Middle East tensions impact Cypriot economic growth

Economist Tasos Yiasemidis has warned that ongoing Middle East instability, particularly tensions between the U.S. and Iran, poses a significant threat to the Cypriot economy. The International Monetary Fund (IMF) announced on July 8 that global economic growth is projected to slow to 3% by 2026 due to heightened geopolitical conflicts. Higher risk premiums and increased energy costs are driving global inflation, which is directly impacting the small and open economy of Cyprus. Currently, inflation in Cyprus has reached 4%, largely attributed to rising prices for fuel and electricity. Analysts argue that Cyprus lacks the resilience to fully absorb these exogenous shocks, which are disrupting global trade routes and shipping lanes. While global markets have shown increased maturity, the volatility caused by the conflict remains a primary concern for international financial stability. If the crisis persists, experts anticipate a sustained slowdown in local economic growth.