Cyprus’s €900 million surplus will help cushion the impact of inflation

Cyprus’s budget surplus in 2026 is expected to reach €900 million, equivalent to 2.3% of GDP. The authorities expect this to allow them to support social measures amid high inflation and the rising cost of living.

Finance Minister Makis Keravnos said that the surplus forecast would not be revised for now. According to him, the country’s financial position remains stable despite uncertainty related to rising energy prices and the geopolitical situation.

The government has already allocated around €200 million to measures aimed at containing price increases. These include a zero VAT rate on certain goods, electricity subsidies for vulnerable groups and a reduction in the excise duty on fuel, which is in effect until 17 September.

The question of extending the reduced fuel excise duty remains open. Keravnos said that the government was assessing the situation and would make a decision based on further developments.

At the same time, the inflation forecast remains high. In the first half of 2026, inflation in Cyprus averaged 1.7%, but rose to 3.1% by June. The main reason for the acceleration in price growth was the increase in international oil prices.

The annual inflation forecast for 2026 remains at 4.5%.

Cyprus’s economic growth this year was also below initial expectations. The forecast was lowered from 3.1% to 2.7%. In the first quarter, the economy grew by 3%.

The projected unemployment rate is 4.5%.