The economy of Cyprus is a
high-income economy as classified by the
World Bank
The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Inte ...
,
and was included by the
International Monetary Fund
The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster glo ...
in its list of
advanced economies
A developed country (or industrialized country, high-income country, more economically developed country (MEDC), advanced country) is a sovereign state that has a high quality of life, developed economy and advanced technological infrastruct ...
in 2001.
Cyprus
Cyprus ; tr, Kıbrıs (), officially the Republic of Cyprus,, , lit: Republic of Cyprus is an island country located south of the Anatolian Peninsula in the eastern Mediterranean Sea. Its continental position is disputed; while it is ...
adopted the
euro
The euro ( symbol: €; code: EUR) is the official currency of 19 out of the member states of the European Union (EU). This group of states is known as the eurozone or, officially, the euro area, and includes about 340 million citizens . ...
as its official currency on 1 January 2008, replacing the
Cypriot pound at an irrevocable fixed
exchange rate
In finance, an exchange rate is the rate at which one currency will be exchanged for another currency. Currencies are most commonly national currencies, but may be sub-national as in the case of Hong Kong or supra-national as in the case of t ...
of CYP 0.585274 per €1.
The
2012–2013 Cypriot financial crisis, part of the wider
European debt crisis
The European debt crisis, often also referred to as the eurozone crisis or the European sovereign debt crisis, is a multi-year debt crisis that took place in the European Union (EU) from 2009 until the mid to late 2010s. Several eurozone me ...
, has dominated the country's economic affairs in recent times. In March 2013, the Cypriot government reached an agreement with its
eurozone
The euro area, commonly called eurozone (EZ), is a currency union of 19 member states of the European Union (EU) that have adopted the euro (€) as their primary currency and sole legal tender, and have thus fully implemented EMU pol ...
partners to split the country's second biggest bank, the
Cyprus Popular Bank
Cyprus Popular Bank (from 2006 to 2011 known as Marfin Popular Bank) was the second-largest banking group in Cyprus behind the Bank of Cyprus until it was 'shuttered' in March 2013 and split into two parts. The 'good' Cypriot part was merged i ...
(also known as Laiki 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
The Bank of Cyprus (BoC) ( el, Τράπεζα Κύπρου, tr, Kıbrıs Bankası) is a Cypriot financial services company established in 1899 with its headquarters in Strovolos.
Current operations
The Bank of Cyprus currently operates 108 bra ...
. In return for a €10 billion
bailout
A bailout is the provision of financial help to a corporation or country which otherwise would be on the brink of bankruptcy.
A bailout differs from the term ''bail-in'' (coined in 2010) under which the bondholders or depositors of global sys ...
from the
European Commission
The European Commission (EC) is the executive of the European Union (EU). It operates as a cabinet government, with 27 members of the Commission (informally known as "Commissioners") headed by a President. It includes an administrative body ...
, the
European Central Bank
The European Central Bank (ECB) is the prime component of the monetary Eurosystem and the European System of Central Banks (ESCB) as well as one of seven institutions of the European Union. It is one of the world's most important centra ...
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
In economics, a recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various ...
, 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
The European Stability Mechanism (ESM) is an intergovernmental organization located in Luxembourg City, which operates under public international law for all eurozone member states having ratified a special ESM intergovernmental treaty. It ...
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
Open or OPEN may refer to:
Music
* Open (band), Australian pop/rock band
* The Open (band), English indie rock band
* Open (Blues Image album), ''Open'' (Blues Image album), 1969
* Open (Gotthard album), ''Open'' (Gotthard album), 1999
* Open (C ...
,
free-market
In economics, a free market is an economic system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of government or any ot ...
,
service-based economy with some light manufacturing. Internationally, Cyprus promotes its geographical location as a "bridge" between
East
East or Orient is one of the four cardinal directions or points of the compass. It is the opposite direction from west and is the direction from which the Sun rises on the Earth.
Etymology
As in other languages, the word is formed from the fac ...
