The International Monetary Fund expects the Cypriot economy to maintain growth of around 3% over the coming years, supported by low inflation and sustained fiscal surpluses that are driving public debt down at a rapid pace. The outlook comes as the global and European picture darkens under the weight of the war in the Middle East, with the IMF warning of heightened risks to growth, inflation and public finances worldwide. Current projections nonetheless suggest that the conflict will not produce a decisive reversal for Cyprus, despite concerns about its effect on energy prices.
In its latest projections, published during the fund's spring meetings in the United States, the IMF placed Cyprus's real GDP growth for 2026 at 3%, with medium-term estimates showing growth "stabilising at around 3%," confirming the economy's resilience. The fund attributes the strong performance primarily to services exports, tourism, foreign investment inflows and a surge in the ICT sector, which together place Cyprus among the highest-growing economies in the eurozone.
Inflation is forecast at 2.6% for 2026 before easing to 1.6% in 2027. On the fiscal side, the IMF's Fiscal Monitor shows Cyprus recording primary surpluses above 3% of GDP for several consecutive years, with overall surpluses of around 2%, enabling steady debt reduction. For 2026, a surplus of 2.6% is projected, with a primary surplus of 3.7%, declining gradually to 1.8% by 2030, with a primary surplus of 2.9%. Public expenditure is forecast to stabilise at 39.4% of GDP.
Having peaked at 113.6% of GDP in 2020, public debt has been on a consistent downward trajectory. According to IMF projections, it will fall well below the 60% threshold in the coming years, reaching 50.9% in 2026 and declining further to 32.1% by 2031. The fund notes that maintaining high surpluses serves as a buffer against future shocks, provided the government continues the "prudent fiscal management" it has already recognised in its successive mission reports on Cyprus.
Cyprus against the eurozone and the global trend
The European picture is considerably more subdued. Under the IMF's baseline World Economic Outlook scenario, eurozone growth slows from 1.4% in 2025 to 1.1% in 2026, recovering only marginally to around 1.2% in 2027, well below Cyprus's projected rate. If the projections hold, Cyprus will continue to grow at more than double the European average, consolidating the gradual convergence of its per capita income toward EU norms.
At the global level, the IMF warns that the world economy is moving "into the shadow of the war," with global growth expected at 3.1% in 2026 and 3.2% in 2027, both below the 2000–2019 average. The revision is negative: compared to the pre-war baseline published in January, the 2026 forecast has been cut by 0.2 percentage points, despite what had initially appeared to be stronger economic momentum. The Fiscal Monitor paints an equally pressured picture for public finances globally, with world public debt approaching 94% of global GDP in 2025 and heading toward 100% by 2029, driven by rising defence spending, social policy commitments and interest costs.
The IMF links the slowdown directly to the war in the Middle East, which is feeding higher energy prices and intensifying inflationary pressures, projected to reach 4.4% globally in 2026. In adverse scenarios, where energy disruptions prove more severe and prolonged, global growth in 2026 could be compressed to 2.5% or even around 2%.
For Cyprus, a protracted crisis in the Middle East would translate primarily into higher energy costs, pressure on tourism and increased investment uncertainty, factors that could erode part of the expected growth. The existence of sustained surpluses and the rapid decline in public debt do, however, provide significant fiscal buffers, allowing the state to absorb short-term shocks without jeopardising debt sustainability.