Cyprus: Economy Overview

The area of the Republic of Cyprus under government control has a market economy dominated by the service sector, which accounts for nearly four-fifths of GDP. Tourism, financial services, and real estate are the most important sectors.

Economy Overview

 Erratic growth rates over the past decade reflect the economy's reliance on tourism, which often fluctuates with political instability in the region and economic conditions in Western Europe. Nevertheless, the economy in the area under government control has grown at a rate well above the EU average since 2000. Cyprus joined the European Exchange Rate Mechanism (ERM2) in May 2005 and adopted the euro as its national currency on 1 January 2008. An aggressive austerity program in the preceding years, aimed at paving the way for the euro, helped turn a soaring fiscal deficit (6.3% in 2003) into a surplus of 1.2% in 2008, and reduced inflation to 4.7%. This prosperity came under pressure in 2009, as construction and tourism slowed in the face of reduced foreign demand triggered by the ongoing global financial crisis. Although Cyprus lagged its EU peers in showing signs of stress from the global crisis, the economy tipped into recession in mid 2009 and GDP contracted by 0.8% in 2009. In addition, the budget deficit is on the rise and reached 4.4% of GDP, a violation of the EU's budget deficit criteria of no more than 3% of GDP. In response to the country's deteriorating finances, Nicosia is promising to implement measures to cut the cost of the state payroll, curb tax evasion, and revamp social benefits. As in the area administered by Turkish Cypriots, water shortages are a perennial problem; a few desalination plants have been added to existing plants over the last year and are now on line. After 10 years of drought, the country received substantial rainfall from 2001-04. Since then, rainfall has been well below average, making water rationing a necessity.

GDP (purchasing power parity):

$22.75 billion (2009 est.)
country comparison to the world: 117
$23.1 billion (2008 est.)
$22.3 billion (2007 est.)
note: data are in 2009 US dollars

GDP (official exchange rate):

$23.6 billion (2009 est.)

GDP - real growth rate:

-1.5% (2009 est.)
country comparison to the world: 143
3.6% (2008 est.)
5.1% (2007 est.)

GDP - per capita (PPP):

$21,000 (2009 est.)
country comparison to the world: 60
$21,700 (2008 est.)
$21,300 (2007 est.)
note: data are in 2009 US dollars

GDP - composition by sector:

agriculture: 2.1%
industry: 18.7%
services: 79.3% (2009 est.)

Labor force:

403,000 (2009 est.)
country comparison to the world: 158

Labor force - by occupation:

agriculture: 8.5%
industry: 20.5%
services: 71% (2006 est.)

Unemployment rate:

5.3% (2009 est.)
country comparison to the world: 49
3.6% (2008 est.)

Investment (gross fixed):

20.4% of GDP (2009 est.)
country comparison to the world: 91

Budget:

revenues: $9.518 billion
expenditures: $10.95 billion (2009 est.)

Inflation rate (consumer prices):

0.4% (2009 est.)
country comparison to the world: 36
4.7% (2008 est.)

Commercial bank prime lending rate:

7.49% (31 December 2009 est.)
country comparison to the world: 125
7.19% (31 December 2008 est.)

Stock of domestic credit:

$101.2 billion (31 December 2009 est.)
country comparison to the world: 48
$80.68 billion (31 December 2008 est.)

Agriculture - products:

citrus, vegetables, barley, grapes, olives, vegetables; poultry, pork, lamb; dairy, cheese

Industries:

tourism, food and beverage processing, cement and gypsum production, ship repair and refurbishment, textiles, light chemicals, metal products, wood, paper, stone, and clay products

Industrial production growth rate:

-5.6% (2009 est.)
country comparison to the world: 118

Oil - production:

0 bbl/day (2007 est.)
country comparison to the world: 91

Natural gas - production:

0 cu m (2008 est.)
country comparison to the world: 181

Current account balance:

$-1.915 billion (2009 est.)
country comparison to the world: 149
$-4.349 billion (2008 est.)

