Cyprus: Economy#
The area of the Republic of Cyprus under government control has a market economy dominated by the service sector, which accounts for more than four-fifths of GDP. Tourism, financial services, shipping, and real estate have traditionally been the most important sectors. Cyprus has been a member of the EU since May 2004 and adopted the euro as its national currency in January 2008.During the first five years of EU membership, the Cyprus economy grew at an average rate of about 4%, with unemployment between 2004 and 2008 averaging about 4%. However, the economy tipped into recession in 2009 as the ongoing global financial crisis and resulting low demand hit the tourism and construction sectors. An overextended banking sector with excessive exposure to Greek debt added to the contraction. Cyprus’ biggest two banks were among the largest holders of Greek bonds in Europe and had a substantial presence in Greece through bank branches and subsidiaries. Following numerous downgrades of its credit rating, Cyprus lost access to international capital markets in May 2011. In July 2012, Cyprus became the fifth euro-zone government to request an economic bailout program from the European Commission, European Central Bank and the International Monetary Fund - known collectively as the "Troika."
Shortly after the election of President Nikos ANASTASIADES in February 2013, Cyprus reached an agreement with the Troika on a $13 billion bailout that resulted in losses on uninsured bank deposits. The bailout triggered a two-week bank closure and the imposition of capital controls that remained partially in place until April 2015. Cyprus' two largest banks merged and the combined entity was recapitalized through conversion of some large bank deposits to shares and imposition of losses on bank bondholders. As with other EU countries, the Troika conditioned the bailout on passing financial and structural reforms and privatizing state-owned enterprises. Despite downsizing and restructuring, the Cypriot financial sector throughout 2015 remained burdened by the largest stock of non-performing loans in the euro zone, equal to nearly half of all loans. Since the bailout, Cyprus has received positive appraisals by the Troika and outperformed fiscal targets but has struggled to overcome political opposition to bailout-mandated legislation, particularly regarding privatizations. Cyprus emerged from recession in 2015 and its economy grew an estimated 1.6% for the year, setting a positive tone for the scheduled end of the bailout program in March 2016.
In October 2013, a US-Israeli consortium completed preliminary appraisals of hydrocarbon deposits in Cyprus’ exclusive economic zone (EEZ), which revealed an estimated gross mean reserve of about 130 billion cubic meters. Though exploration continues in Cyprus’ EEZ, no additional commercially exploitable reserves were identified during the exploratory drilling in 2014/2015. Developing offshore hydrocarbon resources remains a critical component of the government’s economic recovery efforts, but development has been delayed as a result of regional developments and disagreements about exploitation methods.
Economic Facts#
| Economy of the area administered by Turkish Cypriots | Economy - overview: Even though the whole of the island is part of the EU, implementation of the EU "acquis communautaire" has been suspended in the area administered by Turkish Cypriots, known locally as the "Turkish Republic of Northern Cyprus" ("TRNC"), until political conditions permit the reunification of the island. The market-based economy of the "TRNC" is roughly one-fifth the size of its southern neighbor and is likewise dominated by the service sector with a large portion of the population employed by the government. In 2012 - the latest year for which data are available - the services sector, which includes the public sector, trade, tourism, and education, contributed 58.7% to economic output. In the same year, light manufacturing and agriculture