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
The Mediterranean Sea is a sea connected to the Atlantic Ocean, surrounded by the Mediterranean Basin and almost completely enclosed by land: on the north by Western and Southern Europe and Anatolia, on the south by North Africa, and on ...
region, with GDP per capita in 2022 approaching $30,000 in nominal terms and $50,000 on the basis of
purchasing power parity
Purchasing power parity (PPP) is the measurement of prices in different countries that uses the prices of specific goods to compare the absolute purchasing power of the countries' currencies. PPP is effectively the ratio of the price of a bask ...
.
Their
standard of living
Standard of living is the level of income, comforts and services available, generally applied to a society or location, rather than to an individual. Standard of living is relevant because it is considered to contribute to an individual's quality ...
is reflected in the country's "very high"
Human Development Index
The Human Development Index (HDI) is a statistic composite index of life expectancy, education (mean years of schooling completed and expected years of schooling upon entering the education system), and per capita income indicators, w ...
, and Cyprus is ranked 23rd in the world in terms of the
Quality-of-life Index.
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
The Great Recession was a period of marked general decline, i.e. a recession, observed in national economies globally that occurred from late 2007 into 2009. The scale and timing of the recession varied from country to country (see map). At ...
and
European debt crisis
The European debt crisis, often also referred to as the eurozone crisis or the European sovereign debt crisis, is a multi-year debt crisis that took place in the European Union (EU) from 2009 until the mid to late 2010s. Several eurozone me ...
. In recent times, concerns have been raised about the state of public finances and spiralling borrowing costs. 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
Turkey ( tr, Türkiye ), officially the Republic of Türkiye ( tr, Türkiye Cumhuriyeti, links=no ), is a transcontinental country located mainly on the Anatolian Peninsula in Western Asia, with a small portion on the Balkan Peninsula ...
. The Turkish invasion inflicted a serious blow to the Cyprus economy and in particular to agriculture,
tourism
Tourism is travel for pleasure or business; also the theory and practice of touring (disambiguation), touring, the business of attracting, accommodating, and entertaining tourists, and the business of operating tour (disambiguation), tours. Th ...
,
mining
Mining is the extraction of valuable minerals or other geological materials from the Earth, usually from an ore body, lode, vein, seam, reef, or placer deposit. The exploitation of these deposits for raw material is based on the econom ...
and
Quarry
A quarry is a type of open-pit mine in which dimension stone, rock, construction aggregate, riprap, sand, gravel, or slate is excavated from the ground. The operation of quarries is regulated in some jurisdictions to reduce their envir ...
ing: 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
Famagusta ( , ; el, Αμμόχωστος, Ammóchostos, ; tr, Gazimağusa or ) is a city on the east coast of Cyprus. It is located east of Nicosia and possesses the deepest harbour of the island. During the Middle Ages (especially under t ...
, which handled 83 percent of the general cargo, and the closure of
Nicosia International Airport, in the
buffer zone
A buffer zone is a neutral zonal area that lies between two or more bodies of land, usually pertaining to countries. Depending on the type of buffer zone, it may serve to separate regions or conjoin them.
Common types of buffer zones are demili ...
, 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 (average annual growth was 6.1%), 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 (i.e., to economic and political conditions in Cyprus, Western Europe, and the Middle East) 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
Greece,, or , romanized: ', officially the Hellenic Republic, is a country in Southeast Europe. It is situated on the southern tip of the Balkans, and is located at the crossroads of Europe, Asia, and Africa. Greece shares land borders wi ...
and the United Kingdom, while the Middle East receives 20% of exports. In 1991, Cyprus introduced a
value-added tax
A value-added tax (VAT), known in some countries as a goods and services tax (GST), is a type of tax that is assessed incrementally. It is levied on the price of a product or service at each stage of production, distribution, or sale to the en ...
(VAT), which is at 19% as of 13 January 2014. Cyprus ratified the new world trade agreement (
General Agreement on Tariffs and Trade
The General Agreement on Tariffs and Trade (GATT) is a legal agreement between many countries, whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas. According to its pr ...
, GATT) in 1995 and began implementing it fully on 1 January 1996. EU accession negotiations started on 31 March 1998, and concluded when Cyprus joined the organization as a full member in 2004.
