The Central Bank of Cyprus has lowered its economic growth forecasts for 2026 and 2027, warning that the war in the Middle East is creating a more challenging outlook for the economy through weaker tourism, higher energy prices and continued uncertainty over global trade. While domestic demand is expected to remain resilient, the bank now expects slower growth and higher inflation than it projected just three months ago.

Growth Outlook Softens On Geopolitical Shock

In its June 2026 Economic Bulletin, the Central Bank revised its GDP forecast for this year to 2.5%, down from 2.7% in March. Growth for 2027 was also trimmed slightly, from 3% to 2.9%, while the economy is still expected to expand by 3.1% in 2028.

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According to the bank, the downgrade is relatively modest because the March projections had already incorporated conservative assumptions about geopolitical risks. Even so, the outlook remains highly dependent on developments in the Middle East. If the agreement announced between the United States and Iran fails to materialise or is not implemented, Cyprus could face fuel shortages, higher import costs and further supply-chain disruption.

Those risks are expected to weigh most heavily on tourism, shipping, construction and real estate. As a result, the Central Bank expects net exports to subtract from economic growth this year because of weaker tourism revenues, lower shipping receipts and slower growth in other service exports. Domestic demand, however, should continue to provide support, helped by higher real household incomes, a resilient labour market and continued investment in large private projects, even if some of them are delayed.

“Although their implementation schedule may be affected by the crisis in the Middle East, these projects are not expected to be cancelled,”

the Central Bank said.

Inflation Forecast Raised

The biggest revision in the latest projections concerns inflation. The Central Bank now expects inflation, measured by the Harmonised Index of Consumer Prices (HICP), to average 3.2% in 2026, compared with 0.8% in 2025 and 0.5 percentage points higher than forecast in March.

Higher energy prices remain the main driver, reflecting the impact of the conflict on international oil markets and supply chains. Those pressures are expected to feed through to food prices and other goods before inflation gradually eases to 1.9% in both 2027 and 2028. Core inflation, which excludes food and energy, is projected to rise to 2.3% this year before moderating over the following two years.

Labour Market Remains A Bright Spot

Despite the weaker economic outlook, the labour market is expected to remain resilient. Employment growth is forecast to slow from 1.7% in 2025 to 1.3% this year before recovering in 2027 and 2028, while unemployment is projected to edge up only slightly to 4.6% before stabilising around 4.5%, a level the Central Bank considers consistent with full employment.

At the same time, policymakers warned that risks to inflation remain tilted to the upside. Persistently high oil prices, climate-related disruptions and stronger-than-expected wage growth could all keep price pressures elevated for longer than currently forecast.

Cyprus is facing significant labour shortages across key sectors of its economy, according to the annual EURES report on labour shortages and surpluses for 2025, based on 2024 data. The findings point to persistent strain in the labour market and growing pressure on employers trying to fill critical roles.

Health, Technology And Tourism Lead The Shortage List

The most acute shortages are concentrated in health care, information technology and tourism — three sectors that are central to Cyprus’s economic model and service capacity.

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Within health care, the report highlights shortages among nurses, midwives, medical imaging technicians and doctors, with the lack of personnel described as particularly severe.

In technology, shortages are reported for systems analysts, software and applications developers, web and multimedia developers, and ICT sales professionals.

Tourism and hospitality are also under pressure, with vacancies affecting waiters, chefs, cooks, hotel reception staff and restaurant managers. The report also notes significant demand for bus drivers, underscoring broader transport constraints linked to the sector.

Medium And Lower-Intensity Gaps Across The Economy

The shortage is not limited to highly specialized professions. The report also identifies moderate shortages in occupations such as electricians, mechanical technicians, sales workers, cashiers, builders, welders, heavy vehicle drivers, and workers in agriculture, livestock and construction.

At a lower level of severity, shortages appear among engineers in various specializations, health assistants, carpenters, plumbers, electrical technicians and bakers.

Broader European Imbalances Remain Persistent

Across the European Union, EURES notes that labour shortages remain widespread, but are concentrated in a limited number of member states. That pattern, the report suggests, leaves room for stronger cross-border mobility as a policy tool.

