The Cyprus economy continues to show strong fiscal and growth performance, with a surplus of around 3% and public debt falling close to 50% of GDP. Economist Yiannis Telonis says that if this trend continues into 2026, the country could rank among Europe’s strongest fiscal performers.
Speaking to Economy Today, Telonis described recent GDP figures as an excellent performance. Data released on Friday showed growth reached 4.5% in the final quarter of 2025 and 3.7% for the full year.
Growth outpaces Europe
He noted the timing of this performance is particularly significant, as it comes amid global uncertainty linked to US tariff policies and ongoing wars in Ukraine and Gaza. Cyprus also outperformed the European average, where growth stands at roughly 1.3% in the eurozone and 1.5% across the European Union.
Three pillars driving expansion
Telonis identified tourism as the first major driver, describing it as the engine of the economy. Visitor numbers have risen and the tourist season has expanded from April through October.
The second pillar is construction, which is operating close to full capacity despite labour shortages.
The third pillar involves sustained investment in the economy, including new hotel developments, private hospitals, and restructuring funds from the European Union. He stressed that Cyprus ranks among the top countries in absorbing available EU funding.
Full employment and fiscal discipline
Telonis also highlighted that Cyprus is effectively at full employment. He argued that this should translate into wage increases to strengthen social cohesion and ensure a fairer distribution of growing wealth.
He warned, however, that fiscal discipline must continue despite higher tax revenues driven by consumption and business profitability. Spending on non-productive projects that do not benefit society should remain limited.
Inflation pressures and cost of living
Although inflation has eased, households still feel the impact of high prices. Telonis explained that the cost of living stems mainly from frequently purchased essentials such as food, fuel, and energy rather than headline statistical inflation.
He called for stronger pressure in sectors where horizontal monopolies influence pricing, whether through coordination or dependence on externally set prices.
On energy, he noted that international oil prices have declined compared with previous years, but Cyprus is affected more by refined product prices than crude oil. Market clarity is expected in the next quarter as European reserves are replenished.
Strong fiscal outlook
Cyprus maintains a fiscal surplus of about 3%, while public debt has dropped to around half of GDP. If this trajectory continues through 2026, the country could become one of Europe’s most fiscally robust economies, Telonis said.
Future reforms and technology
Sustaining growth in the coming years will require structural reforms and greater investment in technology within the public sector. Without these changes, the economy risks reaching a peak followed by stagnation.
He added that the state cannot continue hiring public employees indefinitely. Rapid technological adoption could leave 10–15% of government workers without clear roles, creating challenges for labour redistribution across the wider economy.
Also read: Cyprus property market top €2.5bn in 2025, apartments lead
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