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. The Cypriots are among the most prosperous people in the Mediterranean region with a GDP per capita of around USD 21,000. The unemployment rate remains under 5% and the inflation rate is under control, at around 2%.
The global economic crisis has affected Cyprus, particularly in the tourism sector, with a drop in European tourist in-flow and in the real estate sector, which also depends on foreign sales. A global economic slowdown took place in 2009 and the country entered into recession during the third quarter of the year. In order to help the banking sector and the Cypriot SMEs, the European Investment Bank (EIB) granted a loan for a total amount of EUR 228 million to the three most important banks of the island. In 2010, the economy of Cyprus became stable and came out from the recession.
Some measures, such as a hiring freeze and salary freeze for public employees, re-organization of social benefits and the hunt for tax evaders will allow the country to recover in 2011and to revive with a modest growth. Despite this, Cyprus remains highly dependent of the economic condition of its neighbors.
Main branches of industry
In the past two decades, Cyprus' 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 main crops are wine grapes, potatoes, cotton and fruits. Mineral resources are limited, they are 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 employs 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 and they have allowed the country to acquire a rapid economic growth.
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.
More than 50% of its trade is done with the EU. Cyprus' three main export partners are France, the United Kingdom and Greece. The main export commodities are electric & electronic equipment, fuels & oil, vehicles and pharmaceutical products. The three main import partners are: Greece, Italy 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. Cyprus' main exports are manufacturing products and within the context of foreign trade with France, pharmaceutical products are in first position regarding exports.
Exports are vital for the country's economy. As a fact, the Cyprus territory is not too extensive and the international trade market is very important.
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Last updates: February 2012
