- GDP (PPP):
- $31.6 billion
- 3.9% growth
- 0.3% 5-year compound annual growth
- $37,023 per capita
- Inflation (CPI):
- FDI Inflow:
Cyprus’s economic freedom score is 68.1, making its economy the 44th freest in the 2019 Index. Its overall score has increased by 0.3 point, with improvements in labor freedom, government integrity, and government spending offsetting a steep decline in judicial effectiveness. Cyprus is ranked 22nd among 44 countries in the Europe region, and its overall score is just below the regional average but well above the world average.
Although the post–financial crisis economic recovery is firmly entrenched, progress has slowed on reforms undertaken by the government to improve fiscal discipline and such other structural reforms as the sale of state assets to improve the efficiency of state-owned enterprises and raise funds to reduce government debt. Inefficient bankruptcy court procedures have impeded liquidation of some nonperforming loans. Cyprus does particularly well in trade freedom and monetary freedom. The regulatory framework is relatively transparent and efficient, and the financial sector has stabilized.
Cyprus gained independence from the United Kingdom in 1960. Tensions between the Greek majority and Turkish minority have led to repeated episodes of violence, and 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. U.N.-brokered reunification talks have yet to resume after collapsing in 2017. Center-right Cyprus President Nicos Anastasiades, who has served as head of state and head of government since 2013, won a second five-year term in 2018. Services such as tourism, finance, shipping, and real estate account for more than 80 percent of GDP. Development of offshore hydrocarbon resources is a priority.
There are significant restrictions on ownership of real estate by non-EU residents. An independent and impartial judiciary that operates under British traditions and upholds due process rights retains high levels of public trust in the Republic of Cyprus, although long court delays tend to undermine that trust. Corruption, patronage, and a lack of transparency are endemic 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 value-added and real estate taxes. The overall tax burden equals 33.6 percent of total domestic income. Over the past three years, government spending has amounted to 38.7 percent of the country’s output (GDP), and budget surpluses have averaged 0.7 percent of GDP. Public debt is equivalent to 99.3 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. The government is committed to privatization of its heavily subsidized state-owned enterprises and the Cyprus Cooperative Bank.
The combined value of exports and imports is equal to 131.6 percent of GDP. The average applied tariff rate is 2.0 percent. Cyprus implements a number of EU-directed nontariff trade barriers including technical and product-specific regulations, subsidies, and quotas. There is no general screening of foreign investment. The banking sector has regained stability in recent years. More than 90 percent of adult Cypriots have access to a formal banking institution.