The Economics Research Center (CypERC) of the University of Cyprus has revised downward its forecast for Cyprus’s real GDP growth in 2025 by 0.5 percentage points, bringing it to 2.8%, citing slower growth among the country’s key trading partners and increased uncertainty surrounding global trade policies.

At the same time, the Center lowered its inflation forecast for 2025 by 0.2 percentage points, setting it at 1.5%.

According to the ERC’s April issue of Economic Outlook, real GDP growth in Cyprus is projected to slow from 3.4% in 2024 to 2.8% in 2025, before improving to 3.2% in 2026.

“The strong economic performance of Cyprus in 2024, combined with easing inflation and falling interest rates, is expected to support economic activity in the coming quarters,” the report highlights.

However, the Center notes that “growth rates in partner economies have remained low, while uncertainty over international trade policies has increased, negatively affecting growth prospects.”

Compared to the January issue, the 2025 forecast has been revised down by 0.5 percentage points, influenced by weaker-than-expected GDP growth in the final quarter of 2024 and signs of softening in some leading indicators during the first quarter of 2025.

“Weak growth and subdued sentiment in partner economies, along with rising uncertainty in global trade policy, have also affected Cyprus’s growth outlook,” the report adds.

Despite the challenges, the labor market remains strong, and ongoing monetary easing is expected to lead to a slightly higher growth rate in 2026—up 0.2 percentage points compared to the January forecast.

On inflation, based on the Consumer Price Index (CPI), the ERC projects a rate of 1.5% in 2025 and 1.8% in 2026.

The downward revision for 2025 is primarily attributed to falling inflation in February and March in Cyprus, along with further drops in international oil prices during the first quarter of 2025.

For 2026, the inflation forecast has been adjusted upward by 0.2 percentage points, reflecting expectations of stronger domestic activity.

Compared to earlier projections, the ERC also notes that trade tensions have intensified, leading to greater volatility in global markets.

“Increased uncertainty over global trade policy, combined with ongoing geopolitical risks, has significantly burdened global growth prospects, raising the likelihood that Cyprus may experience a slower growth rate than currently projected,” the report concludes.