Cyprus’ modern, service-based economy continues to attract business as financial and corporate services draw foreign investors to the island.
Cyprus may be one of the smallest economies within the EU, but the country’s open free-market economy has managed to maintain a positive economic outlook despite the challenging global environment. Classified by the World Bank as a high-income country, the high-value services sector, including tourism, financial services and real estate, account for just under 73 per cent of the island’s total GDP. Cyprus became a member of the EU in 2004 and adopted the euro as its national currency in 2008 and was listed by the IMF as one of the 31 advanced economies in the world in 2011. The island, strategically located at the crossroads of three continents, now promotes itself as the business gateway between Europe, Asia, the Middle East and Africa, and leverages its highly educated, English-speaking population, its EU membership and its excellent ICT infrastructure to attract international business and investment, particularly in services sectors such as banking, insurance, funds, foreign exchange trading, consulting, education and research, real estate, healthcare, maritime management services, tourism and corporate formation
The Cyprus economy is known for its resilience to external shocks. In 2009 Cyprus saw its second recession since independence but the economy recovered to real GDP growth of 1.1 per cent in 2010, thanks to a recovery in financial services and tourism arrivals. The financial and business services sectors grew strongly in 2011 and early 2012 and falling oil prices have eased inflationary pressures in 2012.
Inflation rose from 0.3 per cent in 2009 to 2.4 per cent in 2010 due to higher international oil prices, on which Cyprus remains highly dependent. Increases in electricity tariffs and excise duties pushed average inflation to 3.3 per cent in 2011, while a fall in oil prices helped push inflation down to 2.9 per cent in the first half of 2012.
Cyprus has an open, free-market, service-based economy with a long record of resilience and successful economic performance. Though the island has been affected by the global financial crisis, the impact has been somewhat offset by the success of the tourism and business services sectors. Looking ahead, with measures in place to rein in public spending and boost activity in the main economic sectors, and the new opportunities offered by natural gas, the outlook is extremely optimistic. As the island’s main markets, the UK and Russia, begin to expand in recovery, Cyprus is well-positioned to return to the prosperity of recent years.