Economic and Political Overview

flag Cyprus 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

 

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Cyprus is an open, free-market economy, mainly based on services. After being severely hit by the global financial crisis and the exposure of the national banking system, the country's economy had recovered in recent years, thanks to domestic demand and tourism. Nevertheless, the outbreak of the COVID-19 pandemic and the restrictive measures that followed prompted a drastic reduction of GDP in 2020 (-5.1). Underpinned by both private and public consumption, the economy rebounded in 2021, marking a 4.8% growth (IMF). The tourism sector also recorded a relatively good performance (tourism revenues more than doubled in January-July 2021 compared to the same period of 2020, but remained at around 35% of the pre-pandemic levels), as well as the construction sector. Over the forecast horizon, government spending is expected to decelerate, whereas internal demand should continue expanding, contributing to forecast growth of 3.6% this year and 3.2% in 2023 according to the IMF.

After reaching a surplus in 2019, the fiscal measures adopted to fight the pandemic (including increased social payments related to the roll-out of the second phase of the National Health System reform, wage subsidisation and liquidity support to businesses), partially offset by an increase in revenues (+9.9%), led to a budget deficit of 3.6% in 2021. The deficit is forecast to decline to 1% of GDP in 2022 and 0.4% in 2023, helped by the continuing economic expansion and the withdrawal of COVID-19 measures. The public debt-to-GDP ratio is expected to follow a similar trend: after reaching 111% in 2021 (from a pre-pandemic level of 94%), it should gradually decrease to 103.7% this year and 99.3% in 2023 (IMF). After experiencing deflation following the outbreak of the crisis, headline inflation returned positive in 2021 (+1.7%), driven by higher prices for energy, services and non-energy industrial goods. The rate is expected to slightly decelerate to 1.1% in 2022 amid the normalization of energy prices.

The impact of the COVID-19-led crisis on the labour market has been mitigated by temporary income support measures, which targeted especially employees in the tourism sector. As a result, unemployment stood at 7.5% in 2021 (from 7.1% before the pandemic), and is expected to gradually decrease this year and in 2023 on the back of the economic expansion and the implementation of the EU’s RRP (to 6.9% and 6.4%, respectively - IMF). In recent years, a strong focus on the service and skilled industry, along with industrial and agricultural growth, has allowed the country to improve its already high standard of living; however, 17.6% of the population is at risk of poverty or social exclusion (below the EU average of 21.9% - Eurostat).

 
Main Indicators 20202021 (e)2022 (e)2023 (e)2024 (e)
GDP (billions USD) 24.6727.7426.7127.5928.82
GDP (Constant Prices, Annual % Change) -5.05.63.52.52.6
GDP per Capita (USD) 2730293031
General Government Balance (in % of GDP) -4.1-1.3-0.50.71.0
General Government Gross Debt (in % of GDP) 115.0103.693.687.580.2
Inflation Rate (%) -1.12.28.03.82.1
Unemployment Rate (% of the Labour Force) 7.67.56.76.56.3
Current Account (billions USD) -2.49-2.01-2.27-1.98-2.06
Current Account (in % of GDP) -10.1-7.2-8.5-7.2-7.1

Source: IMF – World Economic Outlook Database , Latest available data

Note: (e) Estimated Data

Main Sectors of Industry

In the past two decades, the basis of the Cypriot economy has shifted from agriculture to light manufacturing and, most importantly, services. The agricultural sector contributes around 1.9% of the GDP and employs 2.4% of the active population (World Bank, latest data available). The traditional agricultural sector suffers from a very dry climate, whereas only 9% of the land is arable. The main crops are wine grapes, potatoes and fruits. Mineral resources are limited and include mostly copper, pyrites, chrome, asbestos and gypsum. According to the latest data from Eurostat, overall agricultural output grew by 2.8% in 2020.

The manufacturing industry (mainly industrial food-processing, paper, chemical products, textiles, metal products and petroleum refining) accounts for 12.7% of GDP (including construction) and employs 18.4% of the active population. The government aims to double the industry's share of GDP by 2030. The manufacturing sector is not very developed and is estimated to account for only 5.5% of GDP (World Bank, latest data available). The annual average variation of industrial production in the period January-November 2020 stood at an estimated minus 7.6%.