Investment climate
The Cyprus
legal system
The contemporary national legal systems are generally based on one of four basic systems: civil law, common law, statutory law, religious law or combinations of these. However, the legal system of each country is shaped by its unique history an ...
is founded on
English law
English law is the common law legal system of England and Wales, comprising mainly criminal law and civil law, each branch having its own courts and procedures.
Principal elements of English law
Although the common law has, historically, b ...
, and is therefore familiar to most
international financiers
International finance (also referred to as international monetary economics or international macroeconomics) is the branch of financial economics broadly concerned with monetary economics, monetary and macroeconomics, macroeconomic interrelations ...
. 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
The Cyprus Stock Exchange or CSE ( el, Χρηματιστήριο Αξιών Κύπρου or ΧΑΚ), is a European stock exchange located in Cyprus.
{{Infobox person
, name = Rohit kanojia
, image =
, image_size ...
was also liberalized.
[Cyprus will continue to fight against money laundering](_blank)
FT.com 20 August 2007 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
The euro area, commonly called eurozone (EZ), is a currency union of 19 member states of the European Union (EU) that have adopted the euro (€) as their primary currency and sole legal tender, and have thus fully implemented EMU pol ...
, 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
The dissolution of the Soviet Union, also negatively connoted as rus, Разва́л Сове́тского Сою́за, r=Razvál Sovétskogo Soyúza, ''Ruining of the Soviet Union''. was the process of internal disintegration within the Sov ...
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
India, officially the Republic of India (Hindi: ), is a country in South Asia. It is the List of countries and dependencies by area, seventh-largest country by area, the List of countries and dependencies by population, second-most populous ...
, 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. As of 2016,
CySEC (the Financial Regulator), regulates many of the world's biggest brands in
retail forex as they generally see it as an efficient way to get an EU operating license and industry know-how.
Agriculture
Cyprus produced in 2018:
* 106 thousand tons of
potato
The potato is a starchy food, a tuber of the plant ''Solanum tuberosum'' and is a root vegetable native to the Americas. The plant is a perennial in the nightshade family Solanaceae.
Wild potato species can be found from the southern Uni ...
;
* 37 thousand tons of
tangerine
The tangerine is a type of citrus fruit that is orange in color. Its scientific name varies. It has been treated as a separate species under the name ''Citrus tangerina'' or ''Citrus'' × ''tangerina'', or treated as a variety of '' Citrus reti ...
;
* 23 thousand tons of
grape
A grape is a fruit, botanically a berry, of the deciduous woody vines of the flowering plant genus '' Vitis''. Grapes are a non- climacteric type of fruit, generally occurring in clusters.
The cultivation of grapes began perhaps 8,000 years a ...
;
* 20 thousand tons of
orange;
* 19 thousand tons of
grapefruit
The grapefruit (''Citrus'' × ''paradisi'') is a subtropical citrus tree known for its relatively large, sour to semi-sweet, somewhat bitter fruit. The interior flesh is segmented and varies in color from pale yellow to dark pink.
Grapefruit ...
;
* 19 thousand tons of
olive
The olive, botanical name ''Olea europaea'', meaning 'European olive' in Latin, is a species of small tree or shrub in the family Oleaceae, found traditionally in the Mediterranean Basin. When in shrub form, it is known as ''Olea europaea'' ' ...
;
* 18 thousand tons of
wheat
Wheat is a grass widely cultivated for its seed, a cereal grain that is a worldwide staple food. The many species of wheat together make up the genus ''Triticum'' ; the most widely grown is common wheat (''T. aestivum''). The archaeologi ...
;
* 18 thousand tons of
barley
Barley (''Hordeum vulgare''), a member of the grass family, is a major cereal grain grown in temperate climates globally. It was one of the first cultivated grains, particularly in Eurasia as early as 10,000 years ago. Globally 70% of barley p ...
;
* 15 thousand tons of
tomato
The tomato is the edible berry of the plant ''Solanum lycopersicum'', commonly known as the tomato plant. The species originated in western South America, Mexico, and Central America. The Mexican Nahuatl word gave rise to the Spanish word ...
