The Central Bank of Cyprus forecasts that strong domestic demand will remain the key driver of economic growth in Cyprus from 2025 through 2028. Private consumption, supported by improvements in real disposable income and near full employment, grew by 3.3% in 2025, while investment activity rose by 6.2% excluding Special Purpose Entities. Public consumption and net exports also contributed positively, with exports growing faster than imports.

Economic growth was notably driven by sectors such as trade, transport, hotels, restaurants, and information and communication. Large-scale private non-residential investments are expected to further bolster domestic demand despite potential delays due to geopolitical instability in the Middle East.

However, recent data for early 2026 shows signs of an economic slowdown. The Economic Sentiment Indicator fell to 99.5 in April–May 2026, reflecting negative impacts from Middle East developments. Despite this, the Central Bank maintains a positive outlook for sustained growth driven by domestic factors over the coming years.