Cyprus’ economy is mostly based on the tertiary sector, which contributes 74.1% of the GDP and employs 79.2% of the active population. Tourism and maritime transportation are considered to be the two pillars of the Cypriot economy. After recording an all-time record for the number of tourists in 2019 (almost 4 million), the number of arrivals was almost halved in 2021 amid the COVID-19 pandemic crisis (Cystat). Cyprus has the eleventh-largest shipping fleet in the world and the third-largest in the European Union. However, offshore activities are often led by foreign-capital companies based in Cyprus, whose commercial activities are executed exclusively outside the country. This system enables them to enjoy substantial tax benefits. Finance and real estate have traditionally been among the most important services. As per the banking sector, there are 30 authorised credit institutions in Cyprus, consisting of seven 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) 2.4 18.4 79.2
Value Added (in % of GDP) 1.9 12.5 74.1
Value Added (Annual % Change) -0.4 -6.7 -4.5

Source: World Bank - Latest available data.

 

Find more information about your business sector on our service Market Reports.

 
 
Monetary Indicators 20162017201820192020
Euro (EUR) - Average Annual Exchange Rate For 1 MUR 0.030.030.020.030.02

Source: World Bank - Latest available data.

 
 

Find out all the exchange rates daily on our service Currency Converter.

Indicator of Economic Freedom

Definition:

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.

Score:
71,4/100
World Rank:
33
Regional Rank:
19

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

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.

Score:
7.01/10
World Rank:
32/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2021-2025

 

Country Risk

See the country risk analysis provided by Coface.

 

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Foreign Trade in Figures

The geographical location of Cyprus (the country 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 141.5% of GDP (World Bank, 2020) and is mainly oriented towards the EU. In that same year, Cyprus main exports were cruise ships (23.4%), petroleum oils (14.9 %), medicaments (13.6%), cheese (9.8%), and vessels (4.4%); with imports being led by petroleum oils other than crude (11.5%), yachts (7.7%), cruise ships (6.5%), and motor cars (6%).

The main destinations for Cyprus’ exports in 2020 were Greece (8.4%), Liberia (7.4%), the United Kingdom (6.5%) and Libya (5.9%); while imports came chiefly from Greece (21.6%), the UK (8.4%), Italy (8.2%), Germany (6.6%), and China (5.9% - Comtrade).

Cyprus' trade balance is traditionally in deficit because the country has to import extensively in order to satisfy domestic demand (particularly, for energy supplies). The country’s trade balance was negative by 2.5% of GDP in 2020, according to data from the World Bank. ). In fact, although Cyprus is a net service exporter - with a total value of exports of USD 12.5 billion (mostly travel, shipping and banking) against USD 9.3 billion of imports – such surplus was offset by the trade in goods (USD 8.5 billion of imports against 3 billion of exports). According to the provisional data from CyStat, in the first eleven months of 2021 total goods imports amounted to EUR 7,7 billion (+11.8% vis-à-vis one year earlier), whereas exports totalled EUR 2.9 billion (marking an increase of 15.3%).

 
Foreign Trade Indicators 20162017201820192020
Imports of Goods (million USD) 6,4919,23110,8159,1278,598
Exports of Goods (million USD) 1,8713,2885,0523,4533,057
Imports of Services (million USD) 5,5426,7488,8689,4749,361
Exports of Services (million USD) 9,83011,29514,48214,27712,563
Imports of Goods and Services (Annual % Change) 10.012.94.52.0-4.2
Exports of Goods and Services (Annual % Change) 7.29.98.0-0.4-12.4
Imports of Goods and Services (in % of GDP) 68.873.973.772.973.9
Exports of Goods and Services (in % of GDP) 70.573.575.271.967.7
Trade Balance (million USD) -4,613-5,633-5,303-5,184-4,797
Trade Balance (Including Service) (million USD) 369-68425-274-1,484
Foreign Trade (in % of GDP) 139.4147.4148.9144.8141.5

