The economic climate in Cyprus deteriorated in June 2025, with the Economic Sentiment Indicator (ESI) falling by 0.8 points compared to May, according to the University of Cyprus Economic Research Centre (CypERC).

Despite this decline, businesses revised their turnover expectations for the next quarter upwards, and consumer sentiment strengthened slightly. In contrast, the Economic Uncertainty Index recorded an increase during the same period.

According to the results of CypERC’s Business and Consumer Survey, the decline in the ESI was driven by a downturn in business sentiment in retail trade and manufacturing, as well as a continued drop in economic confidence in the services sector.

“The weakening of sentiment in services resulted from a deterioration in the current situation, with business assessments of their financial condition and turnover dropping significantly for a third consecutive month,” the report noted.

Nevertheless, expectations for business turnover in the upcoming quarter were revised upwards in June.

In retail trade, the worsening sentiment stemmed from a negative reassessment of the current business situation, particularly in terms of sales and inventories.

Manufacturing also saw a slight decline, attributed both to a worsening current situation—mainly inventory evaluations—and reduced production expectations.

Conversely, the construction sector registered an improvement, driven by more positive assessments of the current situation, including building activity and ongoing projects.

Consumer sentiment slightly strengthened in June, primarily due to more optimistic expectations regarding the country’s future economic situation and a stronger inclination toward major purchases.

However, the Economic Uncertainty Index rose in June following five consecutive months of decline.

“The increase in the Index resulted from heightened uncertainty among businesses—particularly in services and retail—about their future economic condition, possibly due to the recent escalation of geopolitical tensions and their impact on the economic environment,” CypERC explained.

Despite this, household uncertainty regarding their future financial situation remained at low levels, according to the report.