;
* 13 thousand tons of
watermelon
Watermelon (''Citrullus lanatus'') is a flowering plant species of the Cucurbitaceae family and the name of its edible fruit. A scrambling and trailing vine-like plant, it is a highly cultivated fruit worldwide, with more than 1,000 varie ...
;
* 10 thousand tons of
melon
A melon is any of various plants of the family Cucurbitaceae with sweet, edible, and fleshy fruit. The word "melon" can refer to either the plant or specifically to the fruit. Botanically, a melon is a kind of berry, specifically a "pepo". T ...
;
In addition to smaller productions of other agricultural products.
Oil and gas
Surveys suggest more than 100 trillion cubic feet (2.831 trillion cubic metres) of
reserves lie untapped in the eastern Mediterranean basin between Cyprus and Israel – almost equal to the world's total annual consumption of natural gas. In 2011,
Noble Energy estimated that a pipeline to
Leviathan gas field
The Leviathan gas field is a large natural gas field in the Mediterranean Sea off the coast of Israel, south-west of the Tamar gas field. The gas field is roughly west of Haifa in waters deep in the Levantine basin, a rich hydrocarbon are ...
could be in operation as soon as 2014 or 2015.
[Oil and gas for Cyprus and Israel](_blank)
Economist.com 15 November 2011 In January 2012, Noble Energy announced a natural gas field discovery.
It attracted
Shell,
Delek
Delek Group is an Israeli conglomerate and one of Israel's largest companies, Delek Group is involved in the energy and infrastructure, with investments in upstream and downstream energy, water desalination and power plants. Delek Group' subsidi ...
and Avner as partners.
Several
production sharing contracts for exploration were signed with international companies, including
Eni
Eni S.p.A. () is an Italian multinational energy company headquartered in Rome. Considered one of the seven "supermajor" oil companies in the world, it has operations in 69 countries with a market capitalization of US$54.08 billion, as of 11 Ap ...
,
KOGAS
Korea Gas Corporation (KOGAS) is a South Korean public natural gas company that was established by the Korean government in 1983. KOGAS has grown into the largest LNG-importing company in the world and operates four LNG regasification terminal ...
,
TotalEnergies
TotalEnergies SE is a French multinational integrated energy and petroleum company founded in 1924 and one of the seven supermajor oil companies. Its businesses cover the entire oil and gas chain, from crude oil and natural gas exploration and ...
,
ExxonMobil
ExxonMobil Corporation (commonly shortened to Exxon) is an American multinational oil and gas corporation headquartered in Irving, Texas. It is the largest direct descendant of John D. Rockefeller's Standard Oil, and was formed on November 3 ...
and
QatarEnergy.
It is necessary to develop infrastructure for landing the gas in Cyprus and for
liquefaction
In materials science, liquefaction is a process that generates a liquid from a solid or a gas or that generates a non-liquid phase which behaves in accordance with fluid dynamics.
It occurs both naturally and artificially. As an example of th ...
for export.
Role as a shipping hub
Cyprus constitutes one of the largest
ship management
Ship management is the activity of managing marine vessels. The vessels under management could be owned by a sister concern of the ship management company or by independent vessel owners.
A vessel owning company that generally has several vesse ...
centers in the world; around 50 ship management companies and marine-related foreign enterprises are conducting their international activities in the country while the majority of the largest ship management companies in the world have established fully fledged offices on the island. Its geographical position at the crossroads of three continents and its proximity to the
Suez Canal
The Suez Canal ( arz, قَنَاةُ ٱلسُّوَيْسِ, ') is an artificial sea-level waterway in Egypt, connecting the Mediterranean Sea to the Red Sea through the Isthmus of Suez and dividing Africa and Asia. The long canal is a popula ...
has promoted
merchant shipping as an important industry for the island nation. Cyprus has the tenth-largest registered fleet in the world, with 1,030 vessels accounting for 31,706,000
dwt as of 1 January 2013.
