• Why 0.8% Inflation Does Not Reach Citizens’ Pockets
• An X-Ray of Purchasing Power in Cyprus (2019–2025)
• Shocking Increases in Electricity (41.9%) and Food

The picture painted by the numbers suggests prosperity, but the reality on supermarket shelves and electricity bills remains relentless. Despite the impressive slowdown of inflation to 0.8% in 2025, a rate significantly lower than the European Central Bank’s target, Cyprus is facing the specter of cumulative price increases.

This is the main conclusion of a recent study by Kapatai, Mithillou and Papageorgiou, published last Friday on “The CBC Blog,” the blog of the Central Bank of Cyprus, as part of efforts to provide more information and insight on economic issues and central banking matters more broadly.

The CBC Blog hosts technocratic, signed articles by Bank officials on topics related to the economy, financial stability, monetary policy and central banking in general.

The first post is titled “High Prices and Inflation in Cyprus: Recent Trends and Dynamics.”

According to the study, prices have already “locked in” at extremely high levels due to the wave of increases during the 2021–2024 period, when cumulative inflation reached 16.5%.

Basic Goods on Fire

A comparison of 2025 prices with pre-pandemic 2019 reveals the scale of the burden on the average household:

Energy: The overall increase reached 26.1%, with electricity recording an unprecedented rise of 41.9%.

The household basket: Food prices surged by 19.2%. In particular, unprocessed food (fruit, vegetables, meat) rose by 31.3%.

Housing and services: Rents increased by 21.7%, while tourism-related services (hotels and restaurants) recorded increases exceeding 26%.

An Uneven Battle

In the private sector, the “gap” between incomes and the cost of living remains open. During the 2020–2024 period, wages increased on average by 2.9% annually, while inflation was running at 3.1%. The cumulative wage increase (14.5%) failed to cover the cumulative rise in prices (15.4%) over the same period, leading to a gradual erosion of purchasing power.

Buffers Against the Crisis

Despite the bleak picture, the study notes that the situation would have been worse without the intervention of two factors:

First, targeted measures (zero VAT, energy subsidies) reduced inflation by 0.3 to 0.6 percentage points annually between 2022–2024.

Second, during the 2022–2024 period, businesses appear to have kept their profit margins at marginally negative levels (-0.5%), so as not to pass on the entire increase in costs to consumers.

The Day After

Analysts warn that tackling high prices requires structural changes. Strengthening the disposable income of low-paid workers, increasing productivity through new technologies, and ensuring healthy market competition (through tools such as the “e-kalathi”) are the only weapons for shielding households.

Beyond the general increases, specific data highlight the depth of pressure on the Cypriot market and the particular characteristics of the 2019–2025 period:

The “X-ray” of food: While overall food inflation rose by 19.2%, certain categories are staggering, such as fruit with an increase of 41.2% and pork at 32.4%. Soft drinks and juices followed at 28.8%, and bread at 20.9%.

Tourism-driven price hikes: Services linked to Cyprus’ tourism product recorded some of the highest increases, with organized holiday packages soaring to 45% and restaurants and cafés to 28.4%.

The “fast-track” wage exception: The study focuses on the private sector, excluding public administration, education and health, as well as the technology sector (information and communication), due to its particular structure and significant wage differentiation.

The stance of businesses: Notably, during the critical three-year period 2022–2024, businesses acted as “shock absorbers,” with profit margins standing at marginally negative levels (-0.5%), limiting the pass-through of costs to consumers.

Electricity and fuels: The price of electricity in 2025 was 41.9% higher compared to 2019, while diesel and petrol increased by 18% and 15.2% respectively.