The European Commission’s latest economic forecast has raised Cyprus’ growth projection for 2025 to 3.4 per cent, a revision that reflects the enduring resilience and dynamic progress of the island nation even amid persistent geopolitical challenges. Finance Minister Makis Keravnos hailed the findings as a testament to Cyprus’ steady economic advancement and the strength of its fundamentals.
Robust Policy and Strategic Reforms
In an official statement, Keravnos emphasized that the upward revision by 0.4 percentage points from the spring forecast is especially encouraging. The Finance Minister pointed to the government’s consistent economic policy, which is paving the way for a sustainable, outward-looking, and socially inclusive growth model. The report also noted a modest upward adjustment for 2026—now forecast at 2.6 per cent—positioning Cyprus third in the Eurozone behind Ireland and Malta.
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Foundations of Stable Growth
The revised projections underscore a broader vote of confidence in Cyprus’ economic strategy. Keravnos highlighted that the steady progress is driven by a measured and responsible fiscal approach, with ongoing reforms such as an anticipated tax overhaul aimed at boosting incomes, attracting high-quality investments, and fortifying the economy’s competitive edge. This aligns with the government’s commitment to stability, planning, and fiscal prudence.
Wider Economic Landscape
The comprehensive outlook from the European Commission projects domestic demand as the primary engine for growth, with household consumption moderating as real wage growth decelerates. Meanwhile, increased investment backed by the completion of projects under the Recovery and Resilience Plan (RRP) is expected to propel economic activity in 2026. Services exports are anticipated to remain robust, bolstering the overall growth narrative.
Inflation, Labour Market And Public Finances
Inflation is projected to ease, with headline rates falling to 0.9 per cent in 2025 before gradually rising to 1.9 per cent by 2027. Although core inflation will remain slightly elevated, medium-term expectations suggest it will stabilize slightly below 2 per cent. Labour market indicators remain strong, with unemployment expected to stabilize at 4.7 per cent in 2025 before easing further in subsequent years. Additionally, public finances are on a firm footing, with the government balance forecast to be in surplus at 3.3 per cent of GDP in 2025 and with public debt decreasing steadily to 45.7 per cent of GDP by 2027.
Conclusion
The upgraded economic forecast not only reinforces the confidence of European institutions in Cyprus but also validates the government’s strategic initiatives and reforms. As the island economy continues on its resilient path, stakeholders can look forward to a period of stable growth, sound fiscal management, and progressive economic transformation.
