About Cyprus - Economy

Cyprus has an open, free-market, services-based economy with some light manufacturing. Cyprus's accession as a full member to the European Union as of May 1, 2004, has been an important milestone in its recent economic development.

The Cypriots are among the most prosperous people in the Mediterranean region. Internationally, Cyprus promotes its geographical location as a "bridge" between West and East, along with its educated English-speaking population, moderate local costs, good airline connections, and telecommunications.

In the past 20 years, the economy has shifted from agriculture to light manufacturing and services. The service sector, including tourism, contributes 76.2% to the GDP and employs 72.0% of the labor force. Industry and construction contribute 19.3% and employ 22.7% of labor. Manufactured goods account for approximately 58.0% of domestic exports. Agriculture and mining is responsible for 4.4% of GDP and 5.3% of the labor force. Potatoes and citrus are the principal export crops.

Following a classical pattern, growth rates have gradually begun to decline as the Cypriot economy has matured over the years. The average rate of growth went from 6.1% in the 1980s, to 4.4% in the 1990s to 3.4% from 2000 to 2004.

In 2004, growth picked up to 3.6%, from 1.9% in 2003. Unemployment was fairly constant at 3.6% in 2004, while inflation declined to 2.3% in 2004 from 4.1% the year before. As in recent years, the services sectors, and tourism in particular, provided the main impetus for growth.

Trade is vital to the Cypriot economy: the island is not self-sufficient in food, and has few natural resources. The trade deficit increased by 18.4% in 2004, reaching $4.6 billion.

Cyprus must import fuels, most raw materials, heavy machinery, and transportation equipment. More than 50% of its trade is with the European Union, particularly with the United Kingdom.

The economic outlook remained bright in 2005: growth was expected to remain strong (around 4.0%), with low unemployment (less than 4.0%), and low inflation (around 2.3%).

Equally important, public finances were expected to continue improving, with the fiscal deficit forecast to decline to 2.9% of GDP in 2005, from 4.2% in 2004, and 6.3% in 2003.

Economy Statistics
GDP (2004): $15.4 billion.

Annual real growth rate (2004): 3.6%.

Per capita GDP income (2004):
Greek Cypriots--$20,961; Turkish Cypriots--about $7,350.

Agriculture and natural resources (4.4% of GDP):
Products--potatoes and other vegetables, citrus fruits, olives, grapes, wheat, carob seeds. Resources--pyrites, copper, asbestos, gypsum, lumber, salt, marble, clay, earth pigment.

Industry and construction (19.3% of GDP):
Types--mining, cement, construction, utilities, manufacturing, chemicals, non-electric machinery, textiles, footwear, food, beverages, tobacco.

Services and tourism (76.2% of GDP):
Trade, restaurants, and hotels 20.4%; transport 10.9%; finance, real estate, and business 23.8%; government, education, and health 16.1%; and community and other services 4.9%.

Trade (2004): Exports--$1.2 billion:
citrus, grapes, wine, potatoes, pharmaceuticals, clothing, footwear. Major markets--EU (especially the U.K. and Greece), Middle East, Russia. Imports--$5.8 billion: consumer goods, raw materials for industry, petroleum and lubricants, food and feed grains. Major suppliers--Greece, Italy, Germany, U.K. (U.S. trade surplus--for 2004: $112.0 million.)

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