Cyprus Economic Review 2025: Reform, COLA, Geopolitics

2025 was a year of significant economic developments in Cyprus, impacting both households and businesses. Despite geopolitical uncertainty, the Cypriot economy showed resilience, although the high cost of living and labor unrest created a complex scenario.

Two decades after the last revision, Cyprus 'locked in' its new tax system. The Minister of Finance, Makis Keraunos, stated on 23/12 that the reform would give new impetus to the economy, following the 'green light' from Parliament on December 22.

Growth and Challenges: The economy grew by 3.2%, unemployment is low, and public debt is expected to fall to 50.9% of GDP by 2026. Inflation is expected to be limited to 0.2%-0.4%, but property prices continued their upward trend.

Labor Unrest: In December, a permanent agreement was signed for COLA, linking it to the minimum wage. This was preceded by a general strike on September 11. The new decree for the minimum wage, which increases to €1,088 (semi-annually), will take effect from January 1, 2026.

Banking Sector: The merger of Eurobank Cyprus with Hellenic Bank was completed, and the acquisition of Astrobank by Alpha Bank was announced.

Trade War: The imposition of tariffs by US President Donald Trump caused global uncertainty, with a trade agreement for 15% tariffs on European products announced in July.