Source: WTO – World Trade Organisation ; World Bank , Latest Available Data

 

Main Partner Countries

Main Customers
(% of Exports)
2021
Lebanon 8.7%
Greece 7.7%
Marshall Islands 7.6%
United Kingdom 6.5%
Br. Virgin Isds 6.1%
See More Countries 63.4%
Main Suppliers
(% of Imports)
2021
Greece 23.9%
Italy 10.2%
Germany 6.2%
Netherlands 5.1%
China 5.0%
See More Countries 49.6%

Source: Comtrade, Latest Available Data

 
 

Main Products

3.9 bn USD of products exported in 2021
Cruise ships, excursion boats, ferry-boats, cargo...Cruise ships, excursion boats, ferry-boats, cargo ships, barges and similar vessels for the transport of persons or goods 22.6%
Petroleum oils and oils obtained from bituminous...Petroleum oils and oils obtained from bituminous minerals (excl. crude); preparations containing >= 70% by weight of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations, n.e.s.; waste oils containing mainly petroleum or bituminous minerals 18.0%
Medicaments consisting of mixed or unmixed...Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses "incl. those in the form of transdermal administration" or in forms or packings for retail sale (excl. goods of heading 3002, 3005 or 3006) 10.5%
Cheese and curdCheese and curd 8.1%
Yachts and other vessels for pleasure or sports;...Yachts and other vessels for pleasure or sports; rowing boats and canoes 7.0%
See More Products 33.8%
10.1 bn USD of products imported in 2021
Petroleum oils and oils obtained from bituminous...Petroleum oils and oils obtained from bituminous minerals (excl. crude); preparations containing >= 70% by weight of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations, n.e.s.; waste oils containing mainly petroleum or bituminous minerals 14.7%
Cruise ships, excursion boats, ferry-boats, cargo...Cruise ships, excursion boats, ferry-boats, cargo ships, barges and similar vessels for the transport of persons or goods 7.0%
Motor cars and other motor vehicles principally...Motor cars and other motor vehicles principally designed for the transport of persons, incl. station wagons and racing cars (excl. motor vehicles of heading 8702) 4.4%
Medicaments consisting of mixed or unmixed...Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses "incl. those in the form of transdermal administration" or in forms or packings for retail sale (excl. goods of heading 3002, 3005 or 3006) 3.4%
Oils and other products of the distillation of...Oils and other products of the distillation of high temperature coal tar; similar products in which the weight of the aromatic constituents exceeds that of the non-aromatic constituents 3.0%
See More Products 67.5%

Source: Comtrade, Latest Available Data

 
 

To go further, check out our service Import Export Flows.

 
 

Main Services

15.8 bn USD of services exported in 2019
26.69%
24.44%
20.70%
17.67%
4.75%
2.70%
1.12%
0.81%
0.58%
0.48%
0.07%
8.5 bn USD of services imported in 2019
29.41%
23.24%
19.17%
12.27%
7.49%
2.93%
2.20%
2.06%
1.15%
0.08%

Source: United Nations Statistics Division, Latest Available Data

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Sources of General Economic Information

Ministries
Ministry of Finance
Statistical Office
Statistical Service
Central Bank
Central Bank of Cyprus
Stock Exchange
Cyprus Stock Exchange
Search Engines
FindCy
Eureka!
Your Cyprus Portal
Economic Portals
Cypruseconomy

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Political Outline

Current Political Leaders
Chief of State and head of government: President Nicos ANASTASIADIS (since 28 February 2013; reelected on 4 February 2018)
Next Election Dates
Presidential: February 2023
Legislative: 2026 (2023 for the area administered by Turkish Cypriots)
Main Political Parties
The latest presidential elections have returned incumbent President Nicos Anastasiadis to power for another term.

