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Economic and political overview

Economic Overview

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. Real GDP growth remained resilient in 2024, expanding by 3.4% (CyStat), mainly driven by private consumption. Investment, excluding the volatile registration of ships and aircraft, grew, supported by positive sentiment in the construction sector. Strong foreign demand for services, particularly in sea transport and tourism, contributed to solid export performance. This positive trend is expected to persist, with economic growth projected at 3.1% in 2025 and 3% in 2026 (IMF). Investment will likely continue to benefit from Recovery and Resilience Facility funds, while easing financial conditions should provide additional support. Export performance is anticipated to remain strong, driven by rising tourist revenues and a dynamic services sector, particularly in ICT. The ongoing recovery in household purchasing power, supported by rising nominal wages and declining inflation, is expected to further boost private consumption.

The country has a solid fiscal position: according to CyStat, Cyprus recorded a fiscal surplus of EUR 1.51 billion (4.5% of GDP) in 2024, a significant increase from EUR 631.5 million (2.0% of GDP) in 2023. This was driven by higher revenue, which grew by EUR 1.07 billion (+7.8%) to reach EUR 14.84 billion, while total expenditure increased modestly by EUR 197.4 million (+1.5%) to EUR 13.33 billion. The budget surplus is expected to persist but decline to 2.7% of GDP in 2025 and 2026, as tax revenue growth slows in line with income and consumption trends, while tax arrears collection stabilises. Meanwhile, rising expenditure in 2025 will be driven mainly by ad hoc public wage increases approved at the end of 2024 and new measures to support housing. The debt-to-GDP ratio has been following a downward trend in recent years and is expected to continue declining from 70.6% of GDP in 2024 to 59.1% in 2026, largely due to primary surpluses and continued strong nominal GDP growth. The Consumer Price Index (CPI) recorded an increase of 1.8%  in 2024 (CyStat) and is projected to remain around 2% over the forecast period, driven by the fading impact of base effects, particularly for food, and lower domestic energy prices. However, services inflation is expected to stay high, fueled by strong nominal wage growth and rising demand, especially in tourism.

The unemployment rate stood at 4.6% at the end of Q4/2024 (males 4,3%, females 4,9%), the lowest level in the last 15 years. Skills mismatches and labour market slack remain minimal, partly due to an inflow of foreign workers attracted by government incentives for multinational businesses to establish their base in Cyprus. The unemployment rate is expected to continue declining, reaching 4.5% by 2026, according to the EU Commission.  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 IMF estimated Cyprus’ GDP per capita (PPP) at USD 59,857 in 2024.

 
Main Indicators 2024 (E)2025 (E)2026 (E)2027 (E)2028 (E)
GDP (billions USD) 36.1638.7440.6342.4444.33
GDP (Constant Prices, Annual % Change) 3.42.52.73.03.0
GDP per Capita (USD) 38,62541,13242,92844,66546,529
General Government Balance (in % of GDP) 3.32.92.71.81.6
General Government Gross Debt (in % of GDP) 65.460.355.049.844.6
Inflation Rate (%) 2.32.32.02.02.0
Unemployment Rate (% of the Labour Force) 4.94.85.05.05.0
Current Account (billions USD) -2.47-2.81-3.19-3.55-3.90
Current Account (in % of GDP) -6.8-7.3-7.8-8.4-8.8

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

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

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 1.2% of GDP and employs 2.4% of the active population (World Bank, latest data available). The agricultural sector contends with an arid 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 10.5% of GDP (including construction) and employs approximately 16.3% 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 4% of GDP (World Bank, latest data available). According to Statistics Cyprus, the annual average variation of industrial production in 2024 stood at +3%. From January to December 2024, the highest production increases were in water supply (+23.0%), electronics and electrical equipment (+12.9%), machinery and transport equipment (+10.4%), materials recovery (+8.0%), and mining (+7.5%). The biggest declines were in paper and printing (-12.1%), textiles and leather (-6.0%), and non-metallic minerals (-4.8%).

Cyprus’ economy primarily relies on the tertiary sector, which contributes 76.6% of GDP and employs 81.4% 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 surpassed the 4 million mark in 2024. 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 18 authorized credit institutions, comprising six local institutions, three subsidiaries of EU banks, one subsidiary of a foreign bank from a non-EU country, three branches of banks from EU Member States, four branches of banks from non-EU Member States, and one representative office (EBF). Concerning retail trade, the turnover grew by 5.4% in 2024, while volume increased by 4.3% compared to 2023 (Cystat).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 2.4 16.3 81.4
Value Added (in % of GDP) 1.2 10.3 76.9
Value Added (Annual % Change) 1.1 4.6 3.3

Source: World Bank - Latest available data.

 
Monetary Indicators 20202021202220232024
Euro (EUR) - Average Annual Exchange Rate For 1 USD 0.880.850.950.920.92

Source: World Bank - Latest available data.