In countries such as Bulgaria, Italy and the Netherlands, employers struggle to fill a broad range of positions. By contrast, Latvia, Austria and Finland more frequently report labour surpluses.

Notably, 98% of occupations experiencing shortages in at least one member state also show surpluses in another EU country, highlighting the scale of labour mismatches across the bloc.

What Is Driving The Imbalance

The report attributes these imbalances to several structural factors, including limited awareness of job opportunities abroad, difficulties in recognising professional qualifications, language barriers and wage differences.

Particular attention is given to health and care professions, where an ageing population is increasing demand for services. The same pressure is evident in green-transition occupations such as electricians and other skilled tradespeople.

Policy Responses And Workforce Priorities

Among the report’s key recommendations are simpler procedures for recognising qualifications, stronger vocational training, improved job quality and better use of untapped labour pools, including women, older workers and migrants.

For Cyprus, the message is clear: addressing labour shortages will require more than short-term hiring fixes. It will demand coordinated policy action, targeted skills development and a labour market capable of adapting to demographic and technological change.

The value of loans managed outside Cyprus’ traditional banking sector continued to increase in the first quarter of 2026, highlighting the scale of the island’s loan servicing market and the continued burden of distressed debt on households and businesses.

Loan Portfolio Expands By €256 Million

According to figures released by the Central Bank of Cyprus (CBC), the contractual balance of loans managed by Credit Acquiring Companies and Credit Servicing Companies reached €19.61 billion as of March 31, 2026. That was €256 million, or 1.3%, higher than the €19.35 billion recorded at the end of 2025.

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Growth was driven primarily by larger household and non-financial corporate portfolios, which accounted for most of the quarterly increase.

Households And Businesses Carry The Largest Burden

Household loans under management totalled €9.67 billion, including €662 million in performing loans and €9.01 billion classified as non-performing. Those exposures related to 55,044 households.

Loans to non-financial corporations amounted to €9.24 billion, comprising €403 million in performing exposures and €8.83 billion in non-performing loans across 9,261 companies.

Compared with the end of December 2025, non-performing balances increased in both the household and corporate segments, while performing loans declined in each. Taken together, the figures suggest that asset quality remains under pressure even as the overall portfolio continues to expand.

Other Financial Corporations Show Modest Improvement

A more positive trend emerged among other financial corporations. Performing loans in that segment increased to €15 million from €6 million at the end of 2025, while non-performing balances edged down to €689 million from €691 million.

Overall, the segment covers 76 financial corporations.

Net Carrying Amount Highlights Recovery Expectations

Although the contractual value of the managed portfolio stood at €19.61 billion, its net carrying amount was significantly lower at €2.84 billion as of March 31, 2026.

This gap reflects the way acquired loan portfolios are valued on the balance sheets of Credit Acquiring Companies. While the contractual balance represents the full amount owed under loan agreements, including accrued interest, the net carrying amount reflects expected future cash flows after taking impairment losses and anticipated recoveries into account.

Overall, the latest data underline the continued importance of Cyprus’ loan servicing industry. While the managed portfolio continued to expand during the first quarter, the predominance of non-performing loans across both household and corporate borrowers shows that legacy debt remains a significant feature of the country’s financial landscape.

Artificial intelligence and digital transformation took centre stage this week as the 5th Digital Cyprus Conference 2026 brought together business leaders, policymakers, technology experts and internationally recognised speakers in Nicosia to discuss how emerging technologies are reshaping the future of business.

AI Takes Centre Stage In Cyprus’ Digital Agenda

Organised by the Cyprus Information Technology Enterprises Association (CITEA) and IMH, the conference explored how artificial intelligence is transforming industries, changing the way businesses operate and creating new opportunities for growth across the economy.

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Addressing the event, Deputy Minister of Research, Innovation and Digital Policy Nicodemos Damianou highlighted the strategic role of digital transformation and AI adoption in strengthening Cyprus’ long-term competitiveness.

