Grow

Businesses in the most exposed sectors continue to carry relatively high debt levels and limited cash reserves, making them more sensitive to economic shocks. By contrast, firms in information and communication, professional and technical services, as well as transportation and storage, appear better positioned thanks to lower leverage and stronger liquidity.

Financing conditions remained supportive throughout 2025, with new business lending reaching a record €3 billion and household lending totaling €1.8 billion. Banks also maintained strict lending standards, helping contain the risk of new non-performing loans.

Lower-Income Households Remain More Vulnerable

A resilient labour market supported household incomes during 2025, but gains were uneven. Income rose by 3.9% for lower-income households, compared with 7.1% for higher-income groups, leaving more vulnerable families less able to absorb future shocks.

The central bank also warned that renewed inflation or higher borrowing costs would place additional pressure on heavily indebted households and those with limited savings.

Deposits Continue To Strengthen Resilience

Corporate deposits increased by 17.5% in 2025, the fastest annual growth since 2018, while household deposits rose by 6.2%, strengthening liquidity across the private sector.

Although the direct impact of U.S. trade policy on Cyprus is expected to remain limited, the report said indirect effects, including higher energy prices, supply-chain disruptions, weaker external demand and softer investor sentiment, could weigh on economic activity and financial stability.

Cyprus recorded a general government fiscal surplus of €420.3 million in the first six months of 2026, equivalent to 1.1% of GDP, according to preliminary figures released by the Cyprus Statistical Service (Cystat). The result was slightly higher than the €416.8 million surplus recorded in the same period of 2025, which also represented 1.1% of GDP.

Tax Revenue Continues To Grow

Government revenue increased by 4.1% year on year to €7.4 billion, up from €7.11 billion in the first half of 2025. Growth was driven mainly by stronger tax collections and social contributions.

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Revenue from taxes on income and wealth rose by €101 million, or 6.3%, to €1.69 billion, while social contributions increased by €181.3 million, or 7.7%, to €2.54 billion. Taxes on production and imports climbed by €207.9 million, or 9.3%, reaching €2.45 billion, supported by an 18% rise in net VAT revenue to €1.73 billion.

Some revenue streams declined over the period. Capital transfers fell by €84.6 million to €23 million, revenue from the sale of goods and services decreased by €23.4 million to €481.8 million, while property income and current transfers dropped to €73.6 million and €136.9 million, respectively.

Spending Rises Alongside Revenue

Government expenditure increased by 4.3% to €6.98 billion, compared with €6.69 billion a year earlier. Social benefits remained the largest spending category, rising by €151.7 million, or 5.5%, to €2.89 billion. Compensation of employees increased by €64.9 million, or 3.4%, to €1.98 billion, while intermediate consumption rose by €88 million, or 13.4%, to €745.4 million. Interest payments edged up by 4.9% to €263.4 million, and current transfers increased by 9.1% to €478.4 million.

Capital Expenditure Declines

Capital expenditure fell by 9% to €580.8 million during the first half of the year. Although gross capital formation increased slightly to €434 million, other capital spending declined by 31% to €146.8 million. Subsidies also fell by 24.8% to €39.4 million.

Overall, the figures show that stronger tax revenues continued to offset higher government spending, allowing Cyprus to maintain a fiscal surplus during the first half of 2026.

Cyprus’ cash-access infrastructure remained broadly stable in 2025, even as the number of automated teller machines continued its gradual decline, according to a new report from the Central Bank of Cyprus. The number of ATMs fell from 398 at the end of the second half of 2024 to 396 a year later.

While banks added new machines in remote and mountainous areas to improve access for local communities, those installations were offset by removals elsewhere as lenders continued adjusting their branch and self-service networks.

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Contactless ATMs Expand

By the end of the second half of 2025, around 73% of ATMs in Cyprus supported contactless transactions, well above the euro area average of 38%.

ATM numbers also declined across the euro area, falling from 252,249 to 248,888 over the same period. Over the past five years, both Cyprus and the euro area have reduced their ATM networks by around 13%, reflecting lower cash usage and banks’ efforts to streamline operations.

Cash Withdrawals Become Less Frequent

The report also highlights a continued shift in payment habits. According to the ECB’s SPACE study, Cyprus recorded the largest decline in the share of cash payments at the point of sale among euro area countries between 2022 and 2024. At the same time, cashback services have become a more common way for consumers to access cash.

