Cyprus’ economy keeps growing, with falling debt and a stabilizing financial system, but new risks linked to regional instability and long-term structural challenges are still hanging over the country, according to a new report.
In its 2025 annual assessment, the European Stability Mechanism says Cyprus is on a clear path of fiscal consolidation, in simple terms, the government is bringing its finances under control while the economy keeps expanding.
The economy grew by 3.8% in 2025, driven mainly by strong local demand and a booming tourism and services sector.
Inflation also eased sharply to 0.9%, meaning price increases slowed compared with previous years, good news for households still dealing with the cost-of-living squeeze.
At the same time, Cyprus has made significant progress in reducing its debt. Public debt fell to 55% of GDP, down from 63% the previous year and a dramatic drop from around 114% in 2020, when the pandemic pushed borrowing to record levels.
