The International Monetary Fund (IMF) has lowered its growth forecast for the Cypriot economy in 2026 to 2.9%, from the 3% it had projected in its previous forecast, while it raised its forecast for growth in 2027 to 3.2%, up from the 3% it had previously estimated.
At the same time, according to the October 2026 World Economic Outlook report on the global economic outlook published on Tuesday, the Fund estimates in its new projections that inflation will rise to 3.7% this year and decline to 1.9% in 2027.
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Less bureaucracy, more restrictions
Less bureaucracy, more restrictions
In the draft 2027 budget, presented by Finance Minister Makis Keravnos on October 12 in Parliament, the Ministry of Finance forecasts growth of 3.1% in 2026 and 2.9% in 2027.
In its April 2026 World Economic Outlook projections, the IMF expected inflation of 2.6% for this year and just 1.6% in 2027.
Furthermore, in the October 2026 World Economic Outlook, the IMF states that it now expects the unemployment rate to fall to 4% in 2026, down from the 4.6% it projected last April, while for 2027, unemployment is projected to rise slightly to 4.4%, compared with the 4.7% projected last April.
As for the current account deficit, the IMF is optimistic, estimating that it will fall to 7.7% in 2026 and remain unchanged in 2027, contrary to its April 2026 forecast, when it projected a deficit of 9.3% for 2026 and 10.3% for 2027.
According to the IMF, “the global economy is once again demonstrating resilience, albeit unevenly and with rapidly narrowing room for adjustment in the short term.”
“Economic activity in the first half of 2026 remained stronger than expected, despite the ongoing conflict in the Middle East and persistent pressures from trade tensions,” it emphasizes.
The IMF expects global economic growth to reach 3.1% in 2026 and 3.4% in 2027 — rates that are unchanged for 2026 and slightly revised upward for 2027 compared with the projections in the April 2026 World Economic Outlook (WEO) report.
With regard to global inflation, the IMF projects it will rise to 4.7% in 2026 and then decline to 4.1% in 2027, marking a cumulative upward revision of 0.7 percentage points, with this temporary increase primarily driven by energy and food prices, as it notes.
It states that countries with limited direct exposure to the effects of the war in the Middle East and strong participation in the technological boom will see their economic activity remain stable or strengthen.
Noting that the risks are tilted to the downside, the IMF warns that a prolonged stalemate or further escalation of hostilities in the Middle East “could keep energy and food prices high and volatile, reignite inflationary pressures, worsen fiscal and external balances, and weigh on growth.”
Furthermore, the Fund notes that disruptions to energy infrastructure, cyberattacks, or extreme weather events could exacerbate these effects.
Global economic growth is projected to slow to 3.1%
According to the IMF’s projection, global growth will slow from 3.5% in 2025 to 3.1% in 2026, before rebounding to 3.4% in 2027 —a rate unchanged from the April projections for 2026 and revised upward by 0.2 percentage points for 2027.
It notes that 32 economies now account for 95% of global growth, compared with 54 economies last April.
It states that growth in advanced economies is expected to rise slightly from 2.0% in 2025 to 2.1% in 2026, before slowing to 1.8% in 2027.
It adds that in the U.S., growth is projected at 2.3% for 2026 and 2027 —a rate unchanged from the April forecast for 2026 and revised upward by 0.2 percentage points for 2027.
In the euro area, according to the IMF, growth is projected at 1.1% in 2026 and 1.2% in 2027.
“The forecast remains unchanged from the April WEO report for both years, reflecting the ongoing slowdown due to higher energy prices and low consumer confidence,” it emphasizes.
It notes that in the United Kingdom, growth is projected to remain steady at 1.3% in 2026 —a level representing an upward revision of 0.5 percentage points compared with the April WEO report – and to decline slightly to 1.2% in 2027, as higher energy prices and long-term interest rates put pressure on consumption and investment.
It also notes that growth in Japan is projected to slow to 0.7% in 2026, “with fiscal support measures partially mitigating the impact of higher energy prices, and stabilizing at that level in 2027.”
Furthermore, according to the IMF, in emerging markets and developing economies, growth is projected to slow from 4.5% in 2025 to 3.7% in 2026, before rebounding to 4.4% in 2027.
“Growth in emerging and developing Asia is expected to slow slightly,” it notes.
It states that China’s growth rate in 2026 is projected to decline to 4.5%, as higher global oil prices, combined with prolonged uncertainty and structural headwinds, are expected to put pressure on economic activity.
“Policy support is expected to prevent a more severe slowdown,” it adds.
Finally, regarding India, the IMF notes that it remains among the major economies with the fastest growth rates, with growth for 2026 projected at 7.0%.
Source: KYPE
