The cost of living continues to place pressure on household budgets in Cyprus, with energy, housing and food costs remaining elevated despite a slowdown in headline inflation during July.
Following the publication of the latest figures by the Statistical Service, economists told Politis that the realities facing households remain challenging, even though overall inflation has eased.
According to the Statistical Service, inflation slowed to 2.9% in July 2026, down from 3.1% in June, while average inflation for the January-July 2026 period stood at 1.9%.
The largest annual price increases in July were recorded in:
- Housing, Water Supply, Electricity, Gas and Other Fuels (+7.21%)
- Transport (+5.96%)
- Food and Non-Alcoholic Beverages (+4.94%)
By contrast, the largest annual decline was recorded in Clothing and Footwear, where prices fell by 5.86%.
Prices continue to rise
"The inflation rate in Cyprus stood at 2.9% in July, according to figures announced by the Statistical Service. At first glance the number appears encouraging because it is lower than in June, but the reality is more complex," economist Tasos Iasemides told Politis.
According to Iasemides, the slowdown was driven largely by summer discount sales on clothing and footwear, a seasonal development that occurs every July.
"If we remove this factor, the picture of high prices has not changed substantially. Fuel, housing and food continue to become more expensive, and these are the items that the average consumer feels most strongly in their pocket."
He said one positive development was that electricity prices had declined slightly compared with last year, offering households some limited relief on power bills.
However, he noted that, on a month-to-month basis, electricity and water were among the strongest contributors to price increases in July compared with June.
"The real pressures, energy, housing and food, remain in place and they are what keep Cyprus among the countries with the highest inflation in the European Union."
According to recent Eurostat data, harmonised inflation in Cyprus stood at 4% in July, compared with 4.1% in June and just 0.1% in July 2025.
This represents the third-highest inflation rate in the European Union, after Lithuania (5.6%) and Bulgaria (4.1%).
Iasemides stressed that, for households, basic expenses continue to absorb a greater share of income than a year ago.
"Basic expenses, fuel, rent or mortgage instalments, electricity and groceries, continue to absorb a larger proportion of household income than they did a year ago."
He added that businesses relying on imported goods or fuel continue to face elevated production and transport costs.
"For businesses that depend on imported goods or fuel, production and transportation costs remain high, and sooner or later these costs are passed on to prices."
Extreme energy dependence
Economist Stelios Platis argued that the latest figures highlight what he described as the underlying problem of the Cypriot economy.
"The significant fall in oil prices that followed the temporary de-escalation of the conflict in the Gulf region led to a relative decline in petroleum product prices compared with the previous month. Nevertheless, they remain 12.2% more expensive than a year ago, while electricity and water prices increased by 5.3% in just one month."
According to Platis:
"This reveals the real problem of the Cypriot economy: our extreme dependence on imported energy."
He pointed to Eurostat figures showing that Cyprus has an energy import dependence rate of 88%, compared with 57% across the European Union.
As a result, he said, international developments have a disproportionate impact on Cyprus.
"When international oil prices fall, inflation eases somewhat. But when a war or crisis drives prices higher, the cost is transferred to electricity, transport, production and ultimately to supermarket shelves."
He warned that inflation has a cumulative effect and often remains in the economy long after the original crisis has ended.
"Unfortunately, inflation is cumulative and remains for much longer than the crisis itself. The consequences are disproportionately severe for lower-income groups."
Platis stressed that the issue is not Cyprus' inability to control international prices.
"That goes without saying. The problem is that for years we failed to reduce our exposure to them."
He noted that despite Cyprus' abundant sunshine, the European Commission has recorded:
- An 83% increase in renewable-energy curtailments
- Delays in connecting new renewable-energy projects
- Insufficient energy-storage capacity
"This is the real long-standing failure in governance. We knew about the dependency, we knew about the risk, yet we failed to create an energy system capable of protecting the economy and consumers."
Cost pressures expected to continue
The rise in living costs is expected to continue for the remainder of the year.
According to the June Economic Bulletin published by the Central Bank of Cyprus, inflation based on the Harmonised Index of Consumer Prices is projected to rise significantly to 3.2% in 2026, compared with 0.8% in 2025.
The increase is attributed mainly to the economic impact of the conflict in the Middle East.
Specifically, the Central Bank expects significant upward pressure on energy prices due to increases in international oil prices resulting from restrictions on shipping through the Strait of Hormuz.
These developments are also expected to generate indirect inflationary pressures across other categories, contributing to broader price increases throughout the economy.
