IMF updates growth and inflation outlook for Cyprus economy

In its October 2026 World Economic Outlook, the International Monetary Fund (IMF) revised its growth forecast for Cyprus to 2.9% for 2026, a slight decrease from the 3% projection made in April. Conversely, the growth forecast for 2027 was raised to 3.2% from 3%. The IMF also noted a significant increase in inflationary pressure, predicting annual inflation at 3.7% for 2026, up from the previously estimated 2.6%, before expecting a decline to 1.9% in 2027.

Finance Minister Makis Keravnos welcomed these projections, characterizing them as encouraging and evidence of the economy's resilience against international uncertainty and geopolitical conflicts. While the IMF forecasts a 2.9% growth for 2026, the Cypriot Ministry of Finance maintains its own higher estimate of 3.1%, supported by first-half statistical data. The IMF report also highlighted a positive shift in the labor market, forecasting that unemployment will drop to 4% in 2026 before rising slightly to 4.4% in 2027.

The findings underscore the structural challenges facing Cyprus, including a significant current account deficit and the necessity of adapting to global tax changes, such as the 15% minimum corporate tax under Pillar Two. Despite these challenges, the IMF outlook confirms that Cyprus remains one of the stronger performing economies within the European Union.