According to the Central Bank of Cyprus, the island's international investment position deteriorated in Q1 2026, driven by a widening current account deficit of €1,273.8 million and a €1.5 billion increase in net external debt.

Widening Current Account Deficit

Cyprus' international investment position (IIP) deteriorated in the first quarter of 2026, according to provisional data for external statistics released on Tuesday by the Central Bank of Cyprus (CBC). According to the same data, external debt went up about €1.5 billion, while the current account deficit increased by €263 million. According to the preliminary balance of payments data for Q1 2026, the current account balance of Cyprus recorded a deterioration, with the deficit increasing from €1,010.1 million in Q1 2025, to €1,273.8 million, in Q1 2026. The resulting deficit adjusted for the impact of Special Purpose Entities (SPEs), that is, classifying SPEs as non-residents, stood at €1,370.9 million in Q1 2026, compared with a deficit of €1,121.9 million in Q1 2025.

Factors Driving Economic Performance

According to CBC, this deterioration was mainly due to the increased deficit of Secondary income and decreased net export of services, such as those of Financial Services and ICT (telecommunications, computer and information services). The improvement in trade in goods balance and the decreased deficit of Primary Income offset these developments to some extent. The country’s financial flows showed a net inflow of €1,135.9 million, higher than last year, because of the decrease in the net outflow position recorded in the category of Portfolio Investments and the increase in the net inflow position of Other Investments.

Liability Fluctuations and SPE Adjustments

The international investment position (IIP) recorded a deterioration in Q1 2026, presenting a net liability position of €28,313.1 million, compared with a net liability position of €28,165 million in Q4 2025. With the corresponding data being adjusted for the impact of SPEs, IIP recorded a net liability position of €10,030.5 million in Q1 2026, compared with a net liability position of €8,932.3 million, in Q4 2025.

Gross and Net Debt Indicators

The gross external debt increased to €226,664 million in Q1 2026 from €225,188.5 million in Q4 2025. The external assets in debt instruments decreased to €223,528.3 million, from €223,623.3 million in Q4 2025. Consequently, the net external debt increased by €1,570.5 million to €3,135.7 million in Q1 2026. Adjusted for the impact of SPEs, gross external debt reached €59,943.8 million in Q1 2026, compared to €59,179 million, in Q4 2025. The corresponding net external debt indicator increased to -€30,460.6 million in Q1 2026, compared with -€30,946.3 million in Q1 2026. Regarding its trade counterparts, Cyprus recorded bilateral current account surpluses with Germany and Russia but ran deficits with Greece, the UK, and the USA. The deficits with the European Union and the Eurozone decreased.

Source: CNA(ΚΥΠΕ)