Cyprus Q4 2025 Deficit Deepens Amid Persistent Structural Challenges

by THEFUTURE.TEAM

April 10, 2026

Overview Of The Financial Landscape

Eurostat data show Cyprus recorded a current account deficit of €0.8 billion in the fourth quarter of 2025, widening from €0.10 billion in the third quarter. The increase indicates a rise in external imbalances during the period. Compared with Q4 2024, when the deficit reached €1.40 billion, the latest figure reflects a partial year-on-year improvement.

Trends Throughout 2025

Cyprus recorded a current account deficit in each quarter of 2025. Deficits stood at €1.00 billion in Q1 and €0.40 billion in Q2, before narrowing in Q3 and widening again in Q4. The pattern indicates continued reliance on external financing, with only limited improvement during the year.

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European Union: Contrasting Fortunes

The European Union recorded a current account surplus of €86.70 billion in Q4 2025, equal to 1.8% of GDP. This compares with €65.40 billion (1.4% of GDP) in Q3 2025 and €98.20 billion (2.1% of GDP) in Q4 2024. Changes across components varied. The goods surplus declined to €89.10 billion from €95.30 billion, while the services surplus increased to €44.20 billion from €20.50 billion. Primary and secondary income balances also improved during the period.

Global Trade And Investment Dynamics

The EU recorded its largest current account surplus with the United Kingdom at €63.30 billion. Additional surpluses were reported with Switzerland (€22.90 billion), offshore financial centres (€21.00 billion), Canada (€11.30 billion), and Brazil (€11.20 billion). Deficits were highest with China (€54.20 billion) and the United States (€14.60 billion).

Investment And Bankable Performance

Direct investment assets increased by €85.20 billion, while liabilities rose by €32.60 billion, resulting in net outflows of €52.60 billion. Portfolio investment recorded net inflows of €173.50 billion. Other investment flows added €6.10 billion.

Diverse Economic Positions Across Member States

External balances varied across EU countries. Seventeen member states recorded current account surpluses, nine posted deficits, and one remained balanced. Germany reported a surplus of €51.30 billion, followed by the Netherlands (€34.50 billion), France (€21.80 billion), Denmark (€15.20 billion), and Ireland (€12.80 billion). Spain (€10.30 billion) and Sweden (€7.10 billion) also recorded surpluses. Largest deficits were recorded in Romania (€8.30 billion), Greece (€7.00 billion), Belgium (€3.90 billion), and Bulgaria (€3.80 billion).

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Cyprus Banks Urged To Focus On Long-Term Resilience As Profits Remain Strong

by THEFUTURE.TEAM

June 26, 2026

The Cypriot banking sector remains in a strong position, supported by solid capital buffers and overall financial stability, according to speakers at the annual general meeting of the Association of Cyprus Banks. At the same time, government officials and regulators stressed that maintaining this position will require continued discipline and long-term planning.

A Strong Sector, But Not A Complacent One

Finance Minister Makis Keravnos used the meeting to highlight concerns over draft laws recently passed by parliament, which, according to the Ministry of Finance, the Central Bank and the Legal Service, may contain constitutional, legal and institutional issues. Those concerns, he noted, led to presidential referrals and remittals to the Supreme Court.

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Keravnos also said the European Central Bank had been consulted on proposed measures concerning the suspension of foreclosures and the restructuring of loans and guarantees, adding that the ECB had expressed its own concerns.

Profitability Should Reflect Real Economy Lending

While acknowledging that the banking sector remains highly profitable, Keravnos said earnings are expected to reach around €1 billion in 2025, lower than in 2024 as interest-rate conditions gradually normalize.

He said he would prefer bank profitability to rely more on lending to businesses operating in productive sectors and less on the widening of European Central Bank interest-rate spreads.

According to the minister, Cyprus’ return to investment-grade status after 11 years has strengthened the country’s appeal to foreign investors, technology companies and startups. He said this should encourage banks to offer financing that better supports businesses while improving the diversification of their loan portfolios.

The Central Bank’s Warning: Strength Today Is Not A Guarantee Tomorrow

Central Bank Governor Christodoulos Patsalides also warned against complacency, saying the sector’s current strength should not be taken for granted.

“The Cypriot banking sector is strong today. But strength that truly matters is not exhausted by a capital ratio, a profit line or a favorable cycle,” he said.

Patsalides added that lasting resilience depends on institutions remaining strong as conditions change, risks become more complex, and competition evolves. In his view, that requires sufficient capital buffers, adaptable infrastructure and management teams prepared for changing market conditions.

Long-Term Resilience Over Short-Term Gains

Patsalides also stressed that banks should focus on long-term resilience rather than short-term performance. Decisions on dividend policy, capital allocation and the use of resources, he said, should take into account continued investment in technology, operational resilience, human capital and long-term adaptability.

He added that banks able to remain competitive over time will be those that invest early in strengthening their capacity to adapt and respond to future challenges.

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