University of Cyprus revises economic growth and inflation forecasts for 2026-2027

The Centre for Economic Research at the University of Cyprus has downwardly revised its economic growth forecasts for 2026 and 2027, citing regional instability. Projections for 2026 growth were lowered by 0.6 percentage points to 2.9%, while 2027 estimates were reduced by 0.3 percentage points. These adjustments are primarily attributed to the ongoing conflict in the Middle East, which has impacted external demand for services and contributed to rising oil prices. Additionally, a foot-and-mouth disease epidemic in the livestock sector has created further economic domestic pressure. Inflation is expected to accelerate significantly, rising from 0.1% in 2025 to 2.7% in 2026 before easing to 1.8% in 2027, an upward revision of 1.9 percentage points for 2026. Despite these challenges, the Centre noted that strong fourth-quarter growth in 2025, robust public finances, and low unemployment levels should serve as a buffer against these shocks. High uncertainty persists due to the evolving geopolitical situation.