- GDP (PPP):
- $36.9 billion
- 3.2% growth
- 4.4% 5-year compound annual growth
- $41,254 per capita
- Inflation (CPI):
- FDI Inflow:
Cyprus’s economic freedom score is 71.4, making its economy the 33rd freest in the 2021 Index. Its overall score has increased by 1.3 points, primarily because of improvements in judicial effectiveness and government integrity. Cyprus is ranked 19th among 45 countries in the Europe region, and its overall score is above the regional and world averages.
This year, economic freedom in Cyprus advanced a bit higher in the mostly free category, which the country regained in 2020 for the first time since 2012. Perennial problems with judicial effectiveness and government spending have held back the Cypriot economy. Additional reforms are needed to improve the speed and efficiency of the judicial system.
IMPACT OF COVID-19: As of December 1, 2020, 49 deaths had been attributed to the pandemic in Cyprus, and the economy was forecast to contract by 6.4 percent for the year.
Cyprus gained independence from the United Kingdom in 1960. Tensions between the Greek majority and the Turkish minority 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 collapsed in 2017 and, despite informal talks, have yet to resume. Disputes over offshore hydrocarbon resources remain heated, and tensions have flared up several times during the past year. Center-right Cyprus President Nicos Anastasiades 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.
Although property rights are generally respected in Cyprus, property registration and the enforcement of contracts are not efficient. In the Republic of Cyprus, an independent and impartial judiciary that operates under British traditions and upholds due process retains high levels of public trust, but long court delays tend to undermine that trust. Corruption, patronage, and a lack of transparency continue to flourish in the Turkish-controlled area.
The top individual income tax rate is 35 percent, and the top corporate tax rate is 12.5 percent. The overall tax burden equals 24.5 percent of total domestic income. Government spending has amounted to 40.0 percent of total output (GDP) over the past three years, and budget surpluses have averaged 0.01 percent of GDP. Public debt is equivalent to 94.9 percent of GDP.
A reduction in the cost of registering a company has made starting a business less expensive, and the costs of running a business have been reduced in other ways as well. Nonetheless, Cyprus has registered a small retrenchment in business freedom relative to other countries. The labor force participation rate rose in 2019. The government funds a wide variety of subsidies across the entire economy.
As a member of the EU, Cyprus has 45 preferential trade agreements in force. The trade-weighted average tariff rate (common among EU members) is 3 percent, with 639 EU-mandated nontariff measures in force. Cyprus has an additional nine country-specific nontariff barriers. There is no restrictive screening of foreign investment. Financial markets are small, and the evolving banking sector has regained stability in recent years.