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Economic Overview

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 recovered in recent years, thanks to domestic demand and tourism, until the abrupt halt caused by the COVID-19 pandemic. Nevertheless, Cyprus’ GDP returned to its pre-pandemic level already in 2021, with continued growth in 2022 when robust private consumption, the revival of the tourism sector and increased services exports contributed to a 3.5% growth (data IMF; 5.8% according to the EU Commission estimates). A 50% wage indexation was implemented in January 2023 and is expected to support private consumption over the course of the year, with the IMF forecasting growth at 2.5% on the back of a full recovery of the tourism sector (although rising interest rates are set to negatively affect corporate investments and residential construction). The growth rate should remain relatively stable in 2024, at 2.6%.

Concerning public finances, Cyprus’ recorded a general government budget surplus of EUR 587 million (2.2% of GD) during the first nine months of 2022, compared to a deficit of EUR 453.3 million in the corresponding period one year earlier, thanks to a EUR 1.15 billion in revenues (+16.2% - data Statistics Cyprus). The 2023 budget provides for general government expenditures of EUR 11.29 billion and revenues of EUR 11.76 billion, projecting a surplus at around 1.7% of GDP (although the IMF projections are more conservative, at 0.7%). The public debt-to-GDP ratio – at 93.6% in 2022 – has been helped by the continued economic expansion and is expected to follow a downward trend over the forecast horizon, decreasing to 80.2% by 2024. Inflation reached 8% in 2022 fuelled by high energy prices and supply bottlenecks. As falling gas and oil prices ease energy inflation and supply disruptions attenuate further, the IMF sees the inflation rate returning closer to the target, at 3.8% this year and 2.1% in 2024, although wage indexation may exert some upward pressure on core inflation.

The unemployment rate stood at 6.1% in 2022 (from 7.5% one year earlier), and is expected to gradually decrease in 2023 and 2024 on the back of the economic expansion and the implementation of the EU’s RRP (to 6.5% and 6.3%, 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, 17.3% of the population is at risk of poverty or social exclusion (below the EU average of 21.7% - Eurostat). Overall, the IMF estimated Cyprus’ GDP per capita (PPP) at USD 49,504 in 2022.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 28.4632.0334.0636.1338.18
GDP (Constant Prices, Annual % Change) 5.62.22.73.03.0
GDP per Capita (USD) 31,45934,79136,97638,87040,760
General Government Balance (in % of GDP) 1.21.31.21.11.0
General Government Gross Debt (in % of GDP) 86.578.670.966.861.7
Inflation Rate (%) n/a3.52.42.22.1
Unemployment Rate (% of the Labour Force) 6.86.76.46.15.9
Current Account (billions USD) -2.60-2.74-2.69-2.81-2.94
Current Account (in % of GDP) -9.1-8.6-7.9-7.8-7.7

Source: IMF – World Economic Outlook Database , October 2021

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 basis of the Cypriot economy has shifted from agriculture to light manufacturing and, most importantly, services. Nowadays, the agricultural sector contributes around 1.7% of GDP and employs 2% of the active population (World Bank, latest data available). Agricultural sector suffers from a very dry climate, and only 13% of the land is arable (125,000 ha - FAO). The main crops are wine grapes, potatoes and fruits. Mineral resources are limited and include mostly copper, pyrites, chrome, asbestos and gypsum.

Industry (mainly industrial food-processing, paper, chemical products, textiles, metal products and petroleum refining) accounts for 13.1% of GDP (including construction) and employs around 18% 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 nearly 6% of GDP (World Bank, latest data available). According to figures from Statistics Cyprus, the annual average variation of industrial production in the period January-November 2022 stood at an estimated +1.7%.

Cyprus’ economy is mostly based on the tertiary sector, which contributes 73.2% of the GDP and employs 79% 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 of tourists in 2019 (almost 4 million), the number of arrivals was almost halved in 2021 amid the COVID-19 pandemic crisis. Nevertheless, the sector recovered in 2022, when the country welcomed 3.2 million tourists (+65% y-o-y and 80% of the pre-pandemic level - 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 29 authorised credit institutions in Cyprus, consisting of six 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) 2.8 17.9 79.2
Value Added (in % of GDP) 1.7 13.5 72.4
Value Added (Annual % Change) 0.8 0.2 6.6

Source: World Bank - Latest available data.

