2020 Cyprus Country Report
The 2020 Cyprus Country Report features in-depth articles on the economy, foreign direct investment, international trade and headquartering as well as detailed sector profiles and insights from Cyprus’ 100 most influential political, economic and business leaders shaping the future of their country and its industries.
The 2020 Cyprus Country Report features in-depth articles on the economy, foreign direct investment, international trade and headquartering as well as detailed sector profiles and insights from Cyprus’ 100 most influential political, economic and business leaders shaping the future of their country and its industries.
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Economy<br />
The small, open economy<br />
of <strong>Cyprus</strong> is known for its<br />
resilience, having enjoyed<br />
uninterrupted expansion<br />
for more than 30 years<br />
until the global financial<br />
crisis pushed the country<br />
into recession in 2009. The<br />
economy bounced back<br />
swiftly after the banking<br />
crisis in 2013, returning to<br />
growth in 2015, investment<br />
grade rating in 2018 and<br />
recording annual average<br />
real GDP growth of 5.4% in 2016-19. During this<br />
period the banks took the opportunity to consolidate,<br />
boost and diversify their capital base and cut<br />
non-performing loans by over two-thirds. At the<br />
same time, the government reformed its public<br />
finances, brought debt back below 100% of GDP<br />
and paid off its debt to the IMF five years early.<br />
The medium-term focus is on continuing<br />
structural reforms that will encourage investment,<br />
raise the economy’s competitiveness and<br />
leverage the eurozone economy’s highly educated<br />
population. The immediate impact of the Covid-<br />
19 pandemic on the economy has of course been<br />
significant, but the government has marshalled<br />
considerable domestic and eurozone resources to<br />
support business activity. Early signs of returning<br />
confidence suggest that the country’s legendary<br />
resilience will prevail.<br />
KEY SECTORS<br />
The <strong>Cyprus</strong> economy is dominated by services,<br />
which accounted for 82.7% of gross value added<br />
in 2019, while industry accounted for 8%, construction<br />
7% and agriculture, forestry and fishing<br />
2.3%. Over the past two decades the economy<br />
has diversified. While tourism remains one of the<br />
most significant sectors, especially because of its<br />
wider impact on retail, transport, construction<br />
and employment, its value-added contribution,<br />
when narrowly defined as accommodation and<br />
food services, has now been overtaken by professional<br />
services, financial services and real estate.<br />
Diversification has been made possible by the<br />
growing importance of <strong>Cyprus</strong> as an international<br />
business centre. Information and communication<br />
services are also expanding rapidly from a<br />
low base, as the country takes advantage of its ge-<br />
In addition to the upheaval it caused to peoples’ lives<br />
and its continued health threat, unavoidably, the Covid<br />
pandemic also has a momentous impact on businesses<br />
and the economy. From the onset of the crisis, maintaining<br />
positive epidemiological conditions was at the cornerstone of<br />
government policy response. Having achieved to contain the<br />
spread of the virus helps us now to enter the recovery phase<br />
with more confidence despite the uncertainty that still lie ahead.<br />
In the economic front we responded with early and frontloaded<br />
economic measures to address the effects of the pandemic, adopting a generous fiscal stimulus<br />
package mainly based on short term income support and liquidity measures for the employees<br />
and the businesses affected by the pandemic. Those measures have delivered and we can<br />
now focus on the broader recovery strategy for the medium and long term. A strategy which<br />
includes the use of the medium-term budget and the EU recovery fund to achieve two main<br />
recovery goals: to strengthen the resilience of the Cypriot economy and to give a new impetus<br />
to its transformation. A transformation through structural reforms, into the era of a digital,<br />
green and sustainable economy. Taking into consideration the demonstrated flexibility of the<br />
Cypriot economy, I am confident that by following the correct policies through the necessary<br />
political consensus, we will also emerge strong from this crisis as we did in the near past.<br />
Constantinos Petrides<br />
Minister of Finance<br />
20 <strong>Country</strong> <strong>Report</strong> CYPRUS <strong>2020</strong>