IMF Upgrades Cyprus Economic Growth Forecasts for 2025 and 2026

Strategic Insights -

The International Monetary Fund (IMF) has released its latest World Economic Outlook, which includes upgraded economic growth forecasts for Cyprus. According to the report, Cyprus's GDP is expected to grow by 2.9 per cent in 2025 and 2.8 per cent in 2026, up from 2.5 per cent and 2.7 per cent in April's report. This stronger-than-expected performance is attributed to a weakening of global headwinds, including trade tensions and slower external demand. Inflation is also expected to ease sharply, with consumer prices in Cyprus projected to rise by only 0.7 per cent in 2025, the lowest increase in the euro area. However, the current account deficit is expected to widen, reaching 8.5 per cent of GDP in 2025 and 9.1 per cent in 2026.

Key Takeaways:

  • Cyprus's GDP is expected to grow by 2.9 per cent in 2025 and 2.8 per cent in 2026, up from 2.5 per cent and 2.7 per cent in April's report.
  • Inflation is set to ease sharply, with consumer prices in Cyprus projected to rise by only 0.7 per cent in 2025, the lowest increase in the euro area.
  • The current account deficit is expected to widen, reaching 8.5 per cent of GDP in 2025 and 9.1 per cent in 2026.
  • Unemployment is projected to remain low, with an average jobless rate of 4.5 per cent in 2025 and 4.7 per cent in 2026.
  • The IMF attributes the stronger-than-expected performance to a weakening of global headwinds, including trade tensions and slower external demand.
  • The IMF points out that households and firms brought forward spending and investment in anticipation of higher tariffs, giving a temporary boost to global activity.
  • Trade flows have begun to adjust towards third countries, while delays in the implementation of new tariffs allowed companies to postpone price increases.

Statistics:

  • Cyprus's GDP is expected to grow by 2.9 per cent in 2025 and 2.8 per cent in 2026.
  • Inflation in Cyprus is projected to rise by 0.7 per cent in 2025.
  • The current account deficit is expected to reach 8.5 per cent of GDP in 2025 and 9.1 per cent in 2026.
  • Unemployment in Cyprus is projected to remain low, with an average jobless rate of 4.5 per cent in 2025 and 4.7 per cent in 2026.
  • Global growth is expected to expand by 3.2 per cent in 2025 and 3.1 per cent in 2026.
  • The IMF projects that trade policy uncertainty will remain high, with trade flows continuing to adjust towards third countries.

Sources:

  • International Monetary Fund (IMF), World Economic Outlook (October 2022)
  • Cyprus Mail (2022)