**Nicosia, Cyprus** – Cyprus's economic landscape in late 2025 presents a nuanced picture, with forward-looking indicators signalling a gentle expansion, yet a slight tempering of overall sentiment. While the Composite Leading Economic Index (CCLEI) has registered a modest annual uptick, reflecting underlying economic momentum, the broader Economic Sentiment Indicator (ESI) has experienced a marginal decline. These contrasting signals emerge against a backdrop of robust banking sector performance, exemplified by Bank of Cyprus Holdings (BOCH), and a discernible shift in household financial behaviour, marked by increased borrowing coupled with a significant augmentation of savings.
The University of Cyprus Economics Research Centre (CypERC) data for November 2025 reveals that the CCLEI’s year-on-year growth rate held steady at 1.8%. This sustained positive trajectory is underpinned by a confluence of favourable factors, including an invigorating economic climate across both Cyprus and the wider euro area. The island's vital tourism sector, alongside burgeoning retail trade and a vivacious property market, are key contributors. Furthermore, a deflationary influence from a decrease in Brent crude oil prices has provided a welcome economic tailwind. However, this upward momentum is partially counterbalanced by a negative impact stemming from a downturn in electricity production volumes, a factor that subtly tempers the overall expansionary outlook.
Conversely, the ESI-CypERC, a barometer of consumer and business confidence, dipped slightly to 104.0 in November, a marginal retreat from 104.1 in October. This fractional decrease is predominantly attributable to a waning of business confidence within the services sector, specifically concerning firms' evaluations of their recent turnover. Despite this overall dip, confidence levels remain elevated compared to preceding months, and importantly, specific sectors such as retail trade, construction, and industry, alongside consumer sentiment, have exhibited improvements.
In the financial sphere, Bank of Cyprus Holdings has demonstrated considerable resilience. While its profits for the first nine months of 2025 saw a 12% reduction to €353 million compared to the same period in the previous year, this was largely influenced by a contraction in interest income. Nevertheless, the bank has proactively revised its full-year profit projections upwards and signalled its commitment to shareholder returns by increasing dividend payouts. This optimistic outlook is further bolstered by a substantial increase in new loan origination, which surged by 31% year-on-year to €2.24 billion during the January-September period. The bank's gross performing loans have expanded by 6% year-to-date, and its deposit base has seen a healthy 7% year-on-year increase, reaching €21.5 billion by the close of September. The bank also reported a significant reduction in its non-performing exposures, which now constitute a mere 1.2% of its total loans, a marked improvement from 2.0% at the end of 2024. Bank of Cyprus is slated to unveil an updated strategic roadmap and financial targets in the first quarter of 2026.
The intricate behaviour of Cypriot households provides further insight into the prevailing economic conditions. In November 2025, the net increase in loans amounted to €71.5 million, with households accounting for nearly €50 million of this sum. This surge in household borrowing, which has propelled total loans to €26.8 billion with a 10.5% annual growth rate, suggests an immediate need to finance expenses and purchases. Concurrently, a substantial injection of €330.8 million into bank deposits during the same month, with Cypriot residents contributing €258.6 million, indicates a parallel strategy of bolstering 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 points towards households actively managing the pressures of rising costs and seeking to fortify their financial security against an uncertain future.
In essence, Cyprus's economic narrative is one of cautious optimism. While headline sentiment indicators may show minor fluctuations, the underlying economic engine continues to purr, supported by sector-specific strengths and a robust financial institution. Households, in their financial decision-making, are exhibiting a pragmatic resilience, adapting to current economic realities while prudently planning for eventualities. The coming months will be crucial in observing whether the current growth momentum can fully overcome the headwinds of geopolitical uncertainty and domestic sentiment shifts.