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Economy

Economy of the south

The north and south regions of Cyprus have very different economies. The Republic of Cyprus (under the control of the government) is led by the tertiary sector which contributes 76% of the country’s GDP, and tourism is a particularly important part of this sector.

Dependence on tourism

The country’s economy depends on tourism to a large degree, and as the region’s political situation has changed and the economy of Western Europe has varied, over the last ten years this has been reflected in the country’s tourism revenues and its economic performance.

EU membership

In May 2004 Cyprus became a member of the EU and in May 2005 joined the European Exchange Rate Mechanism (ERM2). Its budget deficit is below 3% - a result of strict government policies – and Cyprus is expected to adopt the euro currency in 2008. Cyprus is classified among the high-income countries. It has the third highest standard of living in the Mediterranean, higher than several other EU members. Cyprus’s GDP growth for 2006 was 3.8%.

The unemployment rate in the Republic of Cyprus is around 4%, and the workforce has a literacy rate of 97.6%.

Trade and investment

As the island has relatively meagre natural resources, trade is vital to the Cypriot economy and the island’s trade deficit is growing steadily year on year. More than half its trade is with the EU. In February 1997, the Cypriot government changed its policy on foreign direct investment, permitting 100% foreign ownership in certain cases. In 2005, it received $1.17 billion in foreign direct investment.

Less stable north

To date, the economy of the Turkish Cypriot area of Cyprus has not shared the same stability that the southern region enjoys. Over 50% of the area’s labour force is employed in services and agriculture. The unemployment rate in the north of the island is around 5.5%. Its GDP per capita is around 45% of that of the south.

Erratic economy

Compared to the south, this area is an isolated and relatively small market with an inefficient public sector, and is dependant on the Turkish lira, all of which contributes towards a sometimes erratic economic performance. In 2006, a number of factors led to the Turkish Cypriot GDP per capital growing by 10.6%.

Financial contributions

However, the area relies on financial contributions from the government of Turkey. About a third of the area’s budget is financed by the government and recent funding has exceeded over $400 million annually. Overall funding since 1974 is thought to amount to over $4 billion. Turkey has been the main contributor of foreign investment to the north of Cyprus.

Related items

Documents and Reports

	Cyprus property investment report (373Kb)
	Cyprus country guide (766Kb)
	Cyprus property buying guide (979Kb)
Documents and Reports

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