Cyprus Economy: Resilient Growth Amidst Challenges in 2025

The Cypriot economy entered 2025 with strong growth, having recorded a robust 3.4% growth in 2024. However, the small economy of Cyprus faced persistent external challenges and an economically uncertain global environment. Geopolitical risks, climate change, and the impending tax reform created additional challenges.

Despite these factors, the Cypriot economy maintained strong growth rates, recording 3% in the first quarter of 2025. The Ministry of Finance forecasts 3.1% growth for the entire year, with inflation at 0.9% and unemployment at 4.6%.

Key developments include the signing of an agreement for the exploitation of deposits in the Cypriot EEZ and interest rate cuts by the European Central Bank (ECB). Furthermore, Cyprus exited the macroeconomic imbalances regime, with international rating agencies upgrading the creditworthiness of the Cypriot economy.

The third quarter of 2025 was marked by the passing of tax reform and the agreement on the Automatic Cost of Living Adjustment (ATA). Simultaneously, significant projects such as the Cyprus–Greece electricity interconnection, Great Sea Interconnector (GSI), and the natural gas liquefaction terminal in Vasiliko were set in motion.

Significant international initiatives included the signing of the Exclusive Economic Zone Delimitation Agreement with Lebanon and the strengthening of relations with the United Arab Emirates.