Business Leaders Examine The Next Wave Of Transformation

Building on that theme, speakers from Cyprus and abroad shared insights into the latest developments in digital technologies, focusing on the strategies businesses can adopt to remain competitive in an increasingly technology-driven marketplace.

Alongside the conference programme, participants also explored an outdoor technology exhibition showcasing innovative products, services and digital solutions from companies across the sector.

CITEA Says AI Is No Longer Optional

Reflecting on the discussions, CITEA President Giorgos Malekkos said the conference demonstrated not only how rapidly artificial intelligence is evolving, but also how businesses are already putting the technology into practice while preparing for the opportunities it is expected to create in the years ahead.

“AI is here to stay and was the central theme of the conference, a topic that will continue to be highly relevant in the years ahead,”

he said.

Malekkos added that CITEA and its members stand ready to help businesses take the next step by supporting the adoption and effective use of artificial intelligence.

A Growing Platform For Cyprus’ Digital Ecosystem

This year’s event once again reinforced the conference’s role as one of Cyprus’ leading forums for the business and technology community. By bringing together policymakers, industry leaders and technology providers, it provided a platform for exchanging ideas, sharing expertise and building new partnerships across Cyprus’ growing digital ecosystem.

The financial impact of the Middle East crisis is becoming increasingly visible in Cyprus’ tourism sector. Following the release of April tourism revenue data by the Cyprus Statistical Service (Cystat), the industry has lost more than €150 million in revenue across March and April alone, although strong performance at the start of the year helped soften the overall decline.

March And April Deliver The Heaviest Blow

The downturn gathered pace after the drone incident near the British Bases in the early hours of March 1. From that point, both tourist arrivals and revenue weakened sharply, driven largely by a collapse in visitors from Israel, then Cyprus’ second-largest source market and one of its highest-spending.

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According to the Travel Survey, tourism receipts fell to €197.5 million in April 2026, down 35.1% from €304.2 million a year earlier. Over the first four months of the year, revenue totalled €443 million, compared with €582.5 million during the same period of 2025, representing a decline of 23.9%.

The deterioration had already begun in March, when tourism receipts dropped 33.8% year on year to €85.6 million from €129.4 million, reducing revenue by €43.8 million. April brought an even larger setback, with losses reaching €106.7 million. Together, the two months wiped €150.5 million from Cyprus’ tourism industry.

Strong Early-Year Performance Limited The Damage

The overall picture would have been considerably weaker without a strong start to the year. Between January and February, tourism receipts increased to €159.9 million from €148.9 million in the corresponding period of 2025, an increase of 7.4%.

Those gains helped cushion the losses that followed, but they were not enough to offset the impact of regional instability. Reduced flight schedules, weaker traveller confidence and negative international publicity continued to weigh heavily on bookings throughout the spring.

Signs Of Recovery In May

More recent data, however, suggest the market may be stabilising. Tourist arrivals reached 455,680 in May, down 4.9% from 479,160 in May 2025, but the headline figure masks a notable recovery in one of Cyprus’ most important source markets.

Arrivals from Israel rebounded to 53,649, accounting for 11.8% of all visitors during the month. That compares with just 1,537 Israeli arrivals in March, when the drone incident and the broader regional escalation severely disrupted travel. Numbers recovered to 15,997 in April before surpassing the previous year’s level in May, when Cyprus had welcomed 45,249 visitors from Israel.

Parliament Turns Its Attention To Tourism

The impact of the Middle East crisis is also expected to feature prominently in Parliament. The House Committee on Energy, Commerce, Industry and Tourism is examining how the regional situation has affected Cyprus’ tourism sector, along with possible support measures for businesses.

Among those expected to participate are Deputy Minister of Tourism Kostas Koumis, representatives of hotel associations, travel agents, Hermes Airports, local authorities, tourism development organisations and businesses operating across the hospitality and leisure sectors.

Koumis: April Decline Was Expected

Deputy Minister of Tourism Kostas Koumis said the sharp fall in April tourism receipts was not unexpected, given that the month followed the severe disruption experienced in March.

