Executive Summary
The Central Bank of Cyprus (CBC) Annual Report 2025 presents a year of strong economic performance, financial stability, and institutional modernisation, despite heightened global uncertainty and geopolitical tensions.
Cyprus Economy 2025: Strong, Stable, Resilient
Economic Growth
Cyprus recorded 3.8% GDP growth, driven by:
- Strong private consumption
- Increased public and private investment
- A highly resilient labour market
“Real GDP continued its upward trend, driven by a wide range of sectors of economic activity.”
Inflation & Employment
- Inflation: 0.8% (significantly lower than 2024)
- Unemployment: 4.4% – one of the lowest levels in Cyprus’ history
- Public Debt: Fell to 55% of GDP, continuing its downward trajectory
- Fiscal Surplus: 3.4%
📈 Outlook for 2026–2028
CBC projections (March 2026) indicate:
GDP Growth
- 2026: 2.7%
- 2027: 2.9%
- 2028: 3.1%
Growth will be supported by:
- Rising real disposable income
- Strong labour market
- Large-scale private infrastructure investments
- Expanding exports in technology, financial and professional services
Tourism is expected to soften in 2026 due to geopolitical tensions, then recover from 2027 onward.
Inflation
- 2026: 2.7% (energy-driven)
- 2027: 2.0%
- 2028: 2.2% (ETS2 fuel cost impact)
🏦 Banking Sector: Capital-Rich & Stable
The Cypriot banking sector remained exceptionally robust:
- CET1 Capital Ratio: 25.8%
- Liquidity Coverage: 319%
- Non-Performing Exposures (NPEs): 1.6% – below the EU average (1.8%)
Macroprudential strengthening included:
- Higher Countercyclical Capital Buffer (CCyB)
- Revised O‑SII buffers
- Increase of the Deposit Guarantee Fund target level from 0.8% to 1.25% of covered deposits
🏛 Institutional Modernisation & Governance Reform
2025 marked a transformative year for the CBC’s internal structure:
Key Reforms
- Full organisational restructuring (effective February 2025)
- Establishment of thematic teams in crypto-assets and climate risk
- Strengthened regulatory framework for EMIs and Payment Institutions
- Launch of a new Communication Strategy to enhance transparency
A major governance reform proposal was submitted to the President and Minister of Finance, aiming to align the CBC with European best practices through a leaner, more collective decision-making model.
🌍 Euro Area Context
Despite global uncertainty, the euro area remained resilient:
- GDP growth: 1.5%
- Inflation: 2.1% (near ECB target)
ECB projections (March 2026) foresee:
- Slower growth in 2026 due to Middle East conflict
- Inflation rising to 2.6% in 2026 before easing in 2027–2028
🔍 CBC Strategic Priorities for 2026
The Bank’s 2025–2026 Strategy is built on three pillars: Fix the Bank • Run the Bank • Change the Bank
By end‑2025:
- 40 actions completed
- 44 actions in progress
- 4 scheduled for 2026
2026 priorities include:
- Modernising the governance model
- Advancing HR and IT transformation
- Strengthening risk management frameworks
- Enhancing the CBC’s role within the Eurosystem
📌 At a Glance – Key 2025 Indicators
| Indicator | 2025 Result |
| GDP Growth | 3.8% |
| Inflation | 0.8% |
| Unemployment | 4.4% |
| Public Debt | 55% of GDP |
| Fiscal Surplus | 3.4% |
| CET1 Ratio | 25.8% |
| Liquidity | 319% |
| NPE Ratio | 1.6% |
| CBC Total Assets | €28.8bn |
📄 Read the Full Report
If you would like to read the report in full, you can find it here: https://www.centralbank.cy/images/media/redirectfile/CBC_Annual_Report_English_2025_Final%20(006).pdf
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