Cyprus

Capital: Nicosia

Local time:
It is %T:%M %A in Nicosia

GDP growth rate: 2.0% in 2013

FDI stock: 29 530 million USD in 2010

Economic trends

Cyprus has an open free-market economy, which is based on services. Cyprus became a full member of the EU on May 1, 2004, which has been an important milestone in its economic development. For several years, the growth rate of its GDP has been stagnant, with zero growth in 2011 and likely a negative growth of -1% in 2012. 

The Cypriots are among the most prosperous people in the Mediterranean region with a GDP per capita of around USD 21,000. However, the current situation in Europe and specifically the Greek crisis have profoundly affected the country in 2011 and should continue to hinder its development in 2012. Rating agencies have lowered the country's note and since mid-2011, the country no longer enjoys access to the financial markets to obtain refinancing options. The powerful banking sector was strongly exposed to the Greek risk. Generally, Cyprus remains largely dependent on the economic health of its neighbors. The unemployment rate, which for a long time remained under 5%, rose to 7 % in 2011 and could reach 8.6% in 2012.

To reduce its budget deficit (7% of GDP according to the IMF), the gouvernment lauched an austerity plan in 2011, including especially a VAT increase and a restructuring of social services.

Main branches of industry

In the past two decades, Cypriot economy has shifted from agriculture to light manufacturing and services.

The agricultural and mining sectors contribute around 5% to the GDP and employ around 5% of the active population.  The traditional agricultural sector suffers from persistant droughts. ONly 15% of the land is arable. The main crops are wine grapes, potatoes, cotton and fruits. Mineral resources are limited and include mainly copper, pyrites, chrome, asbestos, and gypsum.

The manufacturing industry (mainly industrial food-processing, paper, chemical products, textiles, metal products, and petroleum refining) accounts for 10% of the GDP, but its competitiveness is declining mainly due to high-cost labor.

The tertiary sector contributes to about two-thirds of the GDP and in 2011 emplyed 70% of the active population. Tourism and maritime transportation are considered to be the two pillars of the Cypriot economy. Offshore activities are led by foreign-capital companies based in Cyprus, whose commercial activities are executed exclusively outside Cyprus, giving them substantial tax benefits. Cyprus has the sixth largest shipping fleet in the world.

Currently, the sectors of tourism, real estate and financial services are the main industries in Cyprus. Although they have allowed the country to acquire a rapid economic growth, they were affected by the crisis in 2011 and should continue to be affected in 2012.

International trade

The geographical location of Cyprus (the country being a bridge between West and East), along with its good airline and telecommunication infrastructures, have enabled the country to turn itself into an important regional and international business center.

The country's foreign trade is mainly oriented towards the EU, its main trading partner which represents more than 50% of its trade.  Thanks to its favorable location at the crossroads of Europe, Asia and Africa, Cyprus also has solid trade relations with Central Europe, Eastern Europe and the Middle East. 

Cyprus' three main export partners are France, the United Kingdom and Greece. The main export commodities are pharmaceutical products, electric & electronic equipment, as well as agricultural products, livestock products and their derivatives. The three main import partners are: Greece, Germany and the United Kingdom. Cyprus mainly imports hydrocarbons, vehicles, machinery, iron and steel.

Cyprus' trade balance is traditionally in deficit, because the country has to import extensively in order to satisfy domestic demand. Cyprus also depends on imports for its energy supplies. Exports are nevertheless vital for the country's economy.  As a fact, the Cyprus territory is not too extensive and the international trade market is very important.