contributed 2.7% and 6.2%, respectively. Manufacturing is limited mainly to food and beverages, furniture and fixtures, construction materials, metal and non-metal products, textiles and clothing. The "TRNC" maintains few economic ties with the Republic of Cyprus outside of trade in construction materials. Since its creation, the "TRNC" has heavily relied on financial assistance from Turkey, which supports the "TRNC" defense, telecommunications, water and postal services. The Turkish Lira is the preferred currency, though foreign currencies are widely accepted in business transactions. The "TRNC" remains vulnerable to the Turkish market and monetary policy because of its use of the Turkish Lira. The "TRNC" weathered the European financial crisis relatively unscathed - compared to the Republic of Cyprus - because of the lack of financial sector development, the health of the Turkish economy, and its separation from the rest of the island. The "TRNC" economy experienced growth estimated at 2.8% in 2013 and 2.3% in 2014 and is projected to grow 3.8% in 2015. GDP (purchasing power parity): $1.829 billion (2007 est.) GDP - real growth rate: 2.3% (2014 est.) ++ 2.8% (2013 est.) GDP - per capita: $11,700 (2007 est.) GDP - composition by sector: agriculture: 6.2%, industry: 35.1%, services: 58.7% (2012 est.) Labor force: 95,030 (2007 est.) Labor force - by occupation: agriculture: 14.5%, industry: 29%, services: 56.5% (2004) Unemployment rate: 9.4% (2005 est.) Population below poverty line: %NA Inflation rate: 11.4% (2006) Budget: revenues: $2.5 billion, expenditures: $2.5 billion (2006) Agriculture - products: citrus fruit, dairy, potatoes, grapes, olives, poultry, lamb Industries: foodstuffs, textiles, clothing, ship repair, clay, gypsum, copper, furniture Industrial production growth rate: -0.3% (2007 est.) Electricity production: 998.9 million kWh (2005) Electricity consumption: 797.9 million kWh (2005) Exports: $68.1 million, f.o.b. (2007 est.) Export - commodities: citrus, dairy, potatoes, textiles Export - partners: Turkey 40%; direct trade between the area administered by Turkish Cypriots and the area under government control remains limited Imports: $1.2 billion, f.o.b. (2007 est.) Import - commodities: vehicles, fuel, cigarettes, food, minerals, chemicals, machinery Import - partners: Turkey 60%; direct trade between the area administered by Turkish Cypriots and the area under government control remains limited Reserves of foreign exchange and gold: $NA Debt - external: $NA Currency (code): Turkish new lira (YTL) Exchange rates: Turkish new lira per US dollar: 1.9 (2013) 1.8 (2012) 1.67 (2011) 1.5 (2010) 1.55 (2009) |
|---|---|
| GDP (purchasing power parity) | $29.26 billion (2016 est.) $28.47 billion (2015 est.) $28.05 billion (2014 est.)GDP (purchasing power parity): $1.829 billion (2007 est.) note: data are in 2016 dollars |
| GDP (official exchange rate) | $19.93 billion (2015 est.) |
| GDP - real growth rate | 2.8% (2016 est.) 1.5% (2015 est.) -2.5% (2014 est.)GDP - real growth rate: 2.3% (2014 est.) |
| GDP - per capita (PPP) | $34,400 (2016 est.) $33,600 (2015 est.) $32,700 (2014 est.) note: data are in 2016 dollars |
| Gross national saving | 9.5% of GDP (2016 est.) 11.7% of GDP (2015 est.) 8.6% of GDP (2014 est.) |
| GDP - composition, by end use | household consumption: 69.1% government consumption: 15.3% investment in fixed capital: 11.3% investment in inventories: 1.9% exports of goods and services: 60.9% imports of goods and services: -58.5% (2016 est.) |
| GDP - composition, by sector of origin | agriculture: 2.3% industry: 10.4% services: 87.2% (2016 est.) |
| Agriculture - products | citrus, vegetables, barley, grapes, olives, vegetables; poultry, pork, lamb; dairy, cheeseAgriculture - products: citrus fruit, dairy, potatoes, grapes, olives, poultry, lamb |
| Industries | tourism, food and beverage processing, cement and gypsum, ship repair and refurbishment, textiles, light chemicals, metal products, wood, paper, stone and clay productsIndustries: foodstuffs, textiles, clothing, ship repair, clay, gypsum, copper, furniture |
