Cyprus has seen a healthy GDP growth with rates averaging 4.4% from 2015-2018 resulting in the island is among the top five eurozone performers. Health growth for Cyprus continues with a 3.1% growth in 2019. With strong sectors driving growth such as private demand, growing employment and an improved tourism sector in 2020 a growth of 2.7% is predicted.
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Due to improved opportunities and investments, the amount of jobs available in Cyprus has increased significantly in the past several years. From an unemployment rate of 16.1% in 2014 the rate has fallen to just 6.9% in 2019 with predictions of an even greater reduction in 2020. As more and more people work and earn money general spending in many sectors such as real estate, restaurants and shops has increased and benefited the overall economy.
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. The agricultural sector contributes around 2% of the GDP and employs the same percentage of the active population (World Bank, 2019). The traditional agricultural sector suffers from a very dry climate, whereas only 9% of the land is arable. The main crops are wine grapes, potatoes and fruits. Mineral resources are limited and include mostly copper, pyrites, chrome, asbestos and gypsum.
The manufacturing industry (mainly industrial food-processing, paper, chemical products, textiles, metal products and petroleum refining) accounts for 12.2% (including construction) of GDP and employs 17% 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 only 5% of GDP.
Cyprus’ economy is mostly based on the tertiary sector, which contributes 72.2% of the GDP and employs 81% of the active population. Tourism and maritime transportation are considered to be the two pillars of the Cypriot economy. The 2019 figures set an all-time record for number of tourists with almost 4 million. 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.
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Investment and Trading
As Cyprus is a member of the EU more than half trade in goods is within the EU with the country achieving strong numbers. The main exports for Cyprus are sent to Greece and the UK for commodities such as mineral origin, pharmaceutical products, and food products. The main imports for Cyprus are hydrocarbons, machinery, chemicals, vehicles and metals such as iron and steel. Cyprus has a small economy that is open, a range of new incentives have been implemented in 2019 and will be going forward into 2020. The incentives aim to attract and renew interest in large scale projects and developments. Other incentives focus on shipping and tourism.
The last few years have muted inflation with a decline of 1.2% in 2016 due to low oil prices and high unemployment. The EU consumer price index rose by just 0.7% in 2017 and 0.8% in 2018, 2019 saw an increase of 0.9% with predictions of 1.1% increase in 2020 according to the EU commission. Earnings on the island have been rising in 2019 and are expected to increase in 2020.
Cyprus Investment Program
Following some changes in 2019, the Cyprus Investment program remains a competitive and appealing option for those looking to gain a second passport. Cyprus is able to provide a Cypriot passport for those who invest a certain amount of money into real estate. Due to the appealing factors that Cyprus has to offer such as tax, lifestyle, education and travel to name just a few this program continues to draw international investment to the island with many purchasing luxury villas or investing in the development of new real estate and projects that benefit the island and economy as a whole.
With newfound gas, the opportunities for Cyprus have increased. Following a year of negotiation in 2019, an agreement has been reached that will allow Cyprus to become a producer offering an alternative source of gas to the EU and the ability to provide gas in the Eastern Mediterranean. The product contract ensures that Cyprus will receive an average yearly income of 520 million dollars over the 18-year lifespan of the gas field. This will benefit the Cypriot economy greatly, not just in 2020 but beyond creating a stable economic backdrop for the growth and development of the island further.
Indicator of Economic Freedom
World Rank: 44
Regional Rank: 22