The ongoing crisis in the Persian Gulf and the structural weaknesses of the Cypriot economy are creating a climate of intense uncertainty, forcing analysts to revise their growth forecasts downward. Speaking on the program “Alpha News,” economist Tasos Giassemidis analyzed the effects of international geopolitical turmoil on the domestic market, highlighting the impact on inflation and public finances.

On the international stage, markets are showing greater maturity than in the past, though volatility remains high. As Mr. Yiasemidis explained, although there has been a temporary stabilization in oil prices, the unrest in the region is creating serious obstacles to global trade and shipping through the straits. At the same time, the International Monetary Fund is already noting a slowdown in the global economy, which is exacerbated by the rise in risk premiums due to hostilities. “The markets seem to be more mature in the way they respond, but we all realize that the flare-up in the region is creating more volatility,” he noted.

These shocks are immediately felt in Cyprus, which, as a small and open economy, is unable to absorb external pressures. This is clearly reflected in inflation, which has climbed to 4%, driven by the increased cost of fuel and electricity. The well-known economist emphasized that “we cannot absorb these developments, so we are very vulnerable to what comes next,” adding that the country’s complete dependence on liquid fuel imports for energy production and rising freight rates are further exacerbating the situation. Consequently, the growth forecast for the Cypriot economy is being revised downward to around 3% (from 3.4%–3.5%), with some estimates suggesting as low as 2.5%.

This slowdown is expected to directly affect the planning of the 2027 state budget. According to Mr. Yiasemidis, the next budget will be “unique,” as it will need to incorporate the new circumstances and rein in government spending, following the recommendations of the Economic Council and the IMF to limit across-the-board increases. The issue of the National Solidarity Fund for depositors who suffered haircuts is also expected to be raised again, with the economist emphasizing the need to find a way to utilize the Fund’s real estate assets, which currently remain idle and generate no income.

In closing, Mr. Yiasemidis focused on the long-standing lack of a strategy to achieve self-sufficiency in key sectors, such as energy and primary production, a fact that leaves the island vulnerable. The delay in implementing energy infrastructure projects (natural gas, terminal) and the dramatic contraction of the primary sector from 8% to 2% of GDP are forcing Cyprus to import most of its food. “Our vulnerability to international turmoil stems from the fact that we are not self-sufficient… The goal should be to be as self-sufficient as possible,” he concluded, sending a clear message about the need for long-term planning.