In a strong demonstration of economic resilience, Cyprus recorded a 3% year‐on‐year growth in the first quarter of 2026, according to preliminary data from the Cyprus Statistical Service. The rebound was largely underpinned by robust household spending, a surge in exports, and vigorous activity across key service sectors.

Economic Performance Overview

Adjusted for seasonal fluctuations and working days, the country’s real gross domestic product (GDP) increased by 0.2% compared to the last quarter of 2025. This performance reflects a balanced mix of demand-driven domestic spending and a buoyant external sector, reinforcing Cyprus’ reputation as a resilient economy.

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Service Sector Growth Drives Expansion

The backbone of this growth came from sectors such as wholesale and retail trade, transport, accommodation and food services, along with strong performances in both information and communication and financial and insurance activities. Notably, the information and communication sector experienced the fastest annual expansion at 5.4%, while construction posted a healthy 4.9% increase. Broader segments encompassing trade, transport, accommodation, and food services reported a 4.4% rise.

Household Consumption Fuels Recovery

Private consumption remained a pivotal growth driver. Expenditures by households and non-profit institutions surged by 5.1% over the same period last year, complementing a 4.6% rise in government spending. Overall, total final consumption expenditure climbed by 4.9% year-on-year, underscoring the importance of internal market dynamics in sustaining economic momentum.

External Sector Performance And Investment Concerns

Export activity was particularly noteworthy, with goods and services exports increasing by 10.5% and reaching €8.68 billion in real terms. Imports grew at a comparable pace, up 10.4% to €8.18 billion, highlighting a balanced trade environment driven by continuous economic demand. On the flip side, investment showed signs of deceleration. Gross fixed capital formation advanced only modestly by 1.5% year-on-year and experienced a 5.2% decline from the previous quarter. Excluding ships and aircraft, overall investment fell by 2.3% annually, signaling softer performances in segments less influenced by high-value transport transactions.

This steady yet uneven expansion presents both opportunities and challenges for policymakers and industry leaders. As Cyprus navigates potential headwinds in investment while capitalizing on strong service sector fundamentals, strategic initiatives may be required to foster sustained growth across all economic segments.