Cyprus: Economic and Political Overview
In this page: Economic Indicators | Foreign Trade in Figures | Sources of General Economic Information | Political Outline | COVID-19 Country Response
Cyprus is an open free-market economy primarily based on services. After enduring the impact of the global financial crisis and the exposure of the national banking system, the country's economy underwent a recovery in recent years, largely driven by domestic demand and tourism until the abrupt halt caused by the COVID-19 pandemic. However, Cyprus’ GDP rebounded to its pre-pandemic level as early as 2021, with continued growth observed in 2022 and 2023 (at 5.6% and 2.2%, respectively). While private consumption remained robust last year, supported by real wage increases and sustained employment expansion, non-tourism services experienced lower external demand. In 2024 and 2025, real GDP is forecasted to increase by 2.7% and 3%, respectively. Domestic demand is expected to persist as the primary driver of real GDP growth, bolstered by automatic wage indexation for approximately half of the employees covered by collective agreements in both the public and private sectors, thereby maintaining their purchasing power. Moreover, significant investment initiatives in real estate, healthcare, transport, and tourism, partially backed by the Recovery and Resilience Facility, will contribute to growth. However, the contribution of net exports is projected to remain subdued due to economic uncertainty in Cyprus' primary trading partners and heightened import demand driven by investments.
Regarding public finances, the IMF estimated a general government budget surplus of 1.3% of GDP in 2023. Despite extending support measures to mitigate the effects of high prices and anticipated fiscal costs from the Mortgage-to-Rent scheme, the IMF anticipates a continued surplus for this year and 2025, slightly exceeding 1% of GDP. The public debt-to-GDP ratio, standing at 78.6% in 2023, has benefited from ongoing economic expansion and is expected to follow a downward trend, decreasing to 66.8% by 2025. HICP inflation decelerated to 3.9% in 2023, down from 8.1% in 2022, primarily due to reduced energy prices. HICP inflation is forecasted to ease to 2.4% in 2024 and further to 2.1% in 2025, reflecting the anticipated ongoing decline in energy and other commodity prices. Conversely, wage indexation is expected to exert upward pressure on HICP inflation excluding energy and food.
The unemployment rate stood at 6.7% in 2023 (down from 6.8% one year earlier) and is anticipated to gradually decrease in 2024 and 2025, driven by economic expansion and the implementation of the EU’s RRP (to 6.4% and 6.1%, respectively – IMF). Despite recent improvements in the service, skilled industry, and agricultural sectors, 16.7% of the population remains at risk of poverty or social exclusion (CyStat). The World Bank estimated Cyprus’ GDP per capita (PPP) at USD 49,931 in 2022.
| Main Indicators | 2022 | 2023 (E) | 2024 (E) | 2025 (E) | 2026 (E) |
|---|---|---|---|---|---|
| GDP (billions USD) | 29.27 | 32.19 | 34.22 | 35.94 | 37.81 |
| GDP (Constant Prices, Annual % Change) | 5.1 | 2.5 | 2.7 | 2.9 | 3.0 |
| GDP per Capita (USD) | 32,357 | 34,957 | 37,149 | 38,665 | 40,356 |
| General Government Balance (in % of GDP) | 1.3 | 1.8 | 1.7 | 1.7 | 1.7 |
| General Government Gross Debt (in % of GDP) | 85.6 | 77.4 | 70.7 | 65.1 | 60.0 |
| Inflation Rate (%) | 8.1 | 3.9 | 2.3 | 2.0 | 2.0 |
| Unemployment Rate (% of the Labour Force) | 6.8 | 6.1 | 5.9 | 5.7 | 5.5 |
| Current Account (billions USD) | -2.32 | -2.99 | -2.93 | -3.07 | -3.22 |
| Current Account (in % of GDP) | -7.9 | -9.3 | -8.6 | -8.5 | -8.5 |
Source: IMF – World Economic Outlook Database , Latest available data
Note: (e) Estimated Data
In the past two decades, the foundation of the Cypriot economy has transitioned from agriculture to light manufacturing and, significantly, services. Presently, the agricultural sector contributes around 1.6% of GDP and employs 2% of the active population (World Bank, latest data available). The agricultural sector contends with a very dry climate, with only 13% of the land being arable (125,000 ha - FAO). Major crops include wine grapes, potatoes, and fruits. Mineral resources are limited, consisting mostly of copper, pyrites, chrome, asbestos, and gypsum.
