Foreign Direct Investment
In recent years, Cyprus has been recognized as one of the top destinations for foreign direct investment due to its rapid economic recovery and favorable business environment. However, the outbreak of the COVID-19 pandemic led to a sharp decline in FDI inflows to Cyprus. According to UNCTAD's World Investment Report 2023, FDI inflows amounted to USD 4.9 billion in 2022, marking a return to positive flows after two consecutive years of negative trends. The total stock of FDI in 2022 was USD 58.2 billion, representing 204.7% of GDP, a notable decrease from the previous year's figure of USD 425 billion in 2021. The financial and insurance activities sector is the primary recipient of FDI in Cyprus, accounting for approximately 99% of the total stock. Other sectors that attract FDI include transport and storage, real estate, tourism, pharmaceuticals, and energy. The main FDI partners for Cyprus are the Russian Federation, Luxembourg, the Netherlands, Germany, and the United Kingdom. Inward FDI stock from the euro area and the European Union (excluding the UK) collectively represents a significant portion, with percentages standing at 29.2% and 30.8%, respectively.
Cyprus has actively sought FDI in various sectors, including financial intermediation, large-scale projects, tourism infrastructure, and privatizations. Efforts have also been made to attract investment in newer sectors such as film production, investment funds, education, research & development, information technology, and regional headquarters. The country's stable and secure EU environment in a turbulent region makes it an attractive base for regional headquarters and support services. While Cyprus does not have a mandatory foreign investment screening mechanism, there are ownership limitations and licensing restrictions for non-EU investors in specific sectors like private land ownership, media, and construction. Additionally, challenges persist, including a small domestic market, ongoing recovery efforts in the banking sector following the 2009 crisis, tensions between Turkish and Cypriot factions on the island, and dependency on Russia and the UK as export markets and sources of financing. Despite these challenges, Cyprus maintains a strong position in global indices, ranking 28th on the Global Innovation Index 2023 and 17th out of 184 countries on the latest Index of Economic Freedom.
Foreign Direct Investment | 2020 | 2021 | 2022 |
FDI Inward Flow (million USD) | -24,451 | -35,744 | 4,913 |
FDI Stock (million USD) | 490,880 | 425,018 | 58,262 |
Number of Greenfield Investments* | 6 | 15 | 24 |
Value of Greenfield Investments (million USD) | 160 | 229 | 363 |
Source: UNCTAD - Latest available data.
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Country Comparison For the Protection of Investors | Cyprus | Eastern Europe & Central Asia | United States | Germany |
Index of Transaction Transparency* | 9.0 | 7.5 | 7.0 | 5.0 |
Index of Manager’s Responsibility** | 4.0 | 5.0 | 9.0 | 5.0 |
Index of Shareholders’ Power*** | 7.0 | 6.8 | 9.0 | 5.0 |
Source: Doing Business - Latest available data.
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.