Tourism
Tourism is an important factor of the island state's economy, culture, and overall brand development. With over 2 million tourist arrivals per year, it is the 40th most popular destination in the world. However, per capita of local population, it ranks 17th. The industry has been honored with various international awards, spanning from the Sustainable Destinations Global Top 100, VISION on Sustainable Tourism, Totem Tourism and Green Destination titles bestowed to
Limassol
Limassol (; el, Λεμεσός, Lemesós ; tr, Limasol or ) is a city on the southern coast of Cyprus and capital of the district with the same name. Limassol is the second largest urban area in Cyprus after Nicosia, with an urban populatio ...
and
Paphos
Paphos ( el, Πάφος ; tr, Baf) is a coastal city in southwest Cyprus and the capital of Paphos District. In classical antiquity, two locations were called Paphos: Old Paphos, today known as Kouklia, and New Paphos.
The current city of P ...
in December 2014. The island beaches have been awarded with 57
Blue Flags. Cyprus became a full member of the
World Tourism Organization
The World Tourism Organization (UNWTO) is the United Nations specialized agency entrusted with the promotion of responsible, sustainable and universally accessible tourism. Its headquarters are in Madrid, Spain. UNWTO is the leading inter ...
when it was created in 1975. According to the
World Economic Forum
The World Economic Forum (WEF) is an international non-governmental and lobbying organisation based in Cologny, canton of Geneva, Switzerland. It was founded on 24 January 1971 by German engineer and economist Klaus Schwab. The foundation, ...
's 2013 Travel and Tourism Competitiveness Index, Cyprus' tourism industry ranks 29th in the world in terms of overall competitiveness. In terms of Tourism Infrastructure, in relation to the tourism industry Cyprus ranks 1st in the world. The Cyprus Tourism Organization has a status of a semi-governmental organisation charged with overseeing the industry practices and promoting the island worldwide.
Trade
In 2008 fiscal aggregate value of goods and services exported by Cyprus was in the region of $1.53 billion. It primarily exported goods and services such as citrus fruits, cement, potatoes, clothing and pharmaceuticals. At that same period total financial value of goods and services imported by Cyprus was about $8.689 billion. Prominent goods and services imported by Cyprus in 2008 were consumer goods, machinery, petroleum and other lubricants, transport equipment and intermediate goods.
Cypriot trade partners
Traditionally Greece has been a major export and import partner of Cyprus. In fiscal 2007, it amounted for 21.1 percent of total exports of Cyprus. At that same period it was responsible for 17.7 percent of goods and services imported by Cyprus. Some other important names in this regard are UK and Italy.
Eurozone crisis
In 2012, Cyprus became affected by the
Eurozone financial and banking crisis. In June 2012, the Cypriot government announced it would need € of foreign aid to support the
Cyprus Popular Bank
Cyprus Popular Bank (from 2006 to 2011 known as Marfin Popular Bank) was the second-largest banking group in Cyprus behind the Bank of Cyprus until it was 'shuttered' in March 2013 and split into two parts. The 'good' Cypriot part was merged i ...
, and this was followed by
Fitch down-grading Cyprus's credit rating to
junk status
In finance, a high-yield bond (non-investment-grade bond, speculative-grade bond, or junk bond) is a bond that is rated below investment grade by credit rating agencies. These bonds have a higher risk of default or other adverse credit events ...
.
Fitch said Cyprus would need an additional € to support its banks and the downgrade was mainly due to the exposure of
Bank of Cyprus
The Bank of Cyprus (BoC) ( el, Τράπεζα Κύπρου, tr, Kıbrıs Bankası) is a Cypriot financial services company established in 1899 with its headquarters in Strovolos.
Current operations
The Bank of Cyprus currently operates 108 bra ...
, Cyprus Popular Bank and
Hellenic Bank
Hellenic Bank Public Company Ltd ( el, Ελληνική Τράπεζα Δημόσια Εταιρία Λτδ) (CSE: HB) is a bank in Cyprus.
History
The bank was founded in 1976 with technical assistance from Bank of America and in 1996 it boug ...
(Cyprus's 3 largest banks) to the
Greek financial crisis.
