Consumption ...
Consumption Powers Growth — But Is Cyprus Too Dependent on Its Own Spending?
Also on 17 November 2025, a Cypriot business commentary focused on how private consumption is the engine behind the country’s growth, according to the European Commission’s latest forecasts.
The piece argues that Cyprus’s current economic strength is rooted in the domestic market: households are spending, salaries (in real terms) have grown, and consumer confidence remains high , all contributing massively to GDP expansion.
At the same time, the commentary warns that this reliance on internal demand is a double-edged sword. While consumption is high now, real wage growth is expected to moderate, and foreign worker inflows , which have boosted household spending , may slow.
Add to that the fact that some of the investment growth stems from EU-backed recovery funds (such as Cyprus’s Recovery and Resilience Plan), and there’s a question of how much of the boom is truly organic versus policy-driven.
From the public finance perspective, the writing is also cautiously optimistic: the primary surplus is strong, but the commentary advises that the government must continue focusing on long-term sustainability rather than short-term gains.
The insight that consumption is the main driver of growth is critical , and somewhat worrisome. Yes, it's great that households are confident and spending, but over-reliance on internal demand can make an economy vulnerable. If consumer sentiment sours (because of wage stagnation, rising costs, or job insecurity), the whole engine could sputter.
Moreover, inflows of foreign labor boosting spending is not a fully stable foundation. Such demographic-driven consumption gains are sensitive to policy changes, migration trends, and labor market shifts.
On the positive side, using EU funds and investment to fuel growth isn’t inherently bad , but it raises the question of sustainability once those funds taper off. Cyprus needs to ensure it translates this short-term boost into long-term capacity building: improving infrastructure, scaling up high-productivity sectors, and pushing for investments that will pay off beyond the next few years.
Cyprus is doing well right now, but it must be careful not to lean too heavily on consumption to sustain its economic momentum. Diversification, prudent fiscal policy, and investments in future-facing industries will be key to weathering any slowdown
Market Cyprus - News Service
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