 
Monetary Indicators 20162017201820192020
Euro (EUR) - Average Annual Exchange Rate For 1 USD 0.940.890.850.890.88

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 170% of GDP (World Bank) and is mainly oriented towards the EU. Cyprus’ main exports include mineral fuels and oils (29.5%), pharmaceutical products (19.7%), halloumi cheese (17.2%), waste and scrap of paper, glass and metal (5.2% - Statistics Cyprus); with imports being led by petroleum oils (14.7%), cruise ships and boats (7%), motor cars (4.4%), and medicaments (3.4%).

The main destinations for Cyprus’ exports in 2021 were Lebanon (8.7%), Greece (7.7%), the Marshall Islands (7.6%), the United Kingdom (6.5%) and the British Virgin Islands (6.1%); while imports came chiefly from Greece (23.9%), Italy (10.2%), Germany (6.2%), the Netherlands (5.1%), and China (5% - 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); in 2021, the country’s trade balance was negative by 2.9% of GDP, according to data from the World Bank. In fact, although Cyprus is a net service exporter - with a total value of exports of USD 18.2 billion (mostly travel, shipping and banking) against USD 12.8 billion in imports – such surplus was offset by the trade in goods (USD 10.1 billion of imports vis-à-vis 3.7 billion in exports). According to the provisional 2022 data from CyStat, total goods imports amounted to EUR 11.2 billion (+29.5% vis-à-vis one year earlier), whereas exports totalled EUR 4.1 billion (marking an increase of 23.8%). The overall trade deficit was EUR 7 billion compared to EUR 5.27 billion in 2021.

 
Foreign Trade Values 20182019202020212022
Imports of Goods (million USD) 10,8159,1278,76110,30912,015
Exports of Goods (million USD) 5,0523,4533,0633,8884,342
Imports of Services (million USD) 9,11610,94612,49714,42415,126
Exports of Services (million USD) 14,80616,39916,96320,36121,215

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

Foreign Trade Indicators 20182019202020212022
Foreign Trade (in % of GDP) 148.5152.0164.2170.3183.4
Trade Balance (million USD) -5,303-5,180-4,842-5,120-6,203
Trade Balance (Including Service) (million USD) 366260-332803-144
Imports of Goods and Services (Annual % Change) 4.39.53.29.018.8
Exports of Goods and Services (Annual % Change) 7.28.72.213.613.7
Imports of Goods and Services (in % of GDP) 73.675.582.883.791.9
Exports of Goods and Services (in % of GDP) 75.076.581.486.691.5

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20232024 (e)2025 (e)2026 (e)2027 (e)
Volume of exports of goods and services (Annual % change) 3.83.43.03.02.7
Volume of imports of goods and services (Annual % change) 3.83.43.23.43.2

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 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)
2022
Hong Kong SAR, China 10.7%
Lebanon 7.5%
Greece 7.1%
United Kingdom 5.6%
Marshall Islands 3.9%
See More Countries 65.2%
Main Suppliers
(% of Imports)
2022
Greece 23.4%
Italy 10.5%
China 8.0%
Israel 7.4%
Germany 5.3%
See More Countries 45.4%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
Chief of State and head of government: President Nikos Christodoulides (in pectore, elected in February 2023)
Next Election Dates
Presidential: 2028
Legislative: 2026 (2027 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).

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 a proportional representation system to serve a 5-year term.
Cypriots enjoy considerable political rights.
 

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COVID-19 Country Response

Travel restrictions
Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.
Import & export restrictions
A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
The summary of the EU’s economic response to the COVID-19 pandemic 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) in Cyprus, please consult the country's dedicated section in the IMF’s Policy Tracker platform.
Support plan for businesses
For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.

 

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