Cyprus’s systemic banks are preparing for a wide range of economic outcomes this year, their 2025 annual reports show, with GDP forecasts stretching from robust growth to a significant contraction depending on how geopolitical tensions, trade conditions and inflation develop. Phileleftheros compiled the projections from all three banks.
Bank of Cyprus
The Bank of Cyprus base case, updated to December 31, 2025, projects GDP growth of 2.6% this year, consumer price inflation rising to 2.6% from 0.1% in 2025, and property prices up 2.5%. The bank described the environment as one of strong growth despite geopolitical risk, with lower inflation and previous interest rate cuts continuing to support activity. It identified geopolitical tensions and reduced global trade flows as the main headwinds, while noting that the growth of artificial intelligence is supporting global trade and investment.
If conditions deteriorate, the picture changes sharply. Under the adverse scenario, real GDP would fall 5.1% in 2026 and a further 2.3% in 2027. Unemployment would climb to 8% in 2026 before easing slightly to 7.4% in 2027, inflation would turn negative at minus 1.4% in 2026 with deflation persisting into 2027, and property prices would decline. The bank noted that Cyprus’s reliance on tourism, international business and technology services makes it more exposed than many economies to external shocks and swings in trade conditions.
The positive scenario is considerably brighter. Real GDP would grow 4.1% in 2026 and 2.6% in 2027, unemployment would hold at 4.1% in both years, consumer inflation would rise to 3.4%, and residential property prices would increase 3.9% in 2026.
Eurobank and Alpha Bank
Eurobank’s projections for Cyprus average annual figures across the period 2026 to 2029. The range is wide: GDP growth of 4.04% under the optimistic scenario narrows to 3.11% in the base case and falls to just 0.70% in the adverse scenario. The unemployment gap is similarly striking, with the optimistic scenario putting the rate at 3.58% against 6.51% in the adverse case. Residential property prices would rise 4.13% in the best case, 2.61% in the base case and fall 1.61% in the adverse scenario. Commercial property prices would rise 3.69% in the optimistic scenario and 1.60% in the base case, but drop 3.79% if conditions worsen.
Alpha Bank covers the period 2025 to 2027 and projects GDP growth of 5.6% under its favourable scenario, falling to 3% in the base case and just 0.4% in the adverse scenario. On unemployment, the range runs from 3% in the favourable case to 6.5% in the adverse scenario, with the base case at 4.8%. Inflation projections move in the opposite direction: 0.8% in the favourable scenario rising to 3.6% in the adverse case, with the base case at 2%. Residential property values would rise 5.4% under the favourable scenario and 3.4% in the base case, but only 1.5% in the adverse scenario. Commercial property values follow a similar pattern, at 3.4%, 2.2% and 0.9% respectively.
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