Industry (mainly industrial food-processing, paper, chemical products, textiles, metal products, and petroleum refining) accounts for 12.1% of GDP (including construction) and employs approximately 17% of the active population. The government targets to double the industry's share of GDP by 2030. The manufacturing sector is relatively underdeveloped, estimated to represent nearly 5% of GDP (World Bank, latest data available). According to Statistics Cyprus, the annual average variation of industrial production in the period January-November 2023 was estimated at +2.5%. Significant improvements were observed in electronic and optical products manufacturing (+28.6%), electrical equipment production, machinery, motor vehicles, and transport equipment (+13.0%), basic metals and fabricated metal products manufacturing (+10.9%), and textiles, apparel, and leather goods production (+10.0%). Conversely, declines were registered in furniture manufacturing and machinery/equipment repair/installation (-7.6%), electricity supply (-1.6%), and rubber/plastic products manufacturing (-0.1%).
Cyprus’ economy primarily relies on the tertiary sector, which contributes 74.3% of GDP and employs 80% of the active population. Tourism and maritime transportation serve as the twin pillars of the Cypriot economy. After reaching an all-time high of tourists in 2019 (almost 4 million), the number of arrivals from January to November 2023 reached 3,722,022, marking a substantial increase of 20.4% compared to the corresponding period in 2022, nearing pre-pandemic levels. Cyprus boasts the eleventh-largest shipping fleet globally and the third-largest in the European Union. However, offshore activities are typically led by foreign-capital companies based in Cyprus, conducting their commercial operations exclusively outside the country, benefiting from significant tax advantages. Finance and real estate have traditionally been among the most critical services. In the banking sector, Cyprus hosts 29 authorized credit institutions, comprising six local institutions, three subsidiaries of EU banks, one subsidiary of a foreign bank from a non-EU country, five branches of banks from EU Member States, 13 branches of banks from non-EU Member States, and one representative office (EBF).
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
|---|---|---|---|
| Employment By Sector (in % of Total Employment) | 2.8 | 17.9 | 79.2 |
| Value Added (in % of GDP) | 1.7 | 13.5 | 72.4 |
| Value Added (Annual % Change) | 0.8 | 0.2 | 6.6 |
Source: World Bank - Latest available data.
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| Monetary Indicators | 2016 | 2017 | 2018 | 2019 | 2020 |
|---|---|---|---|---|---|
| Euro (EUR) - Average Annual Exchange Rate For 1 MUR | 0.03 | 0.03 | 0.02 | 0.03 | 0.02 |
Source: World Bank - Latest available data.
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The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.
Source: The Economist Intelligence Unit - Business Environment Rankings 2021-2025
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The geographical location of Cyprus (being a bridge between West and East), along with its good airlines and telecommunications infrastructure, has enabled the country to turn itself into an important regional and international business centre. The country's foreign trade represents 190% of GDP (World Bank) and is mainly oriented towards the EU. In 2022, Cyprus primarily imported mineral fuels and oils (EUR 2,626.5 million), vessels (EUR 1,302.4 million), electrical machinery and materials (EUR 630.4 million), motor cars, other vehicles, and parts (EUR 626.0 million), and other machinery, boilers, appliances, and their parts (EUR 580.9 million). The key products of domestic origin exported from Cyprus in 2022 included mineral fuels and oils (EUR 455.9 million), pharmaceutical products (EUR 336.5 million), halloumi cheese (EUR 284.5 million), waste and scrap (paper, glass, metal) (EUR 87.0 million), and potatoes (EUR 42.4 million – data CyStat).
