European Commission assessment of the Cypriot economy for 2026

The European Commission, in cooperation with the ECB, ESM, and IMF, conducted a post-programme surveillance of Cyprus between March and April 2026. Real GDP growth reached 3.8% in 2025 and is projected at 2.3% for 2026 and 2.7% for 2027, driven primarily by private consumption. While the economy remains resilient, the Commission warned that changes to the foreclosure framework could pose risks to the financial system. Inflation is forecasted to rise to 3.6% in 2026 due to energy costs before cooling to 2.2% in 2027. The labour market remains strong, with unemployment expected to stabilize at 4.2%. Public finances continue to show a surplus, and public debt dropped below 60% of GDP in 2025, with further declines expected. Banks remain robust, holding a CET1 ratio of 25.8% as of December 2025, the highest in the EU.