During the years since the island’s independence in 1960, Cyprus has been gradually transformed from a mostly closed economy, based on agriculture and mining, into a service-based, export-oriented economy. Much of this transformation was achieved because of the open character of the economy.
For most of the period since independence, the Cyprus economy has performed remarkably well. It has weathered significant external shocks and has taken advantage of a number of different opportunities. A key driving force has been the openness and the responsiveness to international markets and a successful partnership between the private and public sectors. The government invested in infrastructure essential for growth, and the private sector exploited exogenous opportunities. The onset of the global financial crisis in 2008 has also affected the Cypriot economy. It has managed to reverse the growth path, affecting mostly the construction and tourism sectors. The continued difficult global economic situation, with the second wave of crisis, led to a deterioration of public finances.
The major trading partners of Cyprus are the EU member-states, especially Greece and the United Kingdom.
The economy of Cyprus can generally be characterised as small, open and dynamic, with services constituting its engine power. The services sector is the fastest growing area and accounted for more than 80% of GDP in 2011.
The private sector, which is dominated by small and medium-sized enterprises, has a leading role in the production process.The government’s role is mainly to support the private sector and regulate the markets in order to maintain conditions of macroeconomic stability and a favourable business climate, via the creation of the necessary legal and institutional framework and secure conditions of fair competition.
Cyprus has a number of comparative advantages that have contributed towards the island becoming an important international business and shipping centre:
- EU and European Monetary union Member State;
- Strategic geographical location at the crossroad of three continents – ideal for expansion in new markets;
- Broad range and international quality of financial and business services – legal, tax, accounting, investment and brokerage;
- An active Stock Exchange and robust Securities and Exchange Commission;
- Highly educated, qualified and multilingual talent;
- Stable and pleasant business environment, accompanied by simple administrative procedures;
- Low set up and operating costs;
- Advanced transport and telecommunications network;
- Renown international shipping centre;
- Simple, Low Taxation.
Cyprus Economic Indicators
It is a fact that the global financial crisis has affected and continues to affect the Cypriot economy, as shown in the macroeconomic indicators and in the worsening of the public finances. Despite the financial and economic crisis, Cyprus in 2011 enjoyed a positive economic growth rate of about 0,5%. Per capita income in 2011 reached €21,074 – this according to the World Bank classifies Cyprus among the high income countries. Unemployment rate for 2013 was 17,4% which is relatively high for Cyprus. The stability of the Cyprus economy is reflected in the long-standing low inflation rates. Currently our inflation rate is around 1,6% (April 2014), while our core inflation during the past five years was about 1,5-2%.
Considering other socio-economic indicators such as the excellent housing conditions, pollution-free environment and low crime rate, one may conclude that the quality of life, standard of living and economic performance, positions Cyprus favorably among the rest of the EU member states.