In 2022, intra-EU imports comprised 60.8% of the total, down from 65.1% in 2021, while extra-EU imports accounted for 39.2%, up from 34.9% in 2021. In 2022, intra-EU exports constituted 26.0%, down from 27.4% in 2021, while extra-EU exports made up 74.0%, up from 72.6% in 2021. The primary partner countries for imports in 2022 were Greece (EUR 2,640.9 million), Italy (EUR 1,183.9 million), China (EUR 898.2 million), Israel (EUR 835.9 million), and Germany (EUR 600.5 million). For exports of domestic goods, the main partner countries were Lebanon (EUR 287.3 million), the United Kingdom (EUR 204.8 million), Greece (EUR 121.0 million), and Israel (EUR 81.6 million - data CyStat).
Cyprus' trade balance is traditionally in deficit because the country has to import extensively in order to satisfy domestic demand (particularly, for energy supplies). In 2022, the country exported USD 4.3 billion worth of goods, importing USD 12 billion (+11.6% and +16.5% y-o-y, respectively). However, Cyprus is a net service exporter (USD 21.2 billion in 2022 against USD 15.1 billion in imports). According to the provisional 2023 data from CyStat, total goods imports amounted to EUR 12,764.2 million, up from EUR 11,470.0 million in 2022, marking an 11.3% increase. Total goods exports for January to December 2023 were EUR 4,189.5 million, indicating a 0.5% decrease. The trade deficit was EUR 8,574.7 million in 2023, compared to EUR 7,261.2 million in 2022.
| Foreign Trade Indicators | 2019 | 2020 | 2021 | 2022 | 2023 |
|---|---|---|---|---|---|
| Imports of Goods (million USD) | 9,127 | 8,761 | 10,397 | 12,205 | 13,987 |
| Exports of Goods (million USD) | 3,453 | 3,063 | 3,905 | 4,363 | 4,453 |
| Imports of Services (million USD) | 10,946 | 12,494 | 15,602 | 16,560 | 16,603 |
| Exports of Services (million USD) | 16,399 | 17,004 | 21,957 | 22,919 | 23,957 |
| Imports of Goods and Services (Annual % Change) | 9.5 | 3.2 | 9.0 | 18.8 | n/a |
| Exports of Goods and Services (Annual % Change) | 8.7 | 2.2 | 13.6 | 13.7 | n/a |
| Imports of Goods and Services (in % of GDP) | 75.5 | 82.8 | 83.7 | 91.9 | n/a |
| Exports of Goods and Services (in % of GDP) | 76.5 | 81.4 | 86.6 | 91.5 | n/a |
| Trade Balance (million USD) | -5,180 | -4,842 | -5,120 | -6,203 | n/a |
| Trade Balance (Including Service) (million USD) | 260 | -332 | 803 | -144 | n/a |
| Foreign Trade (in % of GDP) | 152.0 | 164.2 | 170.3 | 183.4 | n/a |
Source: WTO – World Trade Organisation ; World Bank , Latest Available Data
| Main Customers (% of Exports) |
2023 |
|---|---|
| Libya | 15.3% |
| Lebanon | 9.5% |
| Bermuda | 8.0% |
| Greece | 6.0% |
| Marshall Islands | 5.8% |
| See More Countries | 55.4% |
| Main Suppliers (% of Imports) |
2023 |
|---|---|
| Greece | 21.9% |
| United Kingdom | 10.3% |
| Italy | 7.7% |
| China | 5.9% |
| Germany | 5.3% |
| See More Countries | 48.8% |
Source: Comtrade, Latest Available Data
Source: Comtrade, Latest Available Data
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| 23.2 bn USD of services exported in 2023 | |
|---|---|
| 33.06% | |
| 20.42% | |
| 19.51% | |
| 15.41% | |
| 7.67% | |
| Miscellaneous business,...Miscellaneous business, professional, and technical services | 7.66% |
| Research and developmentResearch and development | 0.01% |
| 2.48% | |
| 0.73% | |
| 0.67% | |
| 0.05% | |
| 14.7 bn USD of services imported in 2023 | |
|---|---|
| 31.45% | |
| 21.89% | |
| 19.46% | |
| Miscellaneous business,...Miscellaneous business, professional, and technical services | 17.77% |
| Research and developmentResearch and development | 1.69% |
| 12.30% | |
| 10.04% | |
| 2.23% | |
| 2.05% | |
| 0.59% | |
Source: United Nations Statistics Division, Latest Available Data
The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).
The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.
Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House
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Latest Update: September 2024
