IMF Executive Board Concludes 2026 Article IV Consultation with Cyprus
IMF News, June 23, 2026
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Bibliographic details
- Published: June 23, 2026
Overview
- Date of press release: June 23, 2026.
- Executive Board concluded the Article IV consultation for Cyprus on June 17, 2026.
- Authorities consented to publication of the Staff Report prepared for the consultation.
- Core assessment: Despite higher energy prices and lower tourism arrivals, Cyprus’s economy remains resilient, with strong growth and fundamentals.
Economic outlook and risks
- Recent performance:
- 2025 growth among the highest in the EU, supported by robust domestic demand and strong services exports, particularly ICT and tourism.
- Inflation declined in 2025 reflecting favorable energy and goods price developments, but has started to pick up as higher energy prices linked to the war in the Middle East feed through.
- Tourism is showing signs of softening.
- Near-term projections and risks:
- Growth is expected to moderate in 2026 as higher energy prices and geopolitical tensions weigh on real incomes, tourism, and confidence.
- Inflation is projected to rise in the near term before easing.
- Risks are tilted to the downside, notably from a more prolonged war in the Middle East, tighter global financial conditions, and weaker external demand.
- Medium-term prospects:
- More balanced, supported by strong fundamentals and reform momentum.
Fiscal performance and policy guidance
- Recent fiscal outcomes:
- Fiscal performance has remained strong, with continued surpluses and public debt declining below 60 percent of GDP.
- Executive Directors’ guidance:
- Preserve fiscal sustainability while using expanding policy space for gradual, well‑calibrated fiscal easing to avoid overheating.
- Emphasize improving spending and taxation efficiency, prioritizing high‑quality public investment, and maintaining discipline in public wage growth.
- Measures to support households should be temporary and well targeted.
- Directors welcomed recent comprehensive tax reform and the proposal to build financial assets in the social security fund.
Financial sector assessment and recommendations
- Current soundness:
- Banking sector is sound, supported by strong capital and liquidity buffers and improving asset quality.
- Residual vulnerabilities and priorities:
- Significant exposure to real estate and remaining legacy NPLs outside the banking sector warrant continued vigilance.
- Credit intermediation remains subdued; policy priorities include:
- Preserve an effective foreclosure framework.
- Strengthen insolvency processes.
- Improve judicial efficiency to support resolution of distressed assets, deepen credit markets, and foster investment.
- Strengthen risk monitoring frameworks and advance AML/CFT supervision.
Structural reforms and competitiveness
- Directors emphasized that continued implementation of structural reforms is key to raising productivity and supporting long‑term growth.
- Priority areas:
- Address skills mismatches and strengthen human capital and AI readiness.
- Improve the business environment and enhance judicial efficiency.
- Advance energy sector reform to reduce costs, strengthen energy security, and support the green transition.
- Timely implementation of measures under the EU‑funded Recovery and Resilience Facility.
Key statistics and projections (selected figures from Table 1)
- Real GDP (percent change):
- 2022: 8.7
- 2023: 3.6
- 2024: 3.9
- 2025: 3.8
- 2026 (projection): 2.6
- 2027 (projection): 3.0
- Domestic demand (percent change):
- 2022: 8.8
- 2023: 6.6
- 2024: 2.9
- 2025: 1.4
- 2026 (projection): 4.4
- 2027 (projection): 3.5
- Gross capital formation (percent change):
- 2022: 11.5
- 2023: 12.0
- 2024: 0.8
- 2025: -4.6
- 2026 (projection): 11.2
- 2027 (projection): 6.9
- HICP (period average, seasonally-adjusted):
- 2024: 2.3
- 2025: 1.5
- HICP (end of period, seasonally-adjusted):
- 2024: 7.6
- 2025: 3.1
- General government debt (percent of GDP):
- 2022: 80.3
- 2023: 71.1
- 2024: 62.8
- 2025: 55.0
- 2026 (projection): 50.5
- 2027 (projection): 46.2
- 2028 (projection): 42.2
- 2029 (projection): 35.5
- 2030 (projection): 32.4
- General government balance (percent of GDP):
- 2022: 2.4
- Current account balance (percent of GDP):
- 2022: -6.9
- 2023: -9.7
- 2024: -8.2
- 2025: -6.4
- 2026 (projection): -8.3
- 2027 (projection): -8.6
- 2028 (projection): -8.7
- 2029 (projection): -8.5
- 2030 (projection): -8.4
- Exports and imports of goods and services (percent change):
- Exports of goods and services (selected years): 27.8, 5.7, 5.0, 4.1
- Imports of goods and services (selected years): 28.8, 4.6, 6.1, (value for 2025 not explicitly tabulated in provided excerpt)
- Nominal GDP (billions of euros):
- 2022: 29.6
- 2023: 34.8
- 2024: 36.5
- 2025: 38.9
- 2026 (projection): 43.0
- 2027 (projection): 45.3
- 2028 (projection): 47.6
- 2029 (projection): 50.1
- External debt:
- 2022: 868.1
- 2023: 744.6
- 2024: 674.1
- 2025: 639.5
- 2026 (projection): 599.0
- 2027 (projection): 564.4
- 2028 (projection): 529.8
- 2029 (projection): 498.6
- 2030 (projection): 468.2
- 2031 (projection): 440.1
- Net International Investment Position (Net IIP, percent of GDP):
- 2022: -97.4
- 2023: -92.4
- 2024: -84.1
- 2025: -80.8
- 2026 (projection): -83.9
- 2027 (projection): -88.1
- 2028 (projection): -92.3
- 2029 (projection): -96.2
- 2030 (projection): -99.9
- 2031 (projection): -103.3
- APSP oil price ($ per barrel, used for scenario assumptions):
- 2022: 80.6
- 2023: 79.2
- 2024: 67.7
- 2025: 99.4
- 2026 (assumption): 74.6
- 2027 (assumption): 74.2
- 2028 (assumption): 73.9
- 2029 (assumption): 73.7
- 2030 (assumption): 73.3
Executive Board assessment (summary)
- Commended Cyprus’s continued strong macroeconomic performance and resilience: sustained growth, fiscal surpluses, and declining public debt despite a challenging external environment.
- Cautioned that near‑term risks are tilted to the downside and that structural vulnerabilities persist.
- Encouraged authorities to:
- Preserve fiscal sustainability.
- Press ahead with structural reforms to boost productivity and support long‑term growth.
- Maintain vigilance over financial sector exposures and advance judicial and insolvency reforms to deepen credit intermediation.
Press Release No. 26/215, IMF Communications Department, June 23, 2026.