In a written statement, he noted that the comparison was particularly challenging because April 2025 had been the strongest April on record for Cyprus’ tourism industry, with arrivals exceeding 400,000 for the first time. By contrast, April 2026 was marked by regional conflict, negative international media coverage, reduced flight schedules and broader uncertainty across the travel market.

Koumis also pointed to the so-called jet fuel crisis, which created additional pressure on aviation and tourism across Europe amid concerns over fuel supplies, further weighing on booking activity.

Despite those challenges, he said the improvement seen in subsequent months suggests that the measures introduced by the government and the tourism industry are beginning to have an effect, with the sector gradually moving towards a more stable footing.

Cyprus’ annual inflation accelerated to an estimated 4% in June 2026, widening the gap with the euro area, where price growth continued to ease, according to flash estimates released on Tuesday by Eurostat.

Domestic Prices Move Higher

Consumer prices in Cyprus increased by 0.8% compared with May, based on the Harmonised Index of Consumer Prices (HICP), as inflationary pressures gathered pace across the domestic economy.

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That contrasted with the broader euro area, where annual inflation is estimated to have slowed to 2.8% in June from 3.2% in May, extending the bloc’s gradual disinflation trend.

Cyprus Moves Further Above The Euro Area Average

The latest figures leave Cyprus well above the euro area’s average inflation rate, highlighting a divergence between domestic price developments and those across the single currency bloc. While inflation continued to moderate in much of the eurozone, price growth accelerated on the island.

Across the euro area, energy remained the largest contributor to inflation, posting an annual increase of 8.7% in June. Although still elevated, that represented a slowdown from 10.8% in May.

Services inflation also eased, falling to 3.2% from 3.5% a month earlier.

Food And Industrial Goods Show Softer Growth

Price growth moderated in several other categories as well. Inflation for food, alcohol and tobacco slowed to 1.6% from 1.9% in May, while non-energy industrial goods remained unchanged at 0.9%.

A Sharp Reversal From Spring

June’s reading marks a notable shift from earlier in the year. In March, Cyprus recorded one of the lowest inflation rates in the European Union at 1.5%, reflecting relatively subdued price pressures at the time.

Since then, inflation has accelerated as the impact of the conflict in the Middle East and Gulf region, particularly through higher energy costs, has become increasingly visible in consumer prices.

With annual inflation now reaching 4%, Cyprus has moved well above the euro area average, suggesting that imported cost pressures are playing a growing role in domestic inflation.

Cyprus’ retail sector continued to build momentum in May, with both sales values and volumes rising strongly, highlighting resilient consumer spending across a broad range of categories, according to data released by the Cyprus Statistical Service (Cystat).

Turnover Value And Volume Both Move Higher

The retail trade turnover value index increased 9.8% year on year in May, while the turnover volume index rose 7.5% compared with the same month in 2025. Together, the figures suggest that consumers not only spent more but also purchased greater volumes of goods across the retail sector.

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Fuel And Household Goods Lead Value Growth

The strongest increase in turnover value came from automotive fuel, which climbed 20.9% compared with a year earlier.

Other household equipment, a category that includes building materials, carpets, furniture, electrical appliances and lighting, recorded the second-largest gain at 12%, reflecting continued demand for home-related purchases.

Educational and recreational goods, including books, stationery, sporting equipment and toys, also posted solid growth, with turnover value rising 10.1%.

Clothing, Technology And Household Equipment Drive Volume

Measured by sales volume, clothing and footwear delivered the strongest performance, advancing 19.4% year on year. Information and communication equipment followed with a 17.6% increase, while other household equipment recorded a 13.3% gain.

Not every segment shared in the broader upswing. Sales volumes of automotive fuel declined 3.8%, while flowers, plants, watches, jewellery, optical goods and second-hand items fell 2.1%.

Year-To-Date Growth Remains Positive

The positive trend extended across the first five months of the year. Between January and May, the retail turnover value index increased 7.1% compared with the same period of 2025, while the turnover volume index rose 5.9%.

Taken together, the latest figures indicate that Cyprus’ retail sector continues to benefit from resilient consumer demand. Although some categories remain under pressure, spending has remained broad-based across both essential goods and discretionary purchases, supporting steady growth in the market.

