Nicosia:The Cypriot economy is projected to grow by 3.1% in 2026, despite ongoing global challenges such as the Russia-Ukraine war and the Middle East conflict, according to Finance Minister Makis Keravnos. Presenting the 2027 state budget to the House Finance Committee, Keravnos said the economic growth is expected to sustain at around 3% from 2027 to 2029.

According to Cyprus News Agency, inflation is anticipated to be at 4% in 2026, with a decrease to 2.5% in 2027 and 2% in both 2028 and 2029. The unemployment rate is forecasted to be at 3.8%.

Keravnos highlighted that the general government fiscal balance is expected to remain in surplus, reaching 2.7% of GDP in 2026 and improving to 3.9% of GDP in 2027. Public debt as a percentage of GDP is projected to decline significantly, reducing by 6.1 percentage points in 2026, and falling to 46.6% of GDP in 2027, compared to the current level of 48.9%.

In the banking sector, deposits are on an upward trend due to inflows from households and businesses, with deposits by domestic non-financial corporations also seeing a slight increase. Total loans extended by Cypriot banks have been on the rise since 2023, along with an increase in new lending.

Keravnos noted that the banking sector maintains a strong capital base and continues to enhance its resilience, with credit institutions holding high liquidity levels. The 2027 state budget aims to maintain a fiscal surplus, continue reducing public debt, promote the green transition, restrain public sector employment, and maintain a robust financial system to mitigate potential risks to public finances.