[
In June 2012 the Cypriot finance minister, Vassos Shiarly, stated that the ]European Central Bank
The European Central Bank (ECB) is the prime component of the monetary Eurosystem and the European System of Central Banks (ESCB) as well as one of seven institutions of the European Union. It is one of the world's most important centra ...
, European commission
The European Commission (EC) is the executive of the European Union (EU). It operates as a cabinet government, with 27 members of the Commission (informally known as "Commissioners") headed by a President. It includes an administrative body ...
and IMF
The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster glob ...
officials are to carry out an in-depth investigation into Cyprus' economy and banking sector to assess the level of funding it requires. The Ministry of Finance rejected the possibility that Cyprus would be forced to undergo the sweeping austerity measures that have caused turbulence in Greece, but admitted that there would be "some negative repercussion".
In November 2012 international lenders negotiating a bailout with the Cypriot government have agreed on a key capital ratio for banks and a system for the sector's supervision. Both commercial banks and cooperatives will be overseen by the Central Bank
A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union,
and oversees their commercial banking system. In contrast to a commercial bank, a centra ...
and the Ministry of Finance. They also set a core Tier 1 ratio – a measure of financial strength – of 9% by the end of 2013 for banks, which could then rise to 10% in 2014.
In 2014, Harris Georgiades
Harris Georgiades ( el, Χάρης Γεωργιάδης; born 9 April 1972) is a Greek Cypriot economist and politician. He was pivotal in the successful implementation of the economic reform plan for Cyprus and its successful conclusion in 2016. ...
pointed that exiting the Memorandum with the European troika required a return to the markets
Market is a term used to describe concepts such as:
*Market (economics), system in which parties engage in transactions according to supply and demand
*Market economy
*Marketplace, a physical marketplace or public market
Geography
*Märket, an ...
. This he said, required "timely, effective and full implementation of the program." The Finance Minister stressed the need to implement the Memorandum of understanding without an additional loan.
In 2015, Cyprus was praised by the President of the European Commission
The president of the European Commission is the head of the European Commission, the executive branch of the European Union (EU). The President of the Commission leads a Cabinet of Commissioners, referred to as the College, collectively account ...
for adopting the austerity measures and not hesitating to follow a tough reform program.
In 2016, Moody's Investors Service
Moody's Investors Service, often referred to as Moody's, is the bond credit rating business of Moody's Corporation, representing the company's traditional line of business and its historical name. Moody's Investors Service provides internationa ...
changed its outlook on the Cypriot banking system to positive from stable, reflecting the view that the recovery will restore banks to profitability and improve asset quality. The quick economic recovery was driven by tourism, business services and increased consumer spending. Creditor confidence was also strengthened, allowing Bank of Cyprus to reduce its Emergency Liquidity Assistance to €2.0 billion (from €9.4 billion in 2013). Within the same period, Bank of Cyprus chairman Josef Ackermann urged the European Union
The European Union (EU) is a supranational union, supranational political union, political and economic union of Member state of the European Union, member states that are located primarily in Europe, Europe. The union has a total area of ...
to pledge financial support for a permanent solution to the Cyprus dispute
The Cyprus problem, also known as the Cyprus dispute, Cyprus issue, Cyprus question or Cyprus conflict, is an ongoing dispute between Greek Cypriots in the south and Turkish Cypriots in the north. Initially, with the occupation of the island ...
.
Economy of Northern Cyprus
The economy of Turkish-occupied northern Cyprus is about one-fifth the size of the economy of the government-controlled area, while GDP per capita is around half. Because the ''de facto'' administration is recognized only by Turkey
Turkey ( tr, Türkiye ), officially the Republic of Türkiye ( tr, Türkiye Cumhuriyeti, links=no ), is a transcontinental country located mainly on the Anatolian Peninsula in Western Asia, with a small portion on the Balkan Peninsula ...
, it has had much difficulty arranging foreign financing, and foreign firms have hesitated to invest there. The economy mainly revolves around the agricultural sector and government service, which together employ about half of the work force.
