Economic Outlook in Cyprus Worsened in June 2025
In a recent report issued by the Economic Research Centre at the University of Cyprus (CypERC), it was revealed that the Economic Sentiment Indicator (ESI) in Cyprus declined by 0.8 points in June 2025. This dip was primarily due to worsening conditions in key sectors and increased economic uncertainty, despite improved business turnover expectations and a slight boost in consumer sentiment.
The decline in the ESI was driven by a deterioration in business sentiment in retail trade and manufacturing. Firms' assessments of the current situation worsened significantly, with a notable drop in financial condition and turnover in the services sector for the third consecutive month. In the services sector, the weakening sentiment was driven by a worsening current situation, with firms reporting significantly lower financial health and turnover.
In retail trade, the decline was linked to negative business assessments of current sales and inventory levels. The manufacturing sector also saw a slight decline in sentiment, attributed to worsening stock assessments and current conditions.
However, consumer sentiment strengthened slightly in June 2025, primarily due to more optimistic expectations regarding the country's future economic situation and a stronger inclination toward major purchases. This positive trend was not reflected in the Economic Uncertainty Index, which rose in June after five months of decline. The increase was predominantly observed in businesses in the services and retail sectors.
The recent escalation of geopolitical tensions may have contributed to the increased uncertainty among businesses in Cyprus. Despite the strengthening of consumer sentiment, businesses revised their turnover expectations for the next quarter upwards, suggesting a cautious optimism amidst the uncertainty.
The Economic Uncertainty Index rise was not reflected in household uncertainty levels, which remained at low levels according to the report. This indicates that while businesses are uncertain about their future economic condition, households remain relatively optimistic about their financial situation.
In conclusion, although businesses expect better turnover in the next quarter and consumer confidence edged up slightly, the immediate business conditions in crucial sectors such as retail, manufacturing, and services worsened, and economic uncertainty increased, driving the overall decline in economic sentiment in Cyprus for June 2025. The report serves as a reminder of the complex interplay between various economic factors and the need for continued vigilance and adaptability in navigating the economic landscape.
- The decline in business sentiment in Cyprus, particularly in the retail trade and services sectors, was influenced by a deterioration in their financial condition and turnover, as indicated by the Economic Research Centre at the University of Cyprus.
- Despite the improved business turnover expectations and a slight increase in consumer sentiment, the European Union (EU) might need to closely monitor the business environment in Cyprus, given the ongoing challenges in sectors like retail, manufacturing, and services, as well as the rise in economic uncertainty, which may impact the overall business and finance landscape.
