Cyprus economy takes its foot off the accelerator in third quarter

Cyprus recorded annual economic growth of 3.1 per cent in the third quarter of 2026, slowing from 3.4 per cent in the previous quarter, according to preliminary data released by the state statistical service (Cystat) on Friday. Specifically, the Cypriot economy’s seasonally adjusted gross domestic product (GDP) increased by 3.1 per cent compared with the third quarter of 2025, while growth on a quarterly basis reached 0.5 per cent, down from 1.2 per cent in the second quarter. The expansion was driven mainly by wholesale and retail trade and vehicle repairs, financial and insurance activities, construction, and information and communication, the statistical service said. The latest figures show that the economy continued to expand during the summer months, although at a slower pace than in the preceding quarter. According to the updated data, annual GDP growth stood at 3.4 per cent in the second quarter of 2026, following an increase of 3.1 per cent in the first quarter. The second-quarter figure represents an upward revision from the 3.3 per cent reported in August’s preliminary figures, when the economy was estimated to have grown by 0.8 per cent on a quarterly basis. The latest data now puts that quarterly increase at 1.2 per cent, pointing to stronger economic activity during the April-to-June period than initially estimated. Similarly, the first-quarter annual growth rate has been revised to 3.1 per cent, compared with the 3 per cent recorded in earlier GDP estimates. The economy had previously expanded by 4.5 per cent in the fourth quarter of 2025, compared with 4.2 per cent in the third quarter of that year. The third-quarter performance therefore represents a return to the annual growth rate recorded at the beginning of 2026, following the stronger expansion seen in the second quarter. On a quarterly basis, the economy grew by 0.5 per cent between July and September, compared with 1.2 per cent between April and June. This followed quarterly growth of 0.3 per cent in the first three months of 2026, while the economy had expanded by 1.1 per cent in the final quarter of 2025. For comparison, quarterly growth stood at 0.7 per cent in the third quarter of 2025. Meanwhile, construction remained among the sectors supporting economic activity, reflecting the continued importance of property development and building projects. Separate Cystat figures released earlier this week showed that the value of authorised building projects approached €3 billion during the first seven months of 2026, increasing by 36.5 per cent compared with the corresponding period last year. The number of planned homes also rose by 60.5 per cent to 13,044 units, with apartment developments accounting for much of the increase. Information and communication activities also continued to contribute to economic growth, reflecting the significance of Cyprus’ expanding technology industry. Earlier this year, a KPMG assessment presented at the TechIsland Summit estimated that the broader technology sector contributed €5.9bn, equivalent to 16.2 per cent of GDP, in 2025, with its wider economic impact reaching €11.9bn. The new GDP figures also follow a positive assessment of Cyprus’ public finances by Fitch Ratings, which recently upgraded Cyprus to A from A-, citing strong fiscal performance, declining public debt and economic growth prospects. However, the slower quarterly expansion recorded between July and September points to a moderation in the pace of economic activity, despite continued positive growth on both an annual and quarterly basis. The statistical service cautioned that the latest figures are preliminary estimates, intended to provide an early picture of economic developments 45 days after the end of the reference quarter. The flash estimate is based on less information than the regular quarterly national accounts, which are published two months after the end of each quarter. According to Cystat, the estimates are compiled using short-term economic indicators, administrative data, quarterly employment figures and price indices.