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Extended Drought And Water Scarcity Top Risks For Cyprus’ Economy

by THEFUTURE.TEAM

February 11, 2026

Critical Risk Factors Identified

A detailed risk assessment conducted by the Cyprus Council of Economy and Competitiveness has identified extended drought and water shortages as the preeminent threats to the nation’s economy. Released at a press briefing at the Ministry of Finance, the report underscores that these environmental challenges, along with cyberattacks on vital infrastructure, deteriorating climatic conditions, shortages of skilled labor, and delays in digital transformation, pose significant risks to economic stability.

Rigorous Analysis And Methodology

The study, now in its fourth consecutive year, utilized a combined probability and severity index to quantify each hazard. Evangelos Tryfonos of the Council and Panagiotis Panagiotou, Director of Pulse Market Research, led the presentation, offering a detailed breakdown of the data. According to Tryfonos, a staggering 91% risk index was assigned to prolonged drought and water scarcity, eclipsing other threats that registered between 79% and 82%.

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Structured Risk Categorization

Panagiotou further elaborated on the findings by grouping the identified risks into four strategic categories: geopolitical security and external shocks, institutional fortification and structural challenges, social and environmental resilience, and macroeconomic stability. This classification not only clarifies the origins and potential impact of the risks but also aids policymakers in prioritizing preventive measures.

Insights For Policy And Corporate Strategy

While the overall severity of risks remains stable across all categories, variations in the likelihood of these events were observed. Notably, institutional and structural risks emerged with the highest probability, signaling a critical area for policy intervention. “This sends a clear message that through proactive measures and targeted policies, we can mitigate adverse outcomes,” the report emphasized.

Collaborative Approach To Economic Resilience

In response to queries regarding the utilization of these studies, Dimitris Georgiadis, Chairman of the Council, noted that discussions about risks and the implementation of safeguards are not undertaken by the Council in isolation. They form a part of a broader dialogue that includes the Ministry of Finance, the Central Bank, and the Fiscal Council. This collaborative effort has heightened public awareness and sharpened the focus on critical economic vulnerabilities.

Digital Transformation Under Scrutiny

Addressing concerns over digital transformation, Georgiadis remarked that while the research does not prescribe immediate actions, it makes clear that the economic community in Cyprus views the current pace of digital adoption as insufficient. Bureaucratic delays, challenges in attracting appropriate labor, and other obstacles are impeding the necessary digital shift. Ongoing discussions with relevant ministries and agencies are aimed at accelerating these reforms.

As Cyprus navigates these complex challenges, the insights provided by this comprehensive risk assessment serve as a vital roadmap for both policymakers and industry leaders intent on safeguarding the nation’s economic future.

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Cyprus Composite Leading Economic Index Signals Steady Growth Amid Global Uncertainties

by THEFUTURE.TEAM

February 11, 2026

Robust Economic Trajectory In Cyprus

The Cyprus Composite Leading Economic Index (CCLEI) recorded a 2.9% year‐on‐year increase in January 2026, as per the revised data from the University of Cyprus‘s Economics Research Centre (CypERC). This performance, though slightly slower than the 3.1% and 3.2% gains recorded in December and November 2025 respectively, confirms resilient economic fundamentals over the period.

Sectoral Contributions And International Influences

Key components such as temperature-adjusted electricity production, property sales contracts, tourist arrivals, and retail trade activity all posted positive year-on-year growth. In contrast, external factors such as a marked reduction in Brent crude oil prices and diverging economic sentiment indicators between Cyprus and the euro area highlight a complex external environment. While the Economic Sentiment Indicator (ESI) across the euro area improved in January, the domestic ESI in Cyprus declined, reflecting a weakening business climate in the services and industrial sectors.

Detailed Insights Into Business And Consumer Confidence

Additional surveys outlined a slight deterioration in economic sentiment within Cyprus. The overall decline in the Economic Sentiment Indicator, notably a 0.2-point drop from December 2025, was primarily driven by reduced confidence in the construction, retail trade, and industrial sectors. Despite improvements in the Services Confidence Indicator and stable consumer confidence levels, adjustments in stock levels and revised sales expectations contributed to a softer outlook among business leaders. Construction firms, facing seasonal constraints and labor shortages, adopted a more neutral stance, while industrial players tempered expectations due to less favorable assessments of stock levels and production.

Methodology And Future Outlook

The CCLEI, designed to provide early warning signals for turning points in business cycles, derives its insights from an array of domestic and international indicators. These include tracking trends such as the Brent crude oil price in euros, property sales contracts, tourist arrivals, and credit card transaction values. The centre’s ongoing assessment, including its recent summary of business and consumer surveys, suggests that despite external geopolitical and economic uncertainties, the Cypriot economy maintains a stable growth trajectory.