Central Bank of Cyprus revises economic growth and inflation forecasts for 2026

On September 17, 2026, the Central Bank of Cyprus (CBC) released updated economic forecasts, revising growth projections upward compared to its June 2026 assessment. The economy is now expected to grow by 2.9% in 2026, marking a 0.4% increase from previous estimates, with growth projected at 3.1% for both 2027 and 2028. Simultaneously, the inflation forecast for 2026 has been raised to 3.3%, significantly higher than the 0.1% estimate made in June, attributed primarily to the ongoing conflict in the Middle East.

The CBC attributes these adjustments to the regional geopolitical instability, which has led to increased international oil prices and high refining margins. These factors are expected to negatively impact energy prices, tourism, and non-residential private investment. Despite these pressures, the report highlights the continued resilience of the Cypriot economy. Regarding the labor market, the bank expects unemployment to decrease further, reaching 3.8% in 2026, and to stabilize at that level over the next two years.

Looking ahead, the medium-term impact on the economy remains contingent upon the duration and intensity of the conflict. While inflationary pressures are expected to ease to 2.4% in 2027 and 1.9% in 2028, the central bank maintains that the geopolitical environment remains a critical factor in future economic performance.