Following the latest legislative elections, the composition of the Parliament is as follows:
- Democratic Rally (Disy): right-wing, absorbed the Liberals in 1998 (17 seats)
- Progressive Party of the Working People (Akel): left-wing, communist (15 seats)
- Democratic Party (Diko): centrist (9 seats)
- National Popular Front (Elam):  far right, nationalist (4 seats)
- Movement of Social Democrats (Edek): centre-left, formerly known as Social Democratic Movement (Kisos) (3 seats)
- Democratic Front: centre, liberal (4 seats)
- Ecologists Movement (KOSP): centre-left, green (3 seats)
- Citizens' Alliance (SYPOL): centre, centre-left (1 seat).

Type of State
Republic based on parliamentary democracy. The internationally recognized government is the one that controls the southern two-thirds of the island named "Republic of Cyprus". The Northern one-third is Turkish-occupied and only recognized internationally by Turkey since 1983. It is called "the Turkish Republic of Northern Cyprus".
Executive Power
The President is both the Chief of the State and the Head of the Government. The President is elected by popular vote for a five-year term and holds the executive powers. The Council of Ministers is appointed by the President. Under the 1960 Constitution, the position of Vice-President is reserved for a Turkish Cypriot. However, this position has remained vacant since 1973.
Legislative Power
The legislative power of the Republic of Cyprus is unicameral. The parliament consists of the House of Representatives, whose 80 members are directly elected by elected by proportional representation and preferential vote for five years. 24 seats are allocated to the Turkish Cypriot community, but have been vacant since 1974, so that the parliament is formed solely by the 56 Greek Cypriots.
The area administered by Turkish Cypriots has a separate unicameral Parliament (the Assembly of the Republic), formed by 50 members directly elected by proportional representation system to serve a 5-year term.
Cypriots enjoy considerable political rights.
 

Indicator of Freedom of the Press

Definition:

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.).

World Rank:
26/180
 

Indicator of Political Freedom

Definition:

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.

Ranking:
Free
Political Freedom:
1/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

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COVID-19 Country Response

COVID-19 epidemic evolution

To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in the country, consult the infographics on the course of the epidemic on the official governmental portal. The website of Daily Cyprus provides daily updates.
For the international outlook you can consult the latest
situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.

Sanitary measures

To find out about the latest public health situation in Cyprus and the current sanitary measures in vigour, please consult the official governmental portal on COVID-19, including the up-to-date information on the containment measures put in place and public health recommendations. The portal also provides the guidelines for citizens (in Greek). The latest guidelines and instructions on movement restrictions and exemptions can be downloaded here.

Travel restrictions

The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.

The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.

Import & export restrictions

The export of all medicines from Cyprus to any other country has been banned. An export license is required to export personal protective equipment outside of the European Union.
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to Cyprus on the
International Trade Centre's COVID-19 Temporary Trade Measures webpage.

Economic recovery plan

To know about the economic measures taken by the Cypriot government to address the impact of the COVID-19 pandemic on the national economy, please visit the website of the Ministry of Labour, Welfare and Social Insurance (MLWSI). A list of the financial measures adopted can be found on the official portal Covid-19.cy (in Greek).
For an overview of the measures, refer to the KPMG website.
The information on the EU’s economic response to COVID-19 and the actions to minimise the fallout on the EU member states’ economies of the COVID-19 outbreak is available on the website of the
European Council.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the
Cypriot government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to Cyprus in the IMF’s Policy Tracker platform.

Support plan for businesses

For the information on the local business support scheme and taxation measures established by the Cypriot government to help businesses to deal with the economic impacts of the COVID-19 epidemic on their activity, please consult the website of the Ministry of Labour, Welfare and Social Insurance (MLWSI), which provides info on the special schemes for the complete and partial suspension of business, as well as for self-employed workers .
Further information on the business support measures can be found on the official portal Covid-19.cy (in Greek).
For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the World Bank's Map of SME-Support Measures in Response to COVID-19.

Support plan for exporters

At the moment the official government sources do not provide any information on the specific programs for Cypriot exporting companies put in place by the national government following the COVID-19 epidemic outbreak. For updated information please consult the website of the Ministry of Finance.
The European Commission adopted a Temporary Framework for State aid measures to support the economy in the COVID-19 outbreak, which enables short-term export credit insurance to be provided by the State where needed.

 

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Latest Update: November 2022