Nicosia, Cyprus – As 2025 draws to a close, Cyprus's economic outlook presents a complex scenario, balancing forward-looking growth indicators with a slight dip in overall sentiment. Although the Composite Leading Economic Index (CCLEI) has demonstrated a modest yearly increase, suggesting underlying economic strength, the broader Economic Sentiment Indicator (ESI) has experienced a marginal decrease. These divergent trends are unfolding against a backdrop of strong banking performance, notably from Bank of Cyprus Holdings (BOCH), and evolving household financial behaviours, which include increased borrowing alongside significant savings growth.
Data released by the University of Cyprus Economics Research Centre (CypERC) for November 2025 indicated that the CCLEI's year-on-year growth rate remained stable at 1.8%. This consistent positive trend has been facilitated by a combination of favourable elements, such as a vibrant economic environment within Cyprus and the wider euro area. Key sectors contributing to this momentum include the island's crucial tourism industry, alongside expanding retail trade and a dynamic property market. Furthermore, a decrease in Brent crude oil prices has provided a welcome deflationary influence, supporting economic expansion. However, this upward trajectory is partially tempered by a reduction in electricity production volumes, which subtly moderates the overall growth forecast.
In contrast, the ESI-CypERC, a key measure of consumer and business confidence, saw a slight decline to 104.0 in November, a marginal drop from 104.1 recorded in October. This fractional decrease is primarily attributed to a reduction in business confidence within the services sector, specifically concerning firms' assessments of their recent turnover. Despite this overall dip, confidence levels remain higher than in previous months. Importantly, specific sectors such as retail trade, construction, and industry, along with consumer confidence, have shown notable improvements.
The financial sector, particularly Bank of Cyprus Holdings, has displayed considerable resilience. While its profits for the first nine months of 2025 decreased by 12% to €353 million compared to the same period last year, this was largely due to a contraction in interest income. Nevertheless, the bank has proactively raised its full-year profit projections and signalled its commitment to shareholders by increasing dividend payouts. This optimistic outlook is further supported by a substantial 31% year-on-year surge in new loan origination, reaching €2.24 billion during January-September. The bank's gross performing loans have grown by 6% year-to-date, and its deposit base has increased by a healthy 7% year-on-year to €21.5 billion by the end of September. Bank of Cyprus is scheduled to present an updated strategic plan and financial targets in the first quarter of 2026.
The intricate financial decisions of Cypriot households offer additional insights into current economic conditions. In November 2025, net loan increases amounted to €71.5 million, with households contributing nearly €50 million to this figure. This rise in household borrowing, which has driven total loans to €26.8 billion with a 10.5% annual growth rate, suggests an immediate need to fund expenses and purchases. Simultaneously, a significant injection of €330.8 million into bank deposits during the same month, with Cypriot residents contributing €258.6 million, indicates a parallel strategy of augmenting savings. Total deposits have now reached €57.9 billion, reflecting a 6.7% annual growth rate. This dual approach of increased borrowing and heightened saving suggests households are actively managing rising costs and fortifying their financial security against future uncertainties.
In summary, Cyprus's economic narrative is characterized by cautious optimism. While headline sentiment indicators may exhibit minor fluctuations, the underlying economic engine continues to perform steadily, supported by sectoral strengths and a robust financial institution. Households are demonstrating pragmatic resilience in their financial decision-making, adapting to present economic realities while prudently planning for eventualities. The coming months will be crucial in determining whether current growth momentum can effectively overcome headwinds from geopolitical uncertainty and shifts in domestic sentiment.