The tourism sector also contributes substantially into the economy. Moreover, the small economy has seen some downfalls because the Turkish lira
The lira ( tr, Türk lirası; sign: ₺; ISO 4217 code: TRY; abbreviation: TL) is the official currency of Turkey and Northern Cyprus. One lira is divided into one hundred '' kuruş''.
History
Ottoman lira (1844–1923)
The lira, along wi ...
is legal tender
Legal tender is a form of money that courts of law are required to recognize as satisfactory payment for any monetary debt. Each jurisdiction determines what is legal tender, but essentially it is anything which when offered ("tendered") in ...
. To compensate for the economy's weakness, Turkey has been known to provide significant financial aid. In both parts of the island, water shortage is a growing problem, and several desalination
Desalination is a process that takes away mineral components from saline water. More generally, desalination refers to the removal of salts and minerals from a target substance, as in soil desalination, which is an issue for agriculture. Salt ...
plants are planned.
The economic disparity between the two communities is pronounced. Although the economy operates on a free-market basis, the lack of private and government investment, shortages of skilled labor and experienced managers, and inflation and the devaluation of the Turkish lira continue to plague the economy.
Trade with Turkey
Turkey is by far the main trading partner of Northern Cyprus, supplying 55% of imports and absorbing 48% of exports. In a landmark case, the European Court of Justice
The European Court of Justice (ECJ, french: Cour de Justice européenne), formally just the Court of Justice, is the supreme court of the European Union in matters of European Union law. As a part of the Court of Justice of the European U ...
(ECJ) ruled on 5 July 1994 against the British practice of importing produce from Northern Cyprus based on certificates of origin and phytosanitary certificates granted by the ''de facto'' authorities. The ECJ decided that only goods bearing certificates of origin from the internationally recognized Republic of Cyprus could be imported by EU member states. The decision resulted in a considerable decrease of Turkish Cypriot exports to the EU: from $36.4 million (or 66.7% of total Turkish Cypriot exports) in 1993 to $24.7 million in 1996 (or 35% of total exports) in 1996. Even so, the EU continues to be the second-largest trading partner of Northern Cyprus, with a 24.7% share of total imports and 35% share of total exports.
The most important exports of Northern Cyprus are citrus
''Citrus'' is a genus of flowering trees and shrubs in the rue family, Rutaceae. Plants in the genus produce citrus fruits, including important crops such as oranges, lemons, grapefruits, pomelos, and limes. The genus ''Citrus'' is native to ...
and dairy products
Dairy products or milk products, also known as lacticinia, are food products made from (or containing) milk. The most common dairy animals are cow, water buffalo, nanny goat, and ewe. Dairy products include common grocery store food items in ...
. These are followed by rakı
Rakı or raki (, Turkish pronunciation: ) is an alcoholic drink made of twice-distilled grapes. It is the national drink of Turkey. It is also popular in other Balkan countries as an apéritif as well as in Kazakhstan. It is often served with ...
, scrap
Scrap consists of recyclable materials, usually metals, left over from product manufacturing and consumption, such as parts of vehicles, building supplies, and surplus materials. Unlike waste, scrap has monetary value, especially recovered m ...
and clothing.
Assistance from Turkey is the mainstay of the Turkish Cypriot economy. Under the latest economic protocol (signed 3 January 1997), Turkey has undertaken to provide loans totalling $250 million for the purpose of implementing projects included in the protocol related to public finance, tourism, banking, and privatization. Fluctuation in the Turkish lira, which suffered from hyperinflation
In economics, hyperinflation is a very high and typically accelerating inflation. It quickly erodes the real value of the local currency, as the prices of all goods increase. This causes people to minimize their holdings in that currency as t ...
every year until its replacement by the Turkish new lira in 2005, exerted downward pressure on the Turkish Cypriot standard of living for many years.
The ''de facto'' authorities have instituted a free market in foreign exchange and permit residents to hold foreign-currency denominated bank accounts. This encourages transfers from Turkish Cypriots living abroad.
