**Cyprus Economic Outlook Brightens as Business Confidence Strengthens**
Cyprus' economic landscape showed signs of improvement in July 2026, bolstered by a notable increase in business confidence, particularly within the services and retail trade sectors. This positive trend is highlighted in the latest business and consumer surveys conducted by the Economics Research Centre of the University of Cyprus (CypERC).
According to the report, the Economic Sentiment Indicator (ESI-CypERC) rose by 0.7 points compared to June, continuing the upward trajectory observed in previous months. This increase reflects a growing optimism among businesses, despite a slight decline in consumer confidence.
The report indicates that the Services Confidence Indicator experienced a significant boost, primarily driven by businesses expressing enhanced expectations regarding their turnover in the upcoming months. Similarly, the Retail Trade Confidence Indicator saw an uptick for the second consecutive month, as businesses reported more favorable assessments of their current stock levels and stronger expectations for future sales.
However, the construction and industrial sectors experienced a dip in confidence. The Construction Confidence Indicator edged down slightly, attributed to less favorable assessments of current order books among firms. The Industrial Confidence Indicator also weakened, with businesses reporting less optimistic views on finished product stocks and lower expectations for future production.
While businesses exhibited increased optimism, consumer sentiment took a more cautious turn. The Consumer Confidence Indicator fell, as households reported more negative views about their financial situations. The survey revealed a deterioration in consumers' assessments of their recent financial circumstances and a weakening of expectations regarding their future financial outlook.
Despite the decline in consumer confidence, the overall economic uncertainty in Cyprus decreased during July. CypERC noted that the drop in the Economic Uncertainty Indicator was primarily due to reduced uncertainty among businesses in the services, retail trade, and construction sectors. Conversely, consumer uncertainty rose for the second consecutive month, with low-income households experiencing the most significant increase in concerns about their future financial situations.
This latest survey follows updated economic projections released by CypERC, which suggest a slowdown in economic growth and an increase in inflation for the coming year. The centre forecasts that real gross domestic product (GDP) growth will decelerate from an estimated 3.8% in 2025 to 2.7% in 2026, before rebounding to 3.1% in 2027. Concurrently, inflation is expected to rise from 0.1% in 2025 to 3% in 2026, before easing to 2.1% in 2027.
CypERC attributes the weaker economic outlook to several factors, including slower economic activity in Cyprus and the broader euro area, rising energy prices, tighter financing conditions, and the ongoing economic repercussions of instability in the Middle East. Despite these challenges, the centre remains optimistic about the resilience of the Cypriot economy, citing relatively low unemployment rates, sound public finances, and an increased demand for new housing loans as supportive factors.
In summary, while business confidence in Cyprus is on the rise, consumer sentiment has turned more cautious, reflecting a complex economic landscape. The forthcoming months will be crucial in determining how these trends evolve and their impact on the overall economic health of the nation.