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Cyprus Economy: Strong Growth Ahead Despite Structural Challenges

Cyprus is poised to sustain strong economic growth in the coming years, according to a recent report from the Canadian rating agency Morningstar DBRS. The agency also predicts a steady decline in unemployment, which is expected to bolster the nation’s fiscal performance.

Despite these positive projections, the report highlights persistent hurdles facing the Cypriot economy. As a small, service-driven market, Cyprus remains highly susceptible to external shocks. Additionally, while strides have been made to reduce non-performing loans (NPLs), their levels still exceed the Eurozone average. Challenges in labour market productivity further restrict the nation’s economic potential.

On a brighter note, progress in addressing NPLs has been significant. Data from the Central Bank of Cyprus show that NPL ratios in approved credit institutions dropped to 6.8% in August 2024, a dramatic reduction from 43.7% at the end of 2017. This improvement represents an €18.9 billion decrease in absolute terms.

Morningstar DBRS anticipates this downward trajectory to persist but acknowledges that eliminating the remaining NPLs will require time. By mid-2024, credit acquisition companies managed exposures of approximately €21 billion, with 94% classified as non-performing.

The report also notes delays faced by KEDIPES, the state-owned asset management company. Challenges such as foreclosure moratoriums, the COVID-19 pandemic, and geopolitical tensions have pushed the company’s operational deadline to 2030.

Housing prices, meanwhile, have shown sustained growth. As of Q2 2024, property prices in Cyprus rose by an annual rate of 8.0%, with house prices increasing by 6.2% and apartment prices surging by 12.0%. Most of the real estate collateral tied to NPLs consists of residential properties, with Nicosia and Limassol identified as the most stable markets on the island.

While structural vulnerabilities persist, Morningstar DBRS’s analysis underscores Cyprus’ resilience and ability to adapt. Continued efforts to address NPLs, coupled with a robust housing market and improved employment metrics, suggest the nation is on a steady path toward economic stability and growth.

More Than 1.5 Billion People Faced Dangerous Heat This Summer

More than 1.5 billion people were exposed to dangerous levels of heat this summer, according to a global analysis by nonprofit Climate Central.

The study found that Europe experienced the most unusual heat during June-August 2026, with nearly nine in 10 Europeans exposed to at least one month of what researchers classify as “risky heat.”

Europe Emerged As The World’s Hottest Region

Climate Central defines risky heat as temperatures above 90% of local temperatures recorded between 1991 and 2020 for the same period. Researchers use the threshold to identify temperatures at which health risks begin to increase.

Across the world, people in 203 countries experienced at least 30 days of risky heat. In 54 countries, June-August 2026 was the hottest such period on record, while seven of the 10 countries with the largest temperature anomalies were in Europe.

France recorded the largest national temperature anomaly, at 3.5C above its historical average.

“Whether it’s nine in 10 Europeans enduring risky heat, hundreds of millions impacted across Asia and Africa, or relentless record-breaking temperatures in North America, human-driven warming is pushing communities beyond safe physical limits,” said Kristina Dahl of Climate Central.

She said the summer’s heat should be viewed in terms of its immediate effects on health systems, labor productivity, infrastructure and household finances.

Simon Stiell, executive secretary of the United Nations Framework Convention on Climate Change (UNFCCC), who was not involved in the study, said the findings show the rising costs of climate change linked to fossil fuel use.

Clean Energy Faces Rising Demand

Europe’s extreme summer was part of a broader trend that scientists say would have been “virtually impossible” without climate change. Earlier this month, the United Nations said limiting warming to 1.5C is no longer achievable under current conditions.

The latest United Nations Environment Programme (UNEP) outlook projects 1.8C of warming in the best-case scenario and more than 2C in less favorable cases. UNEP now describes the likely pathway as “overshoot, peak and decline.”

Renewable energy is central to limiting that overshoot. Renewables generated almost 34% of global electricity in 2025, but UNEP says the share would need to reach 60%-70% by 2030 under a limited-overshoot pathway.

In the European Union, wind and solar generated more electricity than fossil fuels for the first time last year. SolarPower Europe estimates that solar generation has saved the bloc €33.8 billion in avoided gas imports since the start of the war on Iran.

Power Grids Struggle With Growing Demand

Investment in clean energy has reached about $1.9 trillion annually, but renewable generation is meeting only around 40% of the increase in electricity demand. Air conditioning and the rapid expansion of artificial intelligence are contributing to that growth.

According to the International Energy Agency, data center electricity use increased 17% in 2025, reaching roughly 1.5%-2% of global electricity demand. That figure is expected to double by 2030.

Europe’s aging power grids are also struggling to integrate growing amounts of renewable generation, leaving some solar and wind capacity unused. Battery storage can help reduce those bottlenecks, but investment has not kept pace with the scale of the challenge.

This summer’s heat is adding pressure on governments, businesses and infrastructure systems to adapt to higher temperatures while expanding low-carbon energy capacity.

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