Cyprus : Economy

Economy

GNI: 
US$21.5bn
GNI PC: 
US$25,210
GDP Growth: 
-1.6% p.a. 2009–13
Inflation: 
1.6% p.a. 2009–13

Despite occupation of the north and the consequent forced movement of population and loss of resources, the economy of the Republic has grown steadily with relatively low inflation, particularly in the tourism and offshore financial services sectors, while the agriculture sector and exports of citrus fruits and potatoes became relatively less important. Oil and gas exploration was under way in 2011 and large offshore finds of natural gas were announced in December 2011, amounting to an estimated 140–230 billion cubic metres, and further significant finds were announced in 2012.

From the latter 1990s, the government introduced economic reforms with a view to joining the European Union (EU). The economy continued to grow strongly, until it slowed in the tougher international climate after 2000, picking up again from 2004, the year in which the Republic of Cyprus joined the EU, and continuing at about four per cent until 2008, when the impact of the world economic downturn on tourism and trade caused growth to stall in the latter part of that year and go into reverse in 2009 (–1.7 per cent). There was then a return to growth in 2010–11 before the economy moved into recession again in 2012 (–2.4 per cent), contracting sharply in 2013 (by 5.4 per cent) and 2014 (by about three per cent).

Cyprus adopted the euro at the beginning of 2008, replacing the Cyprus pound. In March 2013 the EU and International Monