A former British colony, Cyprus became independent in 1960 following years of resistance to British rule. Tensions between the Greek Cypriot majority and Turkish Cypriot minority came to a head in December 1963, when violence broke out in the capital of Nicosia. Despite the deployment of UN peacekeepers in 1964, sporadic intercommunal violence continued, forcing most Turkish Cypriots into enclaves throughout the island. In 1974, a Greek Government-sponsored attempt to overthrow the elected president of Cyprus was met by military intervention from Turkey, which soon controlled more than a third of the island. In 1983, the Turkish Cypriot administered area declared itself the "Turkish Republic of Northern Cyprus" ("TRNC"), but it is recognized only by Turkey. A UN-mediated agreement, the Annan Plan, failed to win approval by both communities in 2004. In February 2014, after a hiatus of nearly two years, the leaders of the two communities resumed formal discussions under UN auspices aimed at reuniting the divided island. Talks were suspended in October 2014, but resumed in earnest in May 2015 following the election of a new Turkish Cypriot "president." The entire island entered the EU on 1 May 2004, although the EU acquis - the body of common rights and obligations - applies only to the areas under the internationally recognized government, and is suspended in the area administered by Turkish Cypriots. However, individual Turkish Cypriots able to document their eligibility for Republic of Cyprus citizenship legally enjoy the same rights accorded to other citizens of EU states.
Middle East, island in the Mediterranean Sea, south of Turkey; note - Cyprus views itself as part of Europe; geopolitically, it can be classified as falling within Europe, the Middle East, or both
copper, pyrites, asbestos, gypsum, timber, salt, marble, clay earth pigment
Population - distribution
population concentrated in central Nicosia and in the major cities of the south: Paphos, Limassol, and Larnaca
Greek (official) 80.9%, Turkish (official) 0.2%, English 4.1%, Romanian 2.9%, Russian 2.5%, Bulgarian 2.2%, Arabic 1.2%, Filipino 1.1%, other 4.3%, unspecified 0.6%
NICOSIA (capital) 251,000 (2014)
- Conventional long form
- Republic of Cyprus
- Conventional short form
- Local long form
- Kypriaki Dimokratia/Kibris Cumhuriyeti
- Local short form
Republic of Cyprus - presidential democracy; Turkish Republic of Northern Cyprus (self-declared) - semi-presidential democracy
- Geographic coordinates
- 35 10 N, 33 22 E
- Time difference
- UTC+2 (7 hours ahead of Washington, DC, during Standard Time)
- Daylight saving time
- +1hr, begins last Sunday in March; ends last Sunday in October
accepts compulsory ICJ jurisdiction with reservations; accepts ICCt jurisdiction
The area of the Republic of Cyprus under government control has a market economy dominated by a services sector that accounts for more than four-fifths of GDP. Tourism, finance, shipping, and real estate have traditionally been the most important services. Cyprus has been a member of the EU since May 2004 and adopted the euro as its national currency in January 2008.
- Total tax rate (% of commercial profits)
- Real Interest Rate
- Manufacturing, value added (% of GDP)
- Current Account Balance
- US$ -1,022,632,658
- Labor Force, Total
- Employment in Agriculture
- Employment in Industry
- Employment in Services
- Unemployment Rate
- Imports of goods and services
- US$ 12,363,125,784
- Exports of goods and services
- US$ 12,280,828,097
- Total Merchandise Trade
- FDI, net inflows
- US$ 4,979,180,351
- Commercial Service Exports
- US$ 9,736,514,350
citrus, vegetables, barley, grapes, olives, vegetables; poultry, pork, lamb; dairy, cheese
tourism, food and beverage processing, cement and gypsum, ship repair and refurbishment, textiles, light chemicals, metal products, wood, paper, stone and clay products
- citrus, potatoes, pharmaceuticals, cement, clothing
- Greece 10.9%, Ireland 10.2%, UK 7.2%, Israel 6% (2015)
- consumer goods, petroleum and lubricants, machinery, transport equipment
- Greece 25.7%, UK 9.1%, Italy 8%, Germany 7.5%, Israel 5.5%, China 4.8%, Netherlands 4.1% (2015)
- Country Risk Rating
- Political and economic uncertainties and an occasionally difficult business environment can affect corporate payment behavior. Corporate default probability is appreciable.
- Business Climate Rating
- The business environment is relatively good. Although not always available, corporate financial information is usually reliable. Debt collection and the institutional framework may have some shortcomings. Intercompany transactions may run into occasional difficulties in the otherwise secure environments rated A3.