| Industrial production growth rate | 1.5% (2016 est.)Industrial production growth rate: -0.3% (2007 est.) |
| Labor force | 415,100 (2016 est.)Labor force: 95,030 (2007 est.) |
| Labor force - by occupation | agriculture: 3.8% industry: 15.2% services: 81% (2014 est.) Labor force - by occupation: agriculture: 14.5%, industry: 29%, services: 56.5% (2004) |
| Unemployment rate | 11.8% (2016 est.) 14.9% (2015 est.)Unemployment rate: 9.4% (2005 est.) |
| Population below poverty line | NA%Population below poverty line: %NA |
| Household income or consumption by percentage share | lowest 10%: 3.3% highest 10%: 28.8% (2014) |
| Distribution of family income - Gini index | 34.8 (2014 est.) 32.4 (2013 est.) |
| Budget | revenues: $7.588 billion expenditures: $7.809 billion (2016 est.) Budget: revenues: $2.5 billion, expenditures: $2.5 billion (2006) |
| Taxes and other revenues | 38.1% of GDP (2016 est.) |
| Budget surplus (+) or deficit (-) | -1.1% of GDP (2016 est.) |
| Public debt | 104.6% of GDP (2016 est.) 108.9% of GDP (2015 est.) note: data cover general government debt and include debt instruments issued (or owned) by government entities other than the treasury; the data include treasury debt held by foreign entities; the data exclude debt issued by subnational entities, as well as int |
| Fiscal year | calendar year |
| Inflation rate (consumer prices) | -0.3% (2016 est.) -2.1% (2015 est.) |
| Central bank discount rate | 0.05% (31 December 2013) 0.3% (31 December 2010) note: this is the European Central Bank's rate on the marginal lending facility, which offers overnight credit to banks in the euro area |
| Commercial bank prime lending rate | 4.5% (31 December 2016 est.) 4.69% (31 December 2015 est.) |
| Stock of narrow money | $3.975 billion (31 December 2016 est.) $4.031 billion (31 December 2015 est.) note: see entry for the European Union for money supply for the entire euro area; the European Central Bank (ECB) controls monetary policy for the 18 members of the Economic and Monetary Union (EMU); individual members of the EMU do not control the quantity of |
| Stock of broad money | $43.41 billion (31 December 2014 est.) $47.99 billion (31 December 2013 est.) |
| Stock of domestic credit | $57.96 billion (31 December 2016 est.) $59.58 billion (31 December 2015 est.) |
| Market value of publicly traded shares | $2.692 billion (31 December 2015 est.) $4.031 billion (31 December 2014 est.) $2.105 billion (31 December 2013 est.) |
| Current account balance | -$184 million (2016 est.) -$704 million (2015 est.) |
| Exports | $2.635 billion (2016 est.) $2.759 billion (2015 est.)Exports: $68.1 million, f.o.b. (2007 est.) |
| Exports - commodities | citrus, potatoes, pharmaceuticals, cement, clothing |
| Exports - partners | Greece 10.9%, Ireland 10.2%, UK 7.2%, Israel 6% (2015) |
| Imports | $6.042 billion (2016 est.) $6.286 billion (2015 est.)Imports: $1.2 billion, f.o.b. (2007 est.) |
| Imports - commodities | consumer goods, petroleum and lubricants, machinery, transport equipment |
| Imports - partners | Greece 25.7%, UK 9.1%, Italy 8%, Germany 7.5%, Israel 5.5%, China 4.8%, Netherlands 4.1% (2015) |
| Reserves of foreign exchange and gold | $776.8 million (31 December 2016 est.) $807.6 million (31 December 2015 est.)Reserves of foreign exchange and gold: $NA |
| Debt - external | $95.28 billion (31 December 2013 est.) $103.5 billion (31 December 2012 est.)Debt - external: $NA |
| Stock of direct foreign investment - at home | $142.1 billion (31 December 2016 est.) $140.4 billion (31 December 2015 est.) |
| Stock of direct foreign investment - abroad | $136.8 billion (31 December 2016 est.) $135.2 billion (31 December 2015 est.) |
| Exchange rates | euros (EUR) per US dollar - 0.9214 (2016 est.) 0.885 (2015 est.) 0.885 (2014 est.) 0.7634 (2013 est.) 0.78 (2012 est.)Exchange rates: Turkish new lira per US dollar: 1.9 (2013) 1.8 (2012) 1.67 (2011) 1.5 (2010) 1.55 (2009) |