Exports:

$2.065 billion (2009 est.)
country comparison to the world: 127
$2.13 billion (2008 est.)

Exports - commodities:

citrus, potatoes, pharmaceuticals, cement, and clothing

Exports - partners:

Greece 23.83%, Germany 9.2%, UK 8.78% (2009)

Imports:

$7.973 billion (2009 est.)
country comparison to the world: 95
$11.06 billion (2008 est.)

Imports - commodities:

consumer goods, petroleum and lubricants, intermediate goods, machinery, transport equipment

Imports - partners:

Greece 20.18%, Italy 10.67%, UK 8.95%, Germany 8.79%, Israel 6.99%, China 5.52%, Netherlands 4.85%, France 4.01% (2009)

Debt - external:

$NA billion (31 December 2009 est.)
$32.61 billion (31 December 2008 est.)

Stock of direct foreign investment - at home:

$26.61 billion (31 December 2009 est.)
country comparison to the world: 62
$20.71 billion (31 December 2008 est.)

Stock of direct foreign investment - abroad:

$15.79 billion (31 December 2009 est.)
country comparison to the world: 42
$10.49 billion (31 December 2008 est.)

Exchange rates:

Economy of the area administered by Turkish Cypriots:

Economy - overview: The Turkish Cypriot economy has roughly half the per capita GDP of the south, and economic growth tends to be volatile, given the north's relative isolation, bloated public sector, reliance on the Turkish lira, and small market size. Agriculture and services, together, employ more than half of the work force. The Turkish Cypriot economy grew around 10.6% in 2006, fueled by growth in the construction and education sectors, as well as increased employment of Turkish Cypriots in the area under government control. GDP declined about 2.0% in 2007. The Turkish Cypriots are heavily dependent on transfers from the Turkish Government. Ankara directly finances about one-third of the "TRNC's" budget. Aid from Turkey has exceeded $400 million annually in recent years. The Turkish Cypriot economy experienced a sharp slowdown in 2008-09 due to the global financial crisis and, because of its reliance on British and Turkish tourism, which has declined due to the recession. Turkish Cypriot finances also deteriorated in 2009 as decreased state revenues and increased government expenditures on public sector salaries and social services led to a large budget deficit.

GDP (purchasing power parity): $1.829 billion (2007 est.)
GDP - real growth rate: -2% (2007 est.)
GDP - per capita: $11,700 (2007 est.)
GDP - composition by sector: agriculture: 8.6%, industry: 22.5%, services: 69.1% (2006 est.)
Labor force: 95,030 (2007 est.)
Labor force - by occupation: agriculture: 14.5%, industry: 29%, services: 56.5% (2004)
Unemployment rate: 9.4% (2005 est.)
Inflation rate: 11.4% (2006)
Budget: revenues: $2.5 billion, expenditures: $2.5 billion (2006)
Agriculture - products: citrus fruit, dairy, potatoes, grapes, olives, poultry, lamb
Industries: foodstuffs, textiles, clothing, ship repair, clay, gypsum, copper, furniture
Industrial production growth rate: -0.3% (2007 est.)
Electricity production: 998.9 million kWh (2005)
Electricity consumption: 797.9 million kWh (2005) Exports: $68.1 million, f.o.b. (2007 est.)
Export - commodities: citrus, dairy, potatoes, textiles
Export - partners: Turkey 40%; direct trade between the area administered by Turkish Cypriots and the area under government control remains limited
Imports: $1.2 billion, f.o.b. (2007 est.)
Import - commodities: vehicles, fuel, cigarettes, food, minerals, chemicals, machinery
Import - partners: Turkey 60%; direct trade between the area administered by Turkish Cypriots and the area under government control remains limited
Debt - external: $NA
Currency (code): Turkish new lira (YTL)
Exchange rates: Turkish new lira per US dollar: 1.319 (2007) 1.4286 (2006) 1.3436 (2005) 1.4255 (2004) 1.5009 (2003)

Source: CIA - The World Factbook