- Trade crossroads between Europe, Africa, and Asia
- Membership of the Eurozone
- Tertiary sector: tourism, corporate services, maritime transport
- Well-trained and English-speaking workforce
- High-quality transport and telecoms infrastructures
- Partitioning of island (since 1974) and poor relations with Turkey
- Limited domestic market, isolated, remote, and outside the heart of Europe
- Limited diversification of economy and foreign customer base
- Regional geopolitical instability
- High debt levels of all economic players
- Huge banking sector, very highly concentrated and loaded with debt
Despite levels of household debt that remain in excess of 120% of GDP, the upturn in private consumption will continue, encouraged by falling unemployment, the end of wage freezes, in particular in the public sector, and a steadying in house prices (following a 30% fall since 2010). This will also be boosted by the spending of the three million foreign tourists, amounting to more than three times the local population, visiting the island. Tourism, maritime transport and non-financial corporate services are the island’s three traditional export sectors and are feeling the benefits of the increased competitiveness resulting from the deprecation of the euro and low wage inflation extending the benefits of the decline in wages in recent years. The surplus from these almost covers the trade deficit (18% in 2015) that reflects the very limited diversification in local manufacturing (drugs, cheese and electronics). The likely fall in tourist numbers and spending from the United Kingdom (39% of visitors in 2015) as a result of the depreciation of the pound sterling will probably be largely offset by the increasing geographic diversification of visitors, particularly its increasing popularity with Russian tourists (25% of visitors) which is not expected to change despite the lifting of the restrictions imposed by Russian against Turkey. Despite already high levels of company debt, the upturn in the construction of tourist facilities (marinas, golf courses, ports and theme parks) and offices, the other leading sector, is also expected to continue. Public investment will remain restricted by budget constraints.
Following its accession to the EU in 2004, the Cypriot banking sector swelled to six times GDP. The contraction of the property market at the end of 2008 and the collapse of the Greek economy, in which it was heavily invested, at the beginning of 2010 proved fatal to it, leading to the insolvency of the leading players. Given the government’s inability to carry out the rescue operation, following the deterioration of the public and foreign accounts, under pressure from the European Commission, the ECB and the IMF which made it a condition of any financial assistance, the Cypriot authorities carried out a restructuring of the sector mainly paid for by creditors and depositors. Despite the bankruptcy of one of the biggest banks, the sector, currently highly concentrated, remains very large (3.7 times GDP in June 2016), excluding foreign banks (160%). Thanks to the gradual implementation of the insolvency and foreclosure legislation approved in 2015, the scale of bad debt is being reduced. It does still however account for 48% of bank portfolios (August 2016) and only 40% are covered by provision. Dealing with these has been made extremely complex by the difficulties in estimating the value of the securities used as guarantee, the lack of land registry records for apartments, as well as the slow pace of the transfer by the relevant authorities of title deeds from developers to purchasers. Given this mess, neither households nor developers feel any urgency in repaying their loans. Nevertheless, the increase in deposits recorded since 2015, the growth in new credit and the virtual ending of the use of the liquidity facilities of the Central Bank, are all positive signs in a sector being monitored by the ECB.
The global public deficit has almost disappeared. The primary surplus (i.e. excluding debt interest) and growth should help ease the huge burden of the public debt. Investors, showing their confidence in the improvements, supported a seven year 1 billion euro issue at 3.75% in July 2016. There is a risk, with the reducing influence of the European institutions and the IMF since the end of the assistance program and with the upcoming Presidential election in 2018, that the political class will ease back on its efforts in what is a long-haul struggle. Whilst reforms of the administration (promotion, wage structure, mobility) are underway, reforms in the management of public sector companies, together with privatizations (Cyprus Telecom, Limassol port, electricity), are falling behind. The external debt represents more than 5 times GDP. Almost 70% falls on the private sector, of which 60% correspondents with the commitments of ad hoc structures intended to finance ship-owners and what are in many cases non-resident companies. The purely domestic portion nevertheless still amounts to over 3 times GDP.
The legislative elections in May 2016 confirmed the President’s conservative Democratic Rally party (DISY), as the biggest party in Parliament, with 18 seats out of 56. Opposed by the 16 members of the AKEL (communist) party, President Nicos Anastasiades needs to find ad hoc majorities with the 9 centrist members of the Democratic Party (DIKO) and the 5 members of smaller parties, by combining budget balancing with social measures such as the creation of a national health system. Negotiations have also been taking place between the Greek and Turkish Cypriot community governments on the island aimed at ending the partition of the country. This will provide a boost to the economy and, in particular, any future development of offshore gas fields. Any settlement will depend, among others, on the attitude of Turkey, which maintains a military presence in the north of the island.