Cyprus’ economic growth decelerated to 3.0% year-on-year in the first quarter of 2026, marking the slowest pace in ten quarters, Eurobank Research revealed. This slowdown is mainly due to a rebound in imports and weaker net exports, despite continued strong export growth of 10.5%. Imports rose sharply by 10.4%, reflecting low base effects related to transport equipment investments in the previous year.

Domestic demand showed resilience, with private consumption accelerating to 4.9%, supported by record-low unemployment at 4.0%. Construction, particularly residential housing investment up 4.7%, remains a vital sector, fueled by strong mortgage lending growth. However, investment in intellectual property products continued to decline substantially.

Looking ahead, Eurobank forecasts geopolitical tensions in the Middle East will mainly impact tourism and related services, with tourist arrivals dropping significantly in March and April but showing signs of recovery in May. Inflation pressures from rising energy costs are expected to weigh on consumer spending, though government measures and wage adjustments could mitigate effects. Construction activity, supported by increased building permits and property sales, is expected to sustain economic momentum through 2026.