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- GDP (PPP):
- $28.1 billion
- 1.6% growth
- -1.8% 5-year compound annual growth
- $32,786 per capita
- Inflation (CPI):
- FDI Inflow:
Cyprus has been emerging from a severe economic recession compounded by the collapse of its financial system in 2013. Economic policy has focused mainly on improving fiscal discipline and other structural reforms. Ending its IMF bailout program before term, Cyprus has made a considerable economic adjustment and turned around its economy.
Scoring high in many of the 12 economic freedoms, Cyprus does particularly well in trade freedom and monetary freedom. The regulatory framework is relatively transparent and efficient, the financial sector has become more stable and efficient, and the government has pursued policies that are more favorable to private-sector development. Following the banking sector’s recovery, the government lifted all capital controls.
A U.N. buffer zone has separated the Greek Cypriot Republic of Cyprus from the Turkish Republic of Northern Cyprus since 1974. The Republic of Cyprus joined the European Union in 2004 and acts as the island’s internationally recognized administration. Despite deep mutual hostility, Greek and Turkish leaders continue to negotiate on possible reunification through U.N.-brokered talks. Center-right Cyprus President Nicos Anastasiades has been head of state and head of government since taking office in February 2013. In May 2016, eight political parties won seats in parliament in an election that was marked by low voter turnout.
There are significant restrictions on ownership of real estate by non-EU residents, but a fast-track procedure for claims under €3,000 has simplified the enforcement of contracts. In the Republic of Cyprus, an independent and impartial judiciary operates according to the British tradition, upholding due process rights. Corruption, patronage, and a lack of transparency continue to flourish in the Turkish-controlled area.
The top personal income tax rate is 35 percent, and the top corporate tax rate is 12.5 percent. Other taxes include a value-added tax and a real estate tax. The overall tax burden equals 36.3 percent of total domestic income. Government spending has amounted to 41.3 percent of total output (GDP) over the past three years, and budget deficits have averaged 2.1 percent of GDP. Public debt is equivalent to 108.7 percent of GDP.
The regulatory framework generally facilitates entrepreneurial activity. With no minimum capital requirement, it takes six procedures to launch a company. Relatively flexible labor regulations facilitate employment and productivity growth, although union power is quite strong. According to a 2016 IMF report, government subsidies in the first nine months of 2015 amounted to about 3 percent of GDP.
Trade is extremely important to Cyprus’s economy; the value of exports and imports taken together equals 108 percent of GDP. The average applied tariff rate is 1.5 percent. There is no general screening of foreign investment. State-owned enterprises distort the economy. The banking sector has restored stability and resilience in recent years, but nonperforming loans are equivalent to about 150 percent of GDP.