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Cyprus Achieves Largest Debt Reduction in Eurozone

Cyprus made significant strides in reducing its government debt, with the debt-to-GDP ratio falling to 70.5% by the end of the second quarter of 2024, according to Eurostat. This represents the largest decrease in the eurozone, with a 2.1% drop from Q1 2024 and a notable 10% reduction from Q2 2023.

In contrast, both the eurozone and the EU saw slight increases in their debt-to-GDP ratios. The eurozone’s ratio increased to 88.1% (up from 87.8% in Q1 2024), and the EU’s rose to 81.5% (up from 81.3%).

Despite Cyprus’ success, some countries continue to struggle with high debt levels. Greece and Italy recorded the highest ratios at 163.6% and 137.0%, respectively. Meanwhile, Bulgaria and Estonia maintained the lowest ratios at 22.1% and 23.8%.

The eurozone’s government debt is largely composed of debt securities, accounting for 84% of the total, while intergovernmental lending made up 1.5% of GDP.

Cyprus’ impressive debt reduction stands in contrast to the increases seen in countries such as Finland and Austria, demonstrating the country’s effective fiscal management amid global economic pressures.

Cyprus Economy Seen Slowing In 2026 Before Rebounding In 2027

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.

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.

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