Cyprus leads EU growth entering autumn despite inflation and energy cost challenges
Cyprus is experiencing one of the fastest growth rates in the European Union as it heads into autumn, with real GDP having increased by 3.8% in 2025 compared to the EU average of 1.5%. However, rising energy prices, higher interest rates, and weakening external demand pose significant risks to how much of this growth will benefit households, according to Kyriacos Inios, board member of CFA Society Cyprus.
Energy costs remain a major pressure point, with Cyprus relying heavily on imports that account for 87.7% of its energy needs. Inflation climbed from 1.5% in March to 5.2% in August, driven largely by oil price increases linked to the Middle East conflict. Meanwhile, the ECB’s recent rate hikes are expected to impact borrowers soon, potentially constraining consumer spending.
Tourism, a key sector, saw a drop in arrivals and revenue this year, while external risks include weaker European demand and the impact of US tariffs. Despite these challenges, investments in energy infrastructure, technology, and EU funding projects offer potential relief and growth opportunities. Public debt reduction and budget surpluses provide fiscal space for targeted support to ease the cost-of-living pressures in the coming months.
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