Cyprus may be placing growing emphasis on political progress at the expense of commercial returns in its natural gas strategy, according to energy expert Dr Charles Ellinas, who warned on Wednesday that the government appears increasingly willing to grant concessions to multinational energy companies to keep offshore projects moving.

His comments came after ExxonMobil and QatarEnergy declared the Pegasus and Glaucus fields in Block 10 of Cyprus’ exclusive economic zone (EEZ) to be commercially marketable. While the announcement marks an important milestone in the development process, Ellinas cautioned that it should not be interpreted as a final commitment to move ahead with production.

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Marketable Does Not Mean Approved For Development

Speaking to the Cyprus News Agency, Ellinas said the companies were effectively meeting a procedural deadline after confirmatory drilling established the commercial viability of the discoveries.

“This does not mean that it will proceed with development,” he said, noting that a final investment decision is unlikely before 2029 and that exports are not expected to begin before 2033.

For Ellinas, the more important question is not whether the fields have been declared marketable, but under what commercial terms they will eventually be developed. After years of delays, he argued, the government appears increasingly focused on demonstrating progress while paying less attention to the long-term economics that will ultimately determine the value of the projects.

Concessions May Be Rising As Margins Tighten

That concern is closely linked to the economics of future gas exports, which Ellinas believes are becoming increasingly challenging. He noted that ExxonMobil has already signed memorandums of understanding with Egypt to transport Cypriot gas through Egyptian infrastructure, potentially via the Segas liquefaction terminal in Damietta or a planned new terminal in Port Said.

Even so, he questioned whether those export routes would generate sufficiently attractive returns.

“Based on the liquefied natural gas prices expected at the time ExxonMobil starts exporting, the margins are small. For it to become commercially viable, Cyprus must make concessions,”

he said.

According to Ellinas, industry developments suggest the government has already granted significant concessions, potentially leaving the state with only a modest share of future profits if LNG prices remain weak and Brent crude prices also soften.

In his view, the negotiating dynamic can easily become self-reinforcing. Once governments begin relaxing commercial terms to preserve project momentum, companies often return seeking additional concessions.

Commercial Reality Is Catching Up With Political Ambition

Ellinas believes Cyprus has now reached the point where political priorities are beginning to outweigh commercial considerations. After years of delays following the country’s offshore discoveries, securing an export route has become increasingly important. That urgency, he warned, could weaken the government’s negotiating position.

He pointed to Italian energy company Eni, which has yet to reach a final investment decision on the Kronos field in Block 6 of Cyprus’ EEZ. Although the technical studies have reportedly been completed, the continued delay suggests commercial issues remain unresolved.

“It seems that the problems are continuing, so that the company cannot announce a final investment decision,”

he said, adding that Eni may also be seeking additional concessions.

Global LNG Supply Could Push Prices Lower

The broader market outlook may make those negotiations even more difficult. Ellinas expects global LNG supply to increase by as much as 40%, a development that would likely place significant downward pressure on prices.

“With those huge quantities entering the market, it is expected that LNG prices will decrease considerably,”

he said.

That outlook, he added, is also likely to influence future discussions with Chevron, which holds rights to Block 12 alongside Israel’s NewMed Energy and BG Group, owned by Shell. Block 12 contains the Aphrodite gas field.

According to Ellinas, Chevron previously estimated that developing and exporting Aphrodite would cost around €4 billion without a floating processing platform. Cyprus later requested that such a platform be included, and the company agreed. Even so, he believes negotiations are unlikely to end there.

“I believe they will come and start asking us for more concessions,” he said. “I hope they do not, but I am worried about it.”

ExxonMobil’s Wider Position In The East Mediterranean

Ellinas also highlighted ExxonMobil’s expanding footprint in the eastern Mediterranean, noting that the company now controls a substantial strategic area through its interests in Blocks 4 and 10A. In his view, that gives the company greater flexibility when assessing future discoveries and export options.

He said drilling in the new blocks remains strategically important, even though Pegasus and Glaucus already contain sufficient gas to support exports to Egypt. If additional discoveries significantly increase available volumes, Egypt’s existing infrastructure may eventually prove insufficient, creating the need for alternative export solutions.