 

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Foreign Trade

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 193% of GDP (World Bank) and is mainly oriented towards the EU. In 2023, Cyprus primarily imported mineral fuels and oils (EUR 2.92 billion), vehicles, aircraft, vessels and associated transport equipment (EUR 2.07 billion), electrical machinery and materials (EUR 1.23 billion), products of the chemical or allied industries (EUR 1.04 billion) and other machinery, boilers, appliances, and their parts (EUR 580.9 million). The key products of domestic origin exported from Cyprus in 2023 included mineral fuels and oils (EUR 1.15 billion), pharmaceutical products (EUR 355.6 million), halloumi cheese (EUR 313.2 million), waste and scrap (paper, glass, metal - EUR 38.6 million), and potatoes (EUR 34.1 million – data CyStat).

In 2023, intra-EU imports comprised 55.6% of the total, while extra-EU imports accounted for 18.7%. The primary partner countries for imports in 2023 were Greece (21.9%), the UK (10.2%), Italy (7.7%), Cina (5.9%), and Germany (5.3%). For exports of domestic goods, the main partner countries were Libya (15.3%), Lebanon (9.5%), Bermuda (7.9%), Greece (6%), and the Marshall Islands (5.8% - data CyStat).

Cyprus' goods trade balance is traditionally in deficit because the country has to import extensively in order to satisfy domestic demand (particularly, for energy supplies): in 2023, the country exported USD 4.4 billion worth of goods, importing USD 13.9 billion (+2% and +14.6% y-o-y, respectively). However, Cyprus is a net service exporter (USD 23.9 billion in 2023 against USD 16.6 billion in imports). Therefore, the country’s trade balance for goods and services was estimated to be positive by 1.3% of GDP in 2023 by the World Bank. According to the provisional 2023 data from CyStat, Cyprus’ trade deficit fell by EUR 213 million in 2024 to EUR 8.25 billion. Key exports included mineral fuels (EUR 1.19 billion), pharmaceuticals (EUR 348 million), and halloumi cheese (EUR 323.9 million). Other exports were waste and scrap materials (EUR 87.6 million), fruit and vegetable juices (EUR 48.1 million), potatoes (EUR 47.4 million), telecom equipment (EUR 30.9 million), and fire extinguishers (EUR 31.2 million), with other goods totalling EUR 264.4 million.

 
Foreign Trade Values 20202021202220232024
Imports of Goods (million USD) 8,76110,39712,21314,13513,169
Exports of Goods (million USD) 3,0633,9634,5125,0204,383
Imports of Services (million USD) 12,43816,51019,21319,88321,953
Exports of Services (million USD) 16,79822,98526,22228,01530,907

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20202021202220232024
Foreign Trade (in % of GDP) 160.7176.8207.6193.3189.8
Trade Balance (million USD) -4,842-5,151-6,094-8,017-7,404
Trade Balance (Including Service) (million USD) -3391,3891,0773661,318
Imports of Goods and Services (Annual % Change) 3.319.629.7-0.72.4
Exports of Goods and Services (Annual % Change) 1.627.227.1-2.85.3
Imports of Goods and Services (in % of GDP) 81.086.1102.096.193.1
Exports of Goods and Services (in % of GDP) 79.690.8105.697.296.7

Source: World Bank ; Latest available data

Foreign Trade Forecasts 2025 (e)2026 (e)2027 (e)2028 (e)2029 (e)
Volume of exports of goods and services (Annual % change) 4.24.14.04.04.0
Volume of imports of goods and services (Annual % change) 4.75.14.64.54.3

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
Cyprus is a member of the European Union, the United Nations, the Council of Europe, the World Trade Organization, the GATT, the World Bank, the Commonwealth and the International Monetary Fund. It is also well represented by diplomatic missions in foreign countries.
 

Main Partner Countries

Main Customers
(% of Exports)		 2024
Greece 7.8%
Lebanon 7.6%
United Kingdom 4.9%
Egypt 2.9%
Israel 2.6%
See More Countries 74.1%
Main Suppliers
(% of Imports)		 2024
Greece 23.6%
China 7.8%
Italy 7.6%
Germany 5.7%
Spain 4.9%
See More Countries 50.3%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
Chief of State and head of government: President Nikos CHRISTODOULIDIS (since 28 February 2023)
Next Election Dates
Presidential: 2028
Legislative: May 2026 (2027 for the area administered by Turkish Cypriots)
Main Political Parties
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 (3 seats)
- Movement of Social Democrats (Edek): centre-left, formerly known as Social Democratic Movement (Kisos) (3 seats)
- Democratic Alignment (DiPa): centre, liberal (4 seats)
- Ecologists Movement (KOSP): centre-left, green (2 seats)
- Volt Cyprus: Eurofederalist and progressive (1 seat)
Executive Power
The President is both the Head of State and the Head of Government. The President is elected by popular vote for a five-year term and holds executive power. 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 proportional representation and preferential vote for a five-year term. Twenty-four seats are allocated to the Turkish Cypriot community, but these have remained vacant since 1974. As a result, the parliament functions solely with the 56 Greek Cypriot members.
 

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