Happiness
Economic factors such as the GDP and national income strongly correlate with the happiness
Happiness, in the context of mental or emotional states, is positive or pleasant emotions ranging from contentment to intense joy. Other forms include life satisfaction, well-being, subjective well-being, flourishing and eudaimonia.
...
of a nation's citizens. In a study published in 2005, citizens from a sample of countries were asked to rate how happy or unhappy they were as a whole on a scale of 1 to 7 (Ranking: 1. Completely happy, 2. Very happy, 3. Fairly happy,4. Neither happy nor unhappy, 5. Fairly unhappy, 6. Very unhappy, 7. Completely unhappy.) Cyprus had a score of 5.29. On the question of how satisfied citizens were with their main job, Cyprus scored 5.36 on a scale of 1 to 7 (Ranking: 1. Completely satisfied, 2. Very satisfied, 3. Fairly satisfied, 4. Neither satisfied nor dissatisfied, 5. Fairly dissatisfied, 6. Very dissatisfied, 7. Completely dissatisfied.) In another ranking of happiness, Northern Cyprus ranks 58 and Cyprus ranks 61, according to the 2018 World Happiness Report. The report rates 156 countries based on variables including income, healthy life expectancy, social support, freedom, trust, and generosity.
Economic factors play a significant role in the general life satisfaction of Cyprus citizens, especially with women who participate in the labor force
The workforce or labour force is a concept referring to the pool of human beings either in employment or in unemployment. It is generally used to describe those working for a single company or industry, but can also apply to a geographic ...
at a lower rate, work in lower ranks, and work in more public and service sector jobs than the men. Women of different skill-sets and "differing economic objectives and constraints" participate in the tourism industry. Women participate in this industry through jobs like hotel work to serve and/or bring pride to their family, not necessarily to satisfy their own selves. In this study, women with income higher than the mean household income reported higher levels of satisfaction with their lives while those with lower income reported the opposite. When asked who they compare themselves with (those with lower, same, or higher economic status), results showed that those that compared themselves with people of higher economic statuses than them had the lowest level of life satisfaction. While the correlation of income and happiness is positive, it is significantly low; there is stronger correlation between comparison and happiness. This indicates that not only income level but income level in relation to that of others affects their amount of life satisfaction.
Classified as a Mediterranean welfare regime, Cyprus has a weak public Welfare system. This means there is a strong reliance on the family, instead of the state, for both familial and economic support. Another finding is that being a full-time housewife has a stronger negative effect on happiness for women of Northern Cyprus than being unemployed, showing how the combination of gender and the economic factor of participating in the labor force affects life satisfaction. Economic factors also negatively correlate with the happiness levels of those that live in the capital city: citizens living in the capital express lower levels of happiness. As found in this study, citizens of Cyprus that live in its capital, Nicosia, are significantly less happy than others whether or not socio-economic variables are controlled for. Another finding was that the young people in the capital are unhappier than the rest of Cyprus; the old are not.
See also
* Cypriot pound
*Economy of Europe
The economy of Europe comprises about 748 million people in 50 countries. The formation of the European Union (EU) and in 1999 the introduction of a unified currency, the Euro, brought participating European countries closer through the ...
References
Cyprus
''The World Factbook
''The World Factbook'', also known as the ''CIA World Factbook'', is a reference resource produced by the Central Intelligence Agency (CIA) with almanac-style information about the countries of the world. The official print version is availabl ...
''. Central Intelligence Agency
The Central Intelligence Agency (CIA ), known informally as the Agency and historically as the Company, is a civilian foreign intelligence service of the federal government of the United States, officially tasked with gathering, processing, ...
.
External links
*
{{Economy of Europe
Cyprus
Cyprus ; tr, Kıbrıs (), officially the Republic of Cyprus,, , lit: Republic of Cyprus is an island country located south of the Anatolian Peninsula in the eastern Mediterranean Sea. Its continental position is disputed; while it is ...
Cyprus
Cyprus ; tr, Kıbrıs (), officially the Republic of Cyprus,, , lit: Republic of Cyprus is an island country located south of the Anatolian Peninsula in the eastern Mediterranean Sea. Its continental position is disputed; while it is ...