The Central Bank of Cyprus (CBC) forecasts a GDP growth of 2.2% in 2023, a decrease from the significant 5.1% growth seen in 2022. For the years 2024-26, the CBC anticipates GDP growth rates of 2.6%, 3.1%, and 3.2%, respectively.

CBC Governor Constantinos Herodotou emphasizes that "the implementation of reforms and the focus on sustainable growth are crucial for the country's further prosperity and progress." He also notes that "the banking system continued to demonstrate robustness and resilience in 2023."

According to the macroeconomic projections in the CBC's December 2023 Economic Bulletin, GDP growth in the years 2024-2026 is "primarily driven by the recovery of domestic demand and, to a lesser extent, by net exports in 2025-26, amid the expansion of the turnover of foreign technology companies established in Cyprus, especially in recent years."

The bulletin also mentions, "The growth is partly based on the expected correction in tourism revenues after the anticipated negative impact in 2024 due to hostilities in the Middle East."

Furthermore, the CBC anticipates that geopolitical tensions will have a minimal effect on the labor market, with unemployment projected to continue its gradual decline to 5.3% by 2026.

In terms of inflation, the domestic Harmonised Index of Consumer Prices (HICP) is expected to significantly decrease to 4% in 2023 from 8.1% in 2022. Further declines in inflation are projected for 2024, 2025, and 2026, to 2.4%, 2%, and 1.9%, respectively.

The CBC states that productivity, which rose by 2% in 2022, is expected to slow to 0.6% in 2023 due to job-rich economic growth. From 2024 to 2026, productivity is anticipated to continue recovering, with growth rates of 1.6%, 1.9%, and 2%, respectively.

Unit labor costs are projected to cumulatively rise by approximately 8.5% from 2023 to 2026, mainly due to anticipated increases in nominal expenditure per employee.