That flexibility benefits ExxonMobil by allowing it to keep multiple development options open while postponing major investment commitments. For Cyprus, however, Ellinas warned that continued delays combined with growing concessions could ultimately leave the country with less favourable commercial terms for some of its most valuable energy assets.

Global air passenger demand fell 2.2% year on year in May as the conflict in the Middle East continued to weigh on the aviation sector, according to the International Air Transport Association (IATA). Measured in revenue passenger kilometres (RPKs), demand declined alongside a 2.3% reduction in capacity, measured in available seat kilometres (ASKs). Even so, airlines continued to fill more seats on average, pushing the global passenger load factor up 0.1 percentage points to a record 83.5% for the month.

According to IATA, the overall decline was largely driven by the Middle East. Excluding the region, global passenger demand would have increased by 0.7%.

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Middle East Disruption Distorts The Global Picture

The gap between international and domestic markets became more pronounced in May. International passenger demand declined 1.6% year on year as capacity fell 2.4%, yet the international load factor still improved by 0.7 percentage points to 83.7%. Without the disruption in the Middle East, international demand would have risen 3.1%.

Domestic markets, by contrast, remained under greater pressure. Revenue passenger kilometres fell 3.1% from May 2025, while capacity declined 2.1%, bringing the domestic load factor down 0.8 percentage points to 83%.

IATA Director General Willie Walsh said the conflict in the Middle East continued to have the greatest impact on airlines in the region. Middle Eastern carriers recorded a 28.4% year-on-year decline in passenger demand in May, although that represented a marked improvement from the 46.6% drop reported in April.

“That’s a significant improvement on the 46.6% decline recorded for April, a sign of the region’s resilience,” Walsh said.

He added that North America and Asia also experienced year-on-year declines, driven largely by weaker domestic markets in the United States and China.

Fares, Fuel And Margin Pressure

Despite those headwinds, Walsh said passenger demand remained “largely resilient,” although the impact of the conflict is likely to persist.

He pointed to the recent decline in oil prices as an encouraging development but cautioned that uncertainty surrounding supply through the Strait of Hormuz remains a significant risk. Even if crude prices continue to ease, it will take time before lower costs are reflected in jet fuel prices.

With airlines operating on margins of around 2%, Walsh said carriers have little choice but to continue testing passenger demand with higher fares as they seek to offset elevated fuel costs.

Regional Performance Shows A Split Market

Performance varied considerably across regions, highlighting the uneven impact of current market conditions.

Africa recorded the strongest overall passenger growth in May, with demand rising 6.6% year on year as capacity increased 7%. Even so, the region’s load factor slipped 0.3 percentage points to 73.7%.

Latin America and the Caribbean also delivered solid results, posting 6.1% growth in passenger demand alongside a 4.6% increase in capacity. As a result, the regional load factor improved by 1.2 percentage points to 83.4%.

European airlines remained in positive territory, reporting a 2.7% increase in passenger demand while expanding capacity by 1.8%. The region also achieved the highest load factor worldwide at 85.9%, up 0.8 percentage points from a year earlier.

Elsewhere, the picture was weaker. Asia-Pacific, the largest aviation market by share, saw demand decline 1.4% as capacity fell 2.4%, although its load factor still rose by 0.9 percentage points to 84.3%.

North America also recorded softer results, with demand slipping 0.8% while capacity was broadly unchanged, edging up 0.1%. That left the region’s load factor at 82.8%, down 0.7 percentage points from May 2025.

The Middle East remained by far the weakest-performing region. Passenger demand fell 28.4% year on year, while capacity declined 23.9%, pushing the regional load factor down 4.7 percentage points to 75.9%.

International Markets Show Greater Resilience

International travel proved more resilient than domestic markets in May. According to IATA, the pace of decline moderated compared with April, while several regions recorded their highest-ever May load factors. The Middle East was the only region to see its international load factor decline.

