Economic growth accelerates in the fourth quarter of 2025

Second release cements Cyprus’s status as the EU’s second-fastest-growing economy: A second release confirmed that Cyprus' GDP expanded 4.5% on a seasonally and working-day adjusted year-on-year basis in Q4, following a 3.6% expansion in the prior quarter. Q4's reading was the strongest since Q4 2022 and the second-highest in the EU. In working-day and seasonally adjusted quarter-on-quarter terms, the economy grew 1.4% in Q4, following a 0.9% expansion in the previous quarter. In 2025 as a whole, annual GDP growth inched down from the previous year to 3.8% but remained among the EU’s strongest (2024: +3.9%).

Public spending pushes Q4 growth above earlier quarters: Relative to the prior quarter's data, the reading for government consumption improved in Q4 (+6.5% in working-day and seasonally adjusted annual terms vs +2.7% in Q3). In contrast, readings softened for private consumption (+3.3% vs +5.1% in Q3), fixed investment (-15.2% vs -2.2% in Q3), exports of goods and services (+4.4% vs +6.9% in Q3) and imports of goods and services (+2.7% vs +6.8% in Q3). In 2025 as a whole, public consumption growth roughly doubled from 2024, and fixed investment broadly stabilized after its prior contraction; however, private consumption and exports lost steam.

GDP growth to decelerate through Q4 2026: GDP growth should gradually decelerate from Q4 2025 through Q4 2026, reaching a six-year low in 2026 as a whole. Growth in private consumption and exports should weaken further, though fixed investment is seen rebounding and public consumption growth holding steady. Private consumption should be tempered by slowing wage growth and rising inflation. Meanwhile, fixed investment should be boosted by the full absorption of EUR 1 billion in Recovery and Resilience Facility (RRF) funds. A prolonged U.S.-Iran war diverting tourists and leading to persistently higher energy prices—oil and its byproducts accounted for 85% of Cyprus’s energy supply in 2023—is a key downside risk to GDP growth.

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