European Commission Downgrades Forecast for the EU: Cyprus Economy Remains More Resilient Than Europe’s

The European Commission has revised its economic forecasts for the European Union downward, pointing to slower growth and faster inflation amid the crisis in the Middle East and rising energy prices.

According to the new estimates, the EU economy will grow by only 1.1% in 2026 instead of the previously expected 1.4%. In 2027, a slight acceleration to 1.4% is projected. For euro area countries, the outlook is even weaker: GDP growth is expected to reach 0.9% in 2026 and 1.2% in 2027.

Inflation in the EU, according to the European Commission, will reach 3.1% in 2026 — one percentage point higher than previous forecasts. In the euro area, price growth is expected to be at 3% in 2026. Despite the gradual stabilization of the situation, energy prices are expected to remain about 20% above pre-war levels.

Against this backdrop, Cyprus’s economy is showing more resilient performance. According to the European Commission’s latest spring forecast, Cyprus GDP will grow by 2.3% in 2026 and by 2.7% in 2027, significantly above the European average.

At the same time, inflation in Cyprus in 2026 is forecast at 3.6% due to higher energy prices, although it is expected to fall to 2.2% in 2027.

The European Commission also notes that Cyprus remains resilient thanks to its strong services sector, the development of IT and financial services, as well as stable domestic consumption. An additional positive factor is the reduction in public debt: for the first time since 2009, its level has fallen below 60% of GDP.