Asia-Pacific airlines increased international passenger demand by 1.3% despite a 1.1% reduction in capacity, lifting the regional load factor by 2 percentage points to 85.3%. IATA said tighter restrictions on jet fuel imports in Vietnam contributed to significant cuts in short-haul capacity, resulting in weaker intra-Asia international traffic.

European carriers also delivered solid results. International demand rose 3.8% as capacity expanded 2.3%, pushing the load factor up 1.2 percentage points to 85.4%. IATA also highlighted a 15% increase in direct traffic between Europe and Asia, reflecting a continued shift towards non-stop routes.

North American airlines reported more modest growth, with international demand increasing 1% and capacity rising 0.6%. That helped lift the regional load factor by 0.4 percentage points to 84%.

The Middle East remained the weakest-performing international market. Passenger demand fell 28.8% year on year, while capacity declined 24.3%, reducing the international load factor by 4.8 percentage points to 76.1%. Although comparisons with last year continue to reflect the impact of the conflict involving Iran, IATA said conditions improved compared with April, with the pace of decline almost halving month on month.

Latin American airlines posted the strongest international performance, with demand rising 10.5% alongside a 9% increase in capacity. African carriers also recorded healthy growth, with international demand up 8.9% and capacity increasing 8.3%, lifting the regional load factor to 73.4%.

Domestic Markets Remain Under Pressure

Domestic aviation continued to face greater headwinds in May, with IATA reporting a 3.1% decline in revenue passenger kilometres across domestic markets.

China recorded the sharpest slowdown, with passenger demand falling 6.2% as capacity declined 5.5%. According to IATA, the weaker performance may have reflected both higher airfares and the timing of the Dragon Boat Festival, which took place in June this year rather than May.

The United States also saw domestic demand weaken. Passenger traffic declined 1.9%, while capacity slipped 0.3%, bringing the domestic load factor down 1.4 percentage points to 81.8%.

India remained the strongest domestic aviation market, with demand rising 10.1% and capacity increasing 7.9%. The country’s load factor improved by 1.7 percentage points to 85.5%.

Brazil and Japan also remained in growth territory, with domestic demand increasing 2.8% in both markets. Australia, meanwhile, was broadly unchanged, with demand edging down 0.1% and capacity declining 0.3%.

Residential photovoltaic systems in Cyprus are entering a new phase. The transition from net metering to net billing, growing curtailments of renewable generation, the increasing role of battery storage, changes to subsidy schemes and the launch of the competitive electricity market are reshaping the economics of rooftop solar for thousands of households.

Those changes have direct implications for both existing and prospective solar owners. They affect the financial performance of residential systems while raising practical questions about self-consumption, electricity exports and whether investing in battery storage now makes economic sense.

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Drawing on publicly available information and updates from the relevant energy authorities, the following overview outlines the most important developments and answers some of the questions most frequently raised by residential consumers.

From Net Metering To Net Billing

For years, net metering has been the standard model for residential photovoltaic systems in Cyprus. Publicly available data indicate that around 100,000 households currently operate under the scheme, with a combined installed capacity of approximately 450 MW, representing about 43% of the country’s total solar capacity.

From 1 January 2026, however, new residential solar installations will no longer qualify for net metering and will instead be connected under the net billing framework. The change fundamentally alters how electricity is valued, making it increasingly important for prospective investors to reassess the economics of a new installation.

Why The Difference Matters

The key difference between the two systems lies in how imported and exported electricity is settled.

Under net metering, electricity imported from and exported to the grid is offset on a bi-monthly basis using energy quantities. Any surplus generation is carried forward to the next settlement period, while electricity shortfalls are billed at the applicable retail tariff. Depending on the contract, accumulated surpluses are generally reset without compensation after three years.

Net billing works differently. Settlement is based on the monetary value of electricity rather than the amount of energy generated. Power exported to the grid is compensated at the wholesale price, while electricity imported from the grid is charged at the retail tariff. In practice, households sell electricity at a lower price than they pay to buy it back, making self-consumption significantly more valuable than under the previous system.

