Cyprus Economy Records Solid First-Quarter Growth as Consumption and Services Drive Expansion

Cyprus began 2026 with continued economic momentum, as the country’s economy expanded by 3 per cent in the first quarter compared with the same period a year earlier, according to preliminary figures released on Tuesday by the Cyprus Statistical Service (Cystat). The latest data indicate that household spending, export performance, and strong activity across several major services industries played a central role in supporting growth during the opening months of the year.

Measured in real terms and adjusted for both seasonal effects and variations in working days, gross domestic product (GDP) also registered growth on a quarterly basis. Compared with the final quarter of 2025, the economy expanded by 0.2 per cent, signalling that economic activity continued to advance despite a more moderate pace of growth than that recorded on an annual basis.

The expansion was largely underpinned by several key sectors of the economy. Wholesale and retail trade, transport services, accommodation and food-related activities all made significant contributions to overall performance. Additional support came from information and communication services, as well as financial and insurance activities, both of which continued to demonstrate resilience and growth.

Using the production-based method of calculating economic output, the information and communication sector emerged as the strongest-performing segment of the economy. Activity in the sector increased by 5.4 per cent compared with the first quarter of 2025, representing the largest annual gain among all major sectors.

Construction also delivered a strong performance, recording annual growth of 4.9 per cent. Meanwhile, the broader category encompassing trade, transportation, accommodation, and food services expanded by 4.4 per cent year-on-year, reflecting sustained demand across both domestic and tourism-related activities.

Financial and insurance services continued to contribute positively to economic performance, posting annual growth of 2.4 per cent. Real estate activities likewise remained on an upward trajectory, increasing by 2.1 per cent compared with the corresponding period of the previous year.

From the expenditure perspective, household spending remained the principal engine of economic growth. Consumption by households and non-profit institutions serving households rose by 5.1 per cent year-on-year, demonstrating continued consumer confidence and spending activity despite broader global economic uncertainties.

Public sector expenditure also increased during the quarter. Government consumption rose by 4.6 per cent compared with the first quarter of 2025, further supporting domestic demand and overall economic activity.

As a result of the combined increase in private and public spending, total final consumption expenditure recorded annual growth of 4.9 per cent, reinforcing its role as one of the primary contributors to economic expansion during the quarter.

The external sector also delivered a strong performance. Exports of goods and services increased by 10.5 per cent year-on-year, reaching €8.68 billion in real terms. The increase highlights continued demand for Cypriot goods and services from international markets and reflects the importance of exports as a driver of economic growth.

Imports rose at a nearly identical pace, increasing by 10.4 per cent to €8.18 billion. The growth in imports points to sustained economic activity and ongoing demand from consumers and businesses across the economy, particularly as domestic spending and commercial activity remained robust.

Investment activity, however, presented a more mixed picture. Gross fixed capital formation increased by 1.5 per cent compared with the same quarter of the previous year, indicating modest annual growth. Nevertheless, when measured against the final quarter of 2025, investment declined by 5.2 per cent, suggesting some weakening in capital expenditure during the opening months of 2026.

The investment figures become more subdued when large transport-related purchases are excluded. After removing the effects of ships and aircraft acquisitions, gross fixed capital formation declined by 2.3 per cent on an annual basis. This suggests that certain areas of the economy experienced softer investment activity and that overall investment growth was influenced by significant one-off transactions involving transport equipment rather than broad-based increases in capital spending.

The preliminary data therefore point to an economy that continues to benefit from strong household consumption, expanding service-sector activity, and solid export performance. At the same time, the figures indicate that investment trends remain uneven, particularly when excluding major transport equipment purchases, highlighting areas of the economy where growth has been less pronounced during the first quarter of the year.

By fLEXI tEAM