European Commission releases 2026 economic forecast for Cyprus

The European Commission's Spring 2026 Economic Forecast projects a moderation in Cyprus' GDP growth to 2.3% in 2026 and 2.7% in 2027, down from 3.8% in 2025. This slowdown is attributed to regional conflict in the Middle East, which has triggered energy price increases. Headline inflation is expected to rise to 3.6% in 2026 before easing to 2.2% in 2027. Despite these pressures, the report highlights Cyprus' strong initial fiscal position, with debt-to-GDP falling below 60% by the end of 2025. Budget surpluses are projected to continue at 2.1% of GDP in 2026 and 2.5% in 2027. These figures account for a broad tax reform implemented in early 2026, which includes a corporate tax increase to 15% and adjustments to personal income tax brackets. Private consumption remains a key growth driver, supported by automatic wage indexation, though it faces headwinds from inflation. Tourism exports are expected to weaken due to geopolitical instability, though service exports in ICT remain resilient.