Why Storage Is Becoming More Important

Battery storage increases self-consumption by storing surplus solar energy for use later in the day, when photovoltaic panels are no longer generating electricity. That makes storage considerably more valuable under net billing, where maximising on-site consumption has a greater impact on overall savings.

Even so, installing batteries remains an investment decision that depends on installation costs, system size and future technology prices. For many households, however, battery storage is evolving from an optional upgrade into an increasingly important tool for protecting long-term returns.

What Happens To Existing Net Metering Contracts

Existing net metering agreements remain valid until they expire, typically after 15 years, and are not affected by the rules governing new installations.

Once those agreements come to an end, homeowners will be able to move to net billing or consider other options available under the competitive electricity market.

What Happens To Accumulated Surpluses

Most net metering agreements provide for accumulated energy surpluses to be reset after one or three years, depending on the terms of the contract. Some older agreements still provide compensation for unused surpluses, although such arrangements have become increasingly uncommon.

At the beginning of 2026, EPC Supply decided, under the framework of the 2024 renewable energy grant scheme, that accumulated surpluses would be reset without compensation. The company also decided that the reset would recur every three years for all affected contracts.

The decision prompted strong reactions from residential solar owners, leading to parliamentary debate and a presidential referral. The matter is now awaiting a final decision by the Council of Ministers.

Are New Support Schemes Available

The policy shift is also reflected in changes to government support programmes. The popular Fotovoltaika Gia Olous scheme ended on 31 December 2025, and no replacement grant programme is currently available.

A new scheme, Anavathmizo – Exoikonomo, is expected to launch in September 2026 with a budget of €20 million. It will focus on residential energy upgrades and is expected to support the installation of photovoltaic systems combined with battery storage. The approach is consistent with the European Union’s “energy efficiency first” principle, which prioritises reducing energy consumption before expanding generation capacity.

Residential Solar And The Competitive Electricity Market

Another significant change is the opportunity for residential solar owners to participate in the competitive electricity market. Under the current regulatory framework, households that are not participating in subsidy schemes may monetise surplus electricity through agreements with licensed electricity suppliers or aggregation entities operating in the market.

That creates new commercial opportunities, but it also places greater emphasis on understanding technical limitations, contractual arrangements and market pricing. As the market evolves, informed decision-making is becoming increasingly important.

Why Curtailments Happen

Curtailments remain one of the most frequently discussed issues among residential solar owners. Every electricity system must continuously balance generation with demand to maintain grid stability.

When solar production is high but electricity demand is low, the grid can experience oversupply conditions that threaten the security of supply. In those circumstances, the Cyprus Transmission System Operator may instruct the Distribution System Operator (EAC) to temporarily reduce photovoltaic generation.

Curtailments follow a specific order of priority. Large-scale solar parks are limited first, followed, where necessary, by newer residential installations. Older household systems, which account for roughly half of all residential photovoltaic installations, were connected without ripple-control equipment and are therefore not subject to curtailment.

Can Curtailments Be Avoided

One option is to operate a photovoltaic system in zero-export mode, either temporarily or permanently.

Under this configuration, the electricity generated is consumed within the property rather than exported to the grid, unless temporary exports are permitted. Whether this improves the financial outcome depends on several factors, including household consumption patterns, system size and the presence of battery storage.

Operating completely off-grid is possible only with approval from the relevant authorities and is generally limited to remote locations where a grid connection is impractical. Such systems require a technical study by a qualified electrical engineer and typically combine photovoltaic panels with battery storage. A backup diesel generator is usually required to ensure a reliable power supply.

Homeowners planning to expand or modify an existing photovoltaic installation must also obtain the necessary approvals from EAC Supply. Depending on the scope of the changes, a revised agreement or the installation of ripple-control equipment may be required.

A Market Reset For Homeowners

Residential solar in Cyprus is entering a new operating environment. Net billing, curtailments, battery storage, changes to surplus treatment and the gradual liberalisation of the electricity market are reshaping the economics of rooftop photovoltaic systems.

For households considering a new installation, understanding self-consumption, battery economics and future electricity pricing will become increasingly important. Existing system owners, meanwhile, will need to assess how evolving market rules may affect their current agreements and long-term returns.