Cyprus Sees Dip in Economic Sentiment Amid Rising Uncertainty in June

The economic climate in Cyprus took a downturn in June 2025, as the Economic Sentiment Indicator (ESI) recorded a slight decline, falling by 0.8 points from the previous month, according to data published by the Economics Research Centre (CypERC) at the University of Cyprus.

Despite a modest improvement in consumer sentiment and a rise in business expectations regarding turnover for the upcoming quarter, overall economic confidence weakened. The downward shift in the ESI was mainly driven by a deterioration in sentiment across several key business sectors, particularly in retail trade, manufacturing, and services.

CypERC attributed the broader dip in sentiment largely to worsening conditions in the services industry. “The weakening of sentiment in services resulted from a worsening of the current situation, with firms’ assessments of their financial condition and turnover dropping significantly for a third consecutive month,” the Centre reported.

However, the report also noted a bright spot in business expectations, stating that “business expectations for turnover in the next quarter improved in June,” suggesting a more optimistic outlook among firms for near-term performance.

Retail trade did not fare well either, as sentiment in the sector declined due to businesses reporting weaker evaluations of their current status. According to CypERC, this included negative assessments of both sales performance and inventory levels.

Meanwhile, the manufacturing sector also experienced a marginal deterioration. This was due to a combination of weaker stock evaluations and diminished expectations for future production. The Centre explained that the slight fall in manufacturing sentiment “was attributed both to a worsening of the current situation, particularly in stock assessments, and to lower expectations for future production.”

In contrast, the construction industry bucked the trend with improved sentiment in June. CypERC highlighted that this improvement was “mainly due to more positive assessments of the current situation, including building activity and projects under development.”

Consumers, for their part, displayed a slight uptick in confidence. This increase was primarily driven by more optimistic views of Cyprus’ future economic trajectory, as well as an increased openness to making significant purchases. “Consumer sentiment also strengthened slightly in June, driven largely by more favourable assessments of the country’s future economic outlook and an increased willingness among consumers to make major purchases,” the Centre stated.

Alongside these developments, the Economic Uncertainty Index, which had been declining steadily over the past five months, registered an increase in June. This rise reflects mounting concern among businesses, particularly in the services and retail sectors.

“The increase in the Index was the result of higher uncertainty facing businesses, particularly in services and retail trade, concerning their future economic condition, possibly due to the recent escalation in geopolitical tensions and their impact on the economic environment,” CypERC noted.

However, uncertainty among consumers remained relatively contained. “Uncertainty among households regarding their future economic situation remained at low levels,” the Centre clarified, indicating that households are currently less affected by the broader unease impacting businesses.

The June figures paint a complex picture for Cyprus, where pockets of optimism among consumers and in construction contrast with growing uncertainty and deteriorating sentiment in key business sectors. 

By fLEXI tEAM