The picture of de-escalation of inflation that was cultivated at the beginning of the year was dealt a strong blow in August. The new rise in prices has not only disappointed expectations for stabilization, but has brought back to the fore concerns about the duration and intensity of inflationary pressures in the Cypriot economy.
The government measures in place since April contain inflation to some extent, but do not substantially stop the pressure on prices. The new rise in inflation, based on yesterday's Eurostat data for August, therefore raises a reasonable question: how effectively do these measures absorb the increases and how much more inflationary pressure would be without them.
The most worrying data from yesterday's Eurostat data is not only the new rise in inflation to 5.2% in August, but the fact that Cyprus seems to have now entered a period of consistently higher inflation than the average of the Eurozone and most of its member countries. For the fourth consecutive month, inflation in Cyprus is above the Eurozone average, while in August the difference widened to 1.9 percentage points.
According to preliminary data, for August, the harmonized index of consumer prices increased by 5.2% year-on-year (compared to August last year), compared to 4.4% in July. At the same time, inflation in the Eurozone stood at 3.3%, from 2.9% in July and the difference is now 1.9 percentage points at the expense of Cyprus.
The picture becomes even more worrying when one examines the course of inflation over the last twelve months. In August 2025, annual inflation in Cyprus was 0.0% and in August 2026 it stands at 5.2%.
The acceleration has been particularly strong since spring and in just five months inflation has increased by 3.7 percentage points: March 1.5%, April 3%, May 3.5%, June 4.1%, July 4.4%, August 5.2%.
Lithuania and us
The price growth rate of 5.2% places Cyprus among the countries with the highest inflation rates in the Eurostat table. Only Lithuania is in a higher position with 5.8%, while Bulgaria is at 5.1%. Significantly lower rates are recorded by Germany with 2.9% and France with 2.7%, while Italy had an inflation growth rate of 3.2%, Greece 3.7% and Spain 4.5%.
The recent position of the Minister of Finance Makis Keravnos is also of particular interest. He had stated about a week ago that the forecast is that inflation will remain at higher levels until the end of the year, around 4%, while noting that the Government is taking measures to contain its course.
The data announced yesterday by Eurostat are a cause for concern. Cyprus is within the group of countries with the highest inflation (second among member states) and the numbers partly question the efficiency and adequacy of the government measures in place. Some measures may be extended, such as the excise duty on fuel (a measure in force until the end of September 2026), but they are not expected to change the painful situation for hundreds of thousands of consumers, especially those of the low and middle income levels.
The Minister of Finance announced yesterday his intention to submit to the Council of Ministers a proposal for an extension of the reduction of tax rates on motor fuels after the relevant reports made in the context of the meeting of the parliamentary Energy Committee. A reduced VAT rate of 5% applies to electricity for all household consumers (until March 31, 2027). Also, from April 1, a zero VAT rate is applied to meat, poultry and fish until September 30, 2026.
Let us clarify that 5.2% does not mean that every product on the shelf increased by 5.2%, but for the consumer the message is clear, everyday life is constantly becoming - month by month - more expensive. The actual burden varies from household to household, depending on where the family income is headed. Those who spend a larger portion of their family budget on fastest-growing product categories face more pressure.
When prices rise faster than incomes, purchasing power decreases and this is the big economic issue that the new rise in inflation brings back. It means, however, that the general price level measured by this index is significantly higher than a year ago. When the general price index increases at such rates, the same income buys fewer goods and services, unless wages and other incomes increase at least respectively.
