Cyprus GDP growth forecast raised to 3.2 per cent for 2026

Middle East conflict threatens Cyprus growth outlook, economics research centre warns Cyprus’ economy is expected to grow by 3. 2 per cent in 2026 , up from a previous forecast of 2. 7 per cent , as stronger-than-expected economic activity and improving business confidence offset mounting inflationary pressures linked to the conflict in the Middle East, according to a report published by the University of Cyprus’ Economics Research Centre (CypERC) in October. The latest projections point to economic growth moderating from 4. 8 per cent in 2025 to 3. 2 per cent in 2026 and 3. 1 per cent in 2027, with rising prices and tighter monetary conditions expected to weigh on activity over the coming quarters. The revised 2026 forecast is 0. 5 percentage points higher than CypERC’s July estimate, while the projection for 2027 remains unchanged.

The upward revision reflects stronger-than-expected growth during the second quarter of 2026, alongside favourable developments in the third quarter, including improved economic confidence, low unemployment and continued growth in new housing loans . However, the research centre warned that the outlook remained vulnerable to geopolitical developments, with the Middle East conflict intensifying inflationary pressures and increasing the risk that economic growth could fall short of expectations. Inflation is expected to accelerate sharply , rising from 0. 1 per cent in 2025 to 3. 1 per cent in 2026, before easing to 2. 3 per cent in 2027. The forecasts for 2026 and 2027 are respectively 0. 1 and 0. 2 percentage points higher than those published in July, reflecting rising international oil prices, strong domestic economic activity and persistently low unemployment. Economic activity remains robust Cyprus’ economy continued to expand faster than the…