Skip to content. | Skip to navigation

Personal tools
Sections
You are here: Home europe Cyprus

Cyprus: country overview

27 May 2012
by Ina Dimireva -- last modified 30 January 2017

Cyprus is the largest island in the eastern Mediterranean as well as being the third smallest country in the EU, after Malta and Luxembourg. Cyprus joined the EU as a de facto divided island but the whole of Cyprus is EU territory. Turkish Cypriots are EU citizens as they are citizens of an EU country - the Republic of Cyprus - even if they live in a part of Cyprus not under government control. The most important sectors of Cyprus's economy in 2015 were wholesale and retail trade, transport, accommodation and food services (28.7 %), public administration, defence, education, human health and social work activities (20.2 %) and real estate (11.1 %). Cyprus's main export partners are Greece, Ireland and the UK, while its main import partners are Greece, the UK and Italy.


Advertisement

Cyprus flag

Capital: Nicosia

Geographical size: 9 251 km²

Population: 847 008 (2015)

Population as % of total EU: 0.2 % (2015)

Gross domestic product (GDP): € 17.421 billion (2015)

Official EU language(s): Greek

Political system: presidential republic

EU member country since: 1 May 2004

Seats in the European Parliament: 6

Currency: Euro. Member of the eurozone since 1 January 2008

Schengen area member? No, Cyprus is not a member a member of the Schengen Area.

Presidency of the Council: Cyprus has held the revolving presidency of the Council of the EU once, in 2012.

Cyprus map

Country overview

Cyprus is the largest island in the eastern Mediterranean and is situated south of Turkey. The two main mountain ranges are the Pentadactylos in the north and the Troodos in central and south-western part of the island. Between them is the fertile plain of Messaoria.

Cyprus has long been a crossing point between Europe, Asia and Africa and still has many traces of successive civilisations – Roman theatres and villas, Byzantine churches and monasteries, Crusader castles and pre-historic habitats.

The island's main economic activities are tourism, clothing and craft exports and merchant shipping. Traditional crafts include embroidery, pottery and copperwork.

Traditional local dishes include the meze – a selection of appetizers served as a main dish, halloumi cheese and the zivania schnapps.

Since Turkey occupied the north of the island in 1974, the Turkish Cypriot and Greek Cypriot communities have been separated by the so-called Green Line.

Cyprus is well known as the island of Aphrodite, the goddess of love and beauty, who, according to legend, was born here.

In modern literature, names such as Costas Montis (poet and writer) and Demetris Gotsis (writer) stand out, while Evagoras Karageorgis and Marios Tokas are well known for their musical compositions.

Economy overview

The area of the Republic of Cyprus under government control has a market economy dominated by the service sector, which accounts for more than four-fifths of GDP. Tourism, financial services, shipping, and real estate have traditionally been the most important sectors. Cyprus has been a member of the EU since May 2004 and adopted the euro as its national currency in January 2008.

During the first five years of EU membership, the Cyprus economy grew at an average rate of about 4%, with unemployment between 2004 and 2008 averaging about 4%. However, the economy tipped into recession in 2009 as the ongoing global financial crisis and resulting low demand hit the tourism and construction sectors. An overextended banking sector with excessive exposure to Greek debt added to the contraction. Cyprus' biggest two banks were among the largest holders of Greek bonds in Europe and had a substantial presence in Greece through bank branches and subsidiaries. Following numerous downgrades of its credit rating, Cyprus lost access to international capital markets in May 2011. In July 2012, Cyprus became the fifth euro-zone government to request an economic bailout program from the European Commission, European Central Bank and the International Monetary Fund - known collectively as the "Troika."

Shortly after the election of President Nikos ANASTASIADES in February 2013, Cyprus reached an agreement with the Troika on a $13 billion bailout that resulted in losses on uninsured bank deposits. The bailout triggered a two-week bank closure and the imposition of capital controls that remained partially in place until April 2015. Cyprus' two largest banks merged and the combined entity was recapitalized through conversion of some large bank deposits to shares and imposition of losses on bank bondholders. As with other EU countries, the Troika conditioned the bailout on passing financial and structural reforms and privatizing state-owned enterprises. Despite downsizing and restructuring, the Cypriot financial sector throughout 2015 remained burdened by the largest stock of non-performing loans in the euro zone, equal to nearly half of all loans. Since the bailout, Cyprus has received positive appraisals by the Troika and outperformed fiscal targets but has struggled to overcome political opposition to bailout-mandated legislation, particularly regarding privatizations. Cyprus emerged from recession in 2015 and its economy grew an estimated 1.6% for the year, setting a positive tone for the scheduled end of the bailout program in March 2016.

In October 2013, a US-Israeli consortium completed preliminary appraisals of hydrocarbon deposits in Cyprus' exclusive economic zone (EEZ), which revealed an estimated gross mean reserve of about 130 billion cubic meters. Though exploration continues in Cyprus' EEZ, no additional commercially exploitable reserves were identified during the exploratory drilling in 2014/2015. Developing offshore hydrocarbon resources remains a critical component of the government's economic recovery efforts, but development has been delayed as a result of regional developments and disagreements about exploitation methods.

Economy - overview:

Even though the whole of the island is part of the EU, implementation of the EU "acquis communautaire" has been suspended in the area administered by Turkish Cypriots, known locally as the "Turkish Republic of Northern Cyprus" ("TRNC"), until political conditions permit the reunification of the island. The market-based economy of the "TRNC" is roughly one-fifth the size of its southern neighbor and is likewise dominated by the service sector with a large portion of the population employed by the government. In 2012 - the latest year for which data are available - the services sector, which includes the public sector, trade, tourism, and education, contributed 58.7% to economic output. In the same year, light manufacturing and agriculture contributed 2.7% and 6.2%, respectively. Manufacturing is limited mainly to food and beverages, furniture and fixtures, construction materials, metal and non-metal products, textiles and clothing. The "TRNC" maintains few economic ties with the Republic of Cyprus outside of trade in construction materials. Since its creation, the "TRNC" has heavily relied on financial assistance from Turkey, which supports the "TRNC" defense, telecommunications, water and postal services. The Turkish Lira is the preferred currency, though foreign currencies are widely accepted in business transactions. The "TRNC" remains vulnerable to the Turkish market and monetary policy because of its use of the Turkish Lira. The "TRNC" weathered the European financial crisis relatively unscathed - compared to the Republic of Cyprus - because of the lack of financial sector development, the health of the Turkish economy, and its separation from the rest of the island. The "TRNC" economy experienced growth estimated at 2.8% in 2013 and 2.3% in 2014 and is projected to grow 3.8% in 2015.

Useful links

European Parliament office in Cyprus

Government Web Portal

Tourist information

Source: European Commission, CIA - The World Factbook

Sponsor a Guide

EUbusiness Guides offer background information and web links about key EU business issues.

Promote your services by providing your own practical information and help to EUbusiness members, with your brand and contact details.

To sponsor a Guide phone us on +44 (0)20 7193 7242 or email sales.

EU Guides