The first months of 2026 presented a mixed picture for the Cypriot economy. On the one hand, business activity continues to grow: GDP increased by 3% in the first quarter, the construction sector is showing strong activity, while retail trade, industry and vehicle sales are also rising. On the other hand, tourism has come under pressure, while imports are growing much faster than exports, leading to a further increase in the trade deficit.
At the same time, economic growth improved in the second quarter: according to a preliminary estimate by the Statistical Service of Cyprus, GDP in the second quarter of 2026 grew by 3.3% year on year. Thus, the economy is currently maintaining a steady pace of growth.
Tourism weakens while the trade deficit grows
One of the weaker areas of the Cypriot economy in the first half of 2026 was tourism. Between January and June, the island welcomed 1,656,015 tourists, 10.1% fewer than in the same period last year. Tourism revenue also declined. Between January and May, it amounted to €798.2 million, down 16.5% year on year. Average spending per tourist in April stood at €651.77, which was 10.3% lower than a year earlier.
Trips abroad by Cyprus residents, by contrast, became more popular. During the first six months of the year, the number of residents returning from trips abroad reached 929,479, an increase of 5.2%. The latest available data already show some improvement in tourist arrivals: in July 2026, 582,754 tourists arrived in Cyprus compared with 589,116 in July 2025. The decline was just 1.1%, significantly smaller than in the first half of the year. Foreign trade remains another challenge. Between January and June, imports of goods increased by 8.8% to €7.297 billion. Exports, meanwhile, rose by only 1.2% to €2.618 billion. As a result, the trade deficit for the first six months of 2026 reached €4.679 billion, up 15.4% compared with the same period in 2025.
Construction and real estate remain the main growth areas
The strongest positive momentum can be seen in the construction sector. Between January and April 2026, 2,915 building permits were issued, 35.1% more than a year earlier. The scale of the projects covered by these permits grew even more sharply:
- total area — 1,350,597 m2, up 45.5%;
- total value of projects — €1.671 billion, up 46.1%.
Current data from the Statistical Service confirm that activity remains high: 639 building permits were issued in April alone. Housing prices are also rising. According to the latest CYSTAT data, the House Price Index increased by 3.4% year on year in the first quarter of 2026. The cost of construction materials also continues to rise. In July, the price index reached 123.00 points, up 3.33% over the year.
Positive momentum is also continuing in retail trade. Between January and June, the value turnover index rose by 7.3% to 152.2 points, while the volume turnover index increased by 5.8% to 132.9 points. Growth in industry was more moderate. Between January and May, the industrial production index increased by 1.5% to 116.7 points. The industrial turnover index rose by 3.4% to 148 points. The producer price index in industry increased by 0.8% in the first half of the year to 125.4 points. The automotive market also remains highly active. Between January and July 2026, 34,787 vehicles were registered, 11.5% more than in the same period last year. Passenger car registrations rose by 11.1% to 26,841.
Inflation, the labour market and public finances
Inflation in Cyprus has remained relatively moderate throughout 2026, although the pace accelerated in July. Between January and July, consumer prices increased by an average of 1.87%, while the index itself reached 102.32 points. In July, annual inflation stood at 2.9%. The Harmonised Index of Consumer Prices, meanwhile, rose by 4.4% year on year.
The labour market remains generally favourable. In July, the number of registered unemployed stood at 10,504, which was 5.8% higher than a year earlier. According to Eurostat, the unemployment rate in Cyprus was 3% in June, compared with 3.1% in May and 4.5% in June 2025.
The average monthly salary in the first quarter of 2026 was €2,601. Employment also remains high: the employment rate among people aged 20–64 reached 81.5% in the first quarter. Public finances also remain positive. Between January and June, government revenue increased by 4.1% to €7.4 billion, while expenditure rose by 4.3% to €6.98 billion. As a result, the budget surplus stood at €420.3 million, or 1.1% of GDP, up 0.84% year on year.
What this means for the Cypriot economy
Overall, the Cypriot economy continues to show positive momentum in 2026. The main drivers remain construction, real estate, domestic consumption and the automotive market. The particularly strong growth in building permits points to continued investment activity in the property sector.
At the same time, weaker tourism and the growing trade deficit remain key risks. However, July data on tourist arrivals show that the decline is gradually easing. The latest CYSTAT estimate currently shows GDP growth of 3.3% in the second quarter of 2026, following 3% growth in the first quarter. This indicates that despite difficulties in individual sectors, the Cypriot economy continues to grow at a steady pace.