ATMs remained the primary withdrawal channel, with around €2.6 billion withdrawn during the second half of 2025. Although the total value was broadly unchanged from a year earlier, fewer transactions pushed the average withdrawal up from €307 in the second half of 2022 to €390 by the second half of 2025.

Bank Counter Withdrawals Continue To Decline

Cash withdrawals at bank counters have almost halved over the past three years, reinforcing the shift toward self-service and alternative cash-access channels.

Cyprus Talent Platform Draws More Than 750 Diaspora Professionals

More than 750 Cypriot professionals living abroad have registered on the government’s Minds in Cyprus platform, while employers have posted more than 400 specialised vacancies, officials said at the World Conference of Overseas Cypriots. Launched to strengthen links between the diaspora and the domestic economy, the platform has evolved from a policy initiative into a recruitment tool in just over a year. Irene Georgalla, head of the Office of the Deputy Minister to the President, said more than 300 enquiries, proposals and suggestions have also been submitted through the platform, highlighting continued interest from Cypriots living overseas.

Connecting Global Talent With Cyprus

President Nikos Christodoulides announced the initiative in London in May 2025, and it is being implemented by the relevant ministries in cooperation with Invest Cyprus and Keve under the coordination of the Presidency. According to Georgalla, the aim is to reconnect the experience, expertise and business networks of Cypriots abroad with a development model centred on innovation and high-value economic activity.

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“Attracting and reconnecting talent requires consistency, continuity and, above all, national credibility,” she said. Competition for skilled professionals has intensified amid geopolitical uncertainty and rapid advances in artificial intelligence.

“Talent does not follow economic growth alone, but also trust, stable rules and a clear sense of direction,” Georgalla said. She added that information technology, communications and the digital economy account for around 14% of Cyprus’ GDP, while the country is home to 12 universities and more than 15 research institutes and centres of excellence.

Strengthening Links With The Diaspora

Interest in the initiative was also reflected at a career event held in London in May 2026, which attracted hundreds of Cypriot professionals working in the United Kingdom and brought together more than 20 Cypriot companies and organisations.

Georgalla said the programme is intended to support both professionals considering a return to Cyprus and those who want to contribute from abroad through business, research and professional networks. Tax incentives also back it for returning professionals as part of the government’s broader strategy to strengthen the country’s international competitiveness.

“Our invitation to the diaspora is based not only on emotion or ties with the homeland, but also on genuine and credible professional prospects,” she said. “We do not regard you simply as participants, but as genuine partners. A country’s credibility in the international environment is built to a great extent through its people.”

The Central Bank of Cyprus has published its Quarterly Financial Accounts for the first quarter of 2026, providing an overview of the financial position of households, insurance companies, investment funds, pension funds and non-financial corporations.

Households Continue To Increase Financial Assets

Household financial assets rose to €65.30 billion at the end of March 2026. Cash, deposits and loans continued to dominate portfolios, accounting for 53% of total assets, followed by shares at 26%, other financial assets at 17% and debt securities at 4%.

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Debt also edged higher to €20.10 billion, lifting the household debt ratio to 55% of GDP from the previous quarter. Despite the increase, the longer-term trend remained downward. Compared with December 2016, the ratio has declined by 63%, reflecting a significant improvement in household balance sheets over the past decade.

Investment Portfolios Differ Across Financial Institutions

Insurance companies held €6.10 billion in financial assets at the end of the first quarter. Portfolios consisted of 45% shares, 29% debt securities, 18% other financial assets, 7% cash and deposits and 2% loans.

Investment funds reported €7.60 billion in assets, with equities making up 80% of portfolios. Cash and deposits accounted for 4%, loans and debt securities for 13%, and other financial assets for the remaining 3%.

Pension funds held €5.00 billion in financial assets. Shares represented 55% of portfolios, followed by 14% in cash and deposits, 13% in loans, 11% in other financial assets and 6% in debt securities.

Corporate Debt Remains Below Historical Levels

Non-financial corporations reported €79.60 billion in financial assets, including 39% in shares, 33% in other financial assets, 22% in cash and deposits, 5% in loans and 0.5% in debt securities.

Corporate debt increased to €40.00 billion, bringing the sector’s debt ratio to 109% of GDP, slightly above the previous quarter. However, compared with December 2016, the ratio has fallen by 97%, according to the central bank.

