Economy of Cyprus
The economy of Cyprus is a high-income economy as classified by the World Bank, and was included by the International Monetary Fund in its list of advanced economies in 2001. Cyprus adopted the euro as its official currency on 1 January 2008, replacing the Cypriot pound at an irrevocable fixed exchange rate of CYP 0.585274 per €1.
The 2012–2013 Cypriot financial crisis dominated the country's economic affairs in the 2010s. In March 2013, the Cypriot government reached an agreement with its eurozone partners to split the country's second biggest bank, the Cyprus Popular Bank, into a "bad" bank which would be wound down over time and a "good" bank which would be absorbed by the larger Bank of Cyprus. In return for a €10 billion bailout from the European Commission, the European Central Bank and the International Monetary Fund, the Cypriot government would be required to impose a significant haircut on uninsured deposits. Insured deposits of €100,000 or less would not be affected. After a three-and-a-half-year recession, Cyprus returned to growth in the first quarter of 2015. Cyprus successfully concluded its three-year financial assistance programme at the end of March 2016, having borrowed a total of €6.3 billion from the European Stability Mechanism and €1 billion from the IMF. The remaining €2.7 billion of the ESM bailout was never dispensed, due to the Cypriot government's better than expected finances over the course of the programme.
Economy in the government-controlled area
Cyprus has an open, free-market, service-based economy with some light manufacturing. Internationally, Cyprus promotes its geographical location as a "bridge" between East and West, along with its educated English-speaking population, moderate local costs, good airline connections, and telecommunications.Since gaining independence from the United Kingdom in 1960, Cyprus has had a record of successful economic performance, reflected in strong growth, full employment conditions and relative stability. The underdeveloped agrarian economy inherited from colonial rule has been transformed into a modern economy, with dynamic services, industrial and agricultural sectors and an advanced physical and social infrastructure. The Cypriots are among the most prosperous people in the Mediterranean region, with GDP per capita in 2025 surpassing $42,000 in nominal terms and $65,000 on the basis of purchasing power parity.
Their standard of living is reflected in the country's "very high" Human Development Index, by which it ranks 29th out of 191 countries in the world.
However, after more than three decades of unbroken growth, the Cypriot economy contracted in 2009. This reflected the exposure of Cyprus to the Great Recession and Euro area crisis. Furthermore, Cyprus was dealt a severe blow by the Evangelos Florakis Naval Base explosion in July 2011, with the cost to the economy estimated at €1–3 billion, or up to 17% of GDP.
The economic achievements of Cyprus during the preceding decades have been significant, bearing in mind the severe economic and social dislocation created by the Turkish invasion of 1974 and the continuing occupation of the northern part of the island by Turkey. The Turkish invasion inflicted a serious blow to the Cyprus economy and in particular to agriculture, tourism, mining and Quarrying: 70 percent of the island's wealth-producing resources were lost, the tourist industry lost 65 percent of its hotels and tourist accommodation, the industrial sector lost 46 percent, and mining and quarrying lost 56 percent of production. The loss of the port of Famagusta, which handled 83 percent of the general cargo, and the closure of Nicosia International Airport, in the buffer zone, were additional setbacks.
The success of Cyprus in the economic sphere has been attributed, inter alia, to the adoption of a market-oriented economic system, the pursuance of sound macroeconomic policies by the government as well as the existence of a dynamic and flexible entrepreneurship and a highly educated labor force. Moreover, the economy benefited from the close cooperation between the public and private sectors.
In the past 30 years, the economy has shifted from agriculture to light manufacturing and services. The services sector, including tourism, contributes almost 80% to GDP and employs more than 70% of the labor force. Industry and construction account for approximately one-fifth of GDP and labor, while agriculture is responsible for 2.1% of GDP and 8.5% of the labor force. Potatoes and citrus are the principal export crops. After robust growth rates in the 1980s, economic performance in the 1990s was mixed: real GDP growth was 9.7% in 1992, 1.7% in 1993, 6.0% in 1994, 6.0% in 1995, 1.9% in 1996 and 2.3% in 1997. This pattern underlined the economy's vulnerability to swings in tourist arrivals and the need to diversify the economy. Declining competitiveness in tourism and especially in manufacturing are expected to act as a drag on growth until structural changes are effected. Overvaluation of the Cypriot pound prior to the adoption of the euro in 2008 had kept inflation in check.
Trade is vital to the Cypriot economy — the island is not self-sufficient in food and until the recent offshore gas discoveries had few known natural resources – and the trade deficit continues to grow. Cyprus must import fuels, most raw materials, heavy machinery, and transportation equipment. More than 50% of its trade is with the rest of the European Union, especially Greece and the United Kingdom, while the Middle East receives 20% of exports. In 1991, Cyprus introduced a value-added tax, which is at 19% as of 13 January 2014. Cyprus ratified the new world trade agreement in 1995 and began implementing it fully on 1 January 1996. European Union accession negotiations started on 31 March 1998, and concluded when Cyprus joined the European Union as a full member in 2004.
Investment climate
The Cyprus legal system is founded on English law, and is therefore familiar to most international financiers. Cyprus's legislation was aligned with EU norms in the period leading up to EU accession in 2004. Restrictions on foreign direct investment were removed, permitting 100% foreign ownership in many cases. Foreign portfolio investment in the Cyprus Stock Exchange was also liberalized. In 2002 a modern, business-friendly tax system was put in place with a 12.5% corporate tax rate, one of the lowest in the EU. Cyprus has concluded treaties on double taxation with more than 40 countries, and, as a member of the Eurozone, has no exchange restrictions. Non-residents and foreign investors may freely repatriate proceeds from investments in Cyprus.Role as a financial hub
In the years following the dissolution of the Soviet Union it gained great popularity as a portal for investment from the West into Russia and Eastern Europe, becoming for companies of that origin the most common tax haven. More recently, there have been increasing investment flows from the West through Cyprus into Asia, particularly China and India, South America and the Middle East. In addition, businesses from outside the EU use Cyprus as their entry-point for investment into Europe. The business services sector remains the fastest growing sector of the economy, and had overtaken all other sectors in importance. CIPA has been fundamental towards this trend.Following the 2022 Russian invasion of Ukraine, Cyprus businesses and individuals have come under scrutiny and criticism for allowing EU and US sanctions to be breached with belated attempts to stop them or bring the culprits to justice. A number of professional law and accounting firms have been identified as helping Russian Oligarchs evade sanctions.
In January 2024, during a Council of Europe Parliamentary Assembly, Cypriot President Nikos Christodoulides maintained that Cyprus had fully implemented all European Union sanctions against Russia. Around the same time of his speech, it was reported that Russian deposits held in Cypriot banks had fallen 76% from 2014 to 2022. The number of Russian clients using Cypriot banks also dropped 82% in the same period.
Agriculture
Cyprus produced in 2018:- 106 thousand tons of potato;
- 37 thousand tons of tangerine;
- 23 thousand tons of grape;
- 20 thousand tons of orange;
- 19 thousand tons of grapefruit;
- 19 thousand tons of olive;
- 18 thousand tons of wheat;
- 18 thousand tons of barley;
- 15 thousand tons of tomato;
- 13 thousand tons of watermelon;
- 10 thousand tons of melon,