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Central Bank Revises Growth Forecast Amid Robust Domestic Demand in Cyprus

by THEFUTURE.TEAM

June 21, 2025

Revised Economic Projections and Domestic Demand

The Central Bank of Cyprus has slightly downgraded its 2025 GDP growth forecast to 3.1 per cent from its previous estimate of 3.2 per cent, alongside a marked reduction in projected inflation from 2.1 per cent to 1.5 per cent. These adjustments were made before the recent escalations in the Israel-Iran conflict, meaning any subsequent economic reverberations have not been factored into the current outlook.

Strength in Private Consumption and Investment

Underlying the forecast is a steady rise in domestic demand, powered primarily by increased private consumption due to higher real disposable incomes and a resilient labor market. Large-scale non-residential investments, strategic infrastructure projects supporting digital and green initiatives, and various reforms under the Recovery and Resilience Plan are also expected to bolster consumer spending and overall economic activity.

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Inflation and Sectoral Performance

Inflationary pressures are moderating, as reflected in the drop in the Harmonised Index of Consumer Prices to 1.5 per cent for 2025. This decline is chiefly attributed to easing energy prices and effective monetary policies, although upward pressures are anticipated in the subsequent years due to rising energy and food costs. The role of the technology sector in enhancing net exports and the diversification of financial, professional, and shipping services further underline the economy’s adaptive strengths.

Labor Market Dynamics and Employment Trends

The robust labor market continues to play a key role in supporting the Cypriot economy. With unemployment expected to decline to 4.7 per cent in 2025, a trend corroborated by the European Commission’s Economic Sentiment Surveys, the economy is on course towards near full employment in the coming years, even as slight upward revisions in unemployment rates are noted for 2026 and 2027 due to external uncertainties.

Risks and External Uncertainties

Despite the positive domestic trends, downside risks loom amidst volatile energy prices and uncertain global trade dynamics. The potential escalation of regional conflicts and variability in external demand could temper the economic outlook. Conversely, favorable outcomes from tax reforms, robust wage growth, and a diversified export portfolio stand as key upside factors.

In summary, the central bank’s forecast reflects a cautious yet resilient economic framework for Cyprus, driven by strong private demand and strategic investments, while remaining alert to the challenges posed by global geopolitical tensions and market uncertainties.

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Foreign Firms Contribute €3.5 Billion To Cyprus Economy In 2023

by THEFUTURE.TEAM

November 12, 2025

Recent Eurostat data reveals that Cyprus remains an outlier within the European Union, where foreign-controlled companies contribute minimally to the nation’s employment figures and economic output. While these enterprises have a substantial impact in other member states, in Cyprus they account for only 10 percent of all jobs, a figure comparable only to Italy and marginally higher than Greece’s 8 percent.

Employment Impact

The report highlights that foreign-controlled companies in Cyprus employ 32,119 individuals out of a total workforce that, across the EU, reaches 24,145,727. In contrast, countries such as Luxembourg boast a 45 percent job share in foreign-controlled firms, with Slovakia and the Czech Republic following closely at 28 percent.

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Economic Output Analysis

In terms of economic contribution, these enterprises generated a total value added of €3.5 billion in Cyprus, a small fraction compared to the overall EU total of €2.39 trillion. Notably, Ireland leads with 71 percent of its value added stemming from foreign-controlled firms, followed by Luxembourg at 61 percent and Slovakia at 50 percent. On the lower end, France, Italy, Greece, and Germany exhibit values below 20 percent.

Domestic Versus Foreign Ownership

The data underscores Cyprus’s heavy reliance on domestically controlled enterprises for both employment and economic output. However, it is important to note that certain businesses might be owned by foreign nationals who have established companies under Cypriot jurisdiction. As a result, these firms are classified as domestically controlled despite having foreign ownership or management components.

Conclusion

This analysis emphasizes the unique role that foreign-controlled enterprises play within the Cypriot economy. While their overall impact is limited compared to some EU counterparts, the presence of these companies continues to contribute significantly to the island’s economic landscape.