Amazon and Apple reported quarterly results that beat Wall Street expectations, but investors reacted differently as attention shifted to outlooks, artificial intelligence spending and future growth. While Amazon shares rose in premarket trading Friday after strong cloud results, Apple came under pressure after issuing weaker-than-expected guidance despite beating estimates on revenue, earnings and iPhone sales.

Amazon Sees Strong Cloud Growth

Revenue at Amazon Web Services, the company’s cloud computing division, increased 37% year over year, marking its fastest growth since 2021. Growth in AWS reassured investors that demand for cloud infrastructure remains strong as AI adoption accelerates.

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To support that expansion, Amazon raised its 2026 capital expenditure forecast to $220 billion from $200 billion, reflecting continued investment in AI infrastructure.

“AWS’s strong growth is a clear indicator that its infrastructure investments are meeting market demand rather than outpacing it,” Tracy Woo, principal analyst at Forrester, said in a note.

Apple Outlook Weighs On Shares

Apple exceeded Wall Street expectations for revenue, earnings and iPhone sales, but forecast revenue growth of 9% to 11% for the current quarter, below analysts’ expectations of 12%, according to LSEG.

Supply constraints remain a challenge, particularly for memory components used across the company’s product portfolio. Those pressures have already contributed to higher prices for Macs and iPads, while analysts expect iPhone prices to increase later this year.

Investors Focus On AI Execution

The contrasting market reaction highlights how closely investors are watching AI-related investment and growth across the technology sector. Before Friday’s move, Amazon shares had gained about 4% this year, compared with roughly 23% for Apple.

Elsewhere in the sector, Meta shares fell 8% on Thursday, while Microsoft gained 15%, reflecting differing investor views on AI investment strategies and expected returns.

Growth Outlook Cools After A Strong 2025

Cyprus’ economy is expected to expand by 2.7% in 2026, down from 3.8% in 2025, before accelerating again to 3.1% in 2027. Compared with April’s forecast, the 2026 projection has been revised down by 0.2 percentage points, while the outlook for 2027 remains unchanged.

Why The Forecast Was Cut

The downgrade reflects a softer pace of economic activity in the first quarter of 2026, both in Cyprus and across the euro area. It also reflects developments seen in leading indicators between April and June, driven largely by the continuing conflict in the Middle East.

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Inflation Pressures And Weaker Confidence

The signals point to rising price pressures, a moderation in labour demand in some sectors, a decline in business and consumer confidence, higher economic uncertainty and tighter financing conditions. Taken together, these factors suggest an economy that is still expanding, but facing a less supportive operating environment.

Resilience Remains The Key Strength

Even so, the Cypriot economy is expected to remain resilient. Support should come from relatively low unemployment, healthy public finances and a recent increase in new housing loans, all of which help cushion the impact of external headwinds.

Google said its internal AI tools helped identify and fix more security vulnerabilities in the last two Chrome releases than the company patched across the previous two years combined.

In a post published Thursday on its security blog, Google said it fixed 1,072 security bugs in Chrome versions 149 and 150, both released in June. That compares with 1,036 vulnerabilities fixed across the previous 23 Chrome releases.

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Google Expands AI Use In Security

Google outlined its approach in a white paper describing how it uses AI models to identify vulnerabilities and accelerate remediation. The report includes a chart showing a sharp increase in the number of bugs fixed in recent Chrome releases.

The company refers to each Chrome release as a “milestone.” Chrome version 126 was released in June 2024, while versions 149 and 150 shipped last month.

Company Says AI Speeds Vulnerability Detection

Doug Turner, Chrome’s director of engineering, said large language models have “fundamentally shifted the economics of cybersecurity” by automating vulnerability discovery.

“By applying models like Gemini, we are preemptively fixing vulnerabilities, outpacing our adversaries and making Chrome safer with every update,” Turner said.

Microsoft Also Reports More Security Fixes

Google is not the only technology company reporting higher numbers of security patches alongside broader AI adoption. Earlier this month, Microsoft said it fixed a record 570 vulnerabilities during its monthly Patch Tuesday release and cited its use of AI as one factor behind the increase.

Apple has not reported a comparable increase. According to an independent vulnerability tracker, the company has fixed 482 security flaws in 2026 so far, a total broadly in line with previous years.

Apple’s services business surpassed 1.5 billion paid subscriptions during the June quarter, up from 1 billion in January 2025, as the company continued to expand its ecosystem despite revenue coming in below Wall Street expectations.

Services revenue reached $30.74 billion, missing analysts’ estimate of $31.22 billion. The shortfall, together with weaker-than-expected performance in China, sent Apple shares down more than 4% in after-hours trading.

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App Store Growth Slows

Chief Financial Officer Kevan Parekh said several factors weighed on services revenue, including slower mobile gaming activity and changes to the App Store business model in some markets.

In the United States, court-ordered changes now allow developers to process payments outside the App Store, reducing Apple’s ability to collect commissions on some transactions. The legal dispute remains ongoing and is expected to reach the U.S. Supreme Court.

Parekh did not quantify the financial impact of those changes.

Foreign Exchange Also Weighed On Results

According to Apple, foreign exchange was the largest factor behind the services revenue miss. Results were also affected by a difficult comparison with the prior year, when the theatrical release of F1 boosted performance.

Despite the weaker-than-expected revenue, the App Store recorded a June quarter revenue record. That figure includes Apple Ads, which recently expanded to Apple Maps.

Paid Subscriptions Continue To Grow

Apple said services revenue reached an all-time high across developed markets and a June quarter record in emerging markets. Double-digit growth was recorded in the vast majority of markets where the company operates.

“Our services continue to attract more customers, and we have now surpassed one and a half billion in paid subscriptions,” Parekh said. “Both transacting and paid accounts reached new all-time highs in the quarter, with double-digit growth for both in emerging markets.”

Multiple Services Posted Record Results

Apple said Apple Ads, the App Store, AppleCare, Apple Music and Apple TV each recorded June quarter revenue records. Cloud services and payment services reached all-time highs, while Apple TV reported record viewership during the quarter.

Apple Expands Services Offering

The company also highlighted newer products, including Creator Studio subscriptions and planned bill-splitting features for Apple Cash, as part of its expanding services portfolio.

Apple’s Upgrade program, launched with Klarna, is designed to simplify device purchases and could encourage more customers to adopt Apple products and services.

Reddit Chief Executive Steve Huffman said Google’s AI Overviews are making search traffic less predictable, highlighting growing uncertainty over a channel that has long been one of the platform’s main sources of new users.

Speaking after Reddit reported second-quarter results that topped expectations, Huffman said changes to Google’s search experience continue to affect referral traffic. The company also issued a stronger-than-expected outlook, although shares fell 11% in extended trading.

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AI Search Changes Referral Traffic

For years, Reddit relied on Google Search to direct users to discussions and recommendations across the platform. As Google expands AI-generated summaries in search results, fewer users may need to click through to external websites.

“Search is volatile, and we see those changes, we’ve been through those many times,”

Huffman said.

Huffman said Google’s traditional search model created significant value for publishers and online platforms, while AI Overviews have yet to deliver similar benefits.

“If we look at the Google ecosystem, the 10 blue links have driven a tremendous amount of value for the whole ecosystem. AI Overviews has yet to make a similar level of positive impact, and that seems consistent across the broader landscape,”

he said.

Reddit Focuses On Direct User Growth

Huffman said Reddit is investing in product improvements, international expansion and user retention as it seeks to reduce its dependence on search referrals.

“We’re thinking about all of our options. Our goal is to maximize the long-term value for Reddit,”

he said.

He also said users visit Reddit for perspectives and discussions that AI-generated summaries cannot fully replicate.

“Some of the tension is that people want Reddit, they don’t necessarily want a summary of Reddit. They want the human perspective, the multiple perspectives, the lived experience that we provide,”

Huffman said.

Company Keeps AI Spending Low

Unlike larger technology companies investing billions of dollars in AI infrastructure, Reddit continues to operate with relatively low capital spending.

“We’re a low-spend company,” Huffman said, adding that capital expenditures totalled about $1.1 million during the quarter. “We’re trying to deliver the AI returns without the AI cost.”

Data Licensing Continues To Grow

Reddit continues to generate revenue from licensing its data to AI companies, including OpenAI and Google. Revenue from its “other” category, which includes licensing agreements, rose 24% year over year to $43 million.

Earlier this month, The Wall Street Journal reported that Reddit was considering limiting Google’s access to its data as publishers raised concerns over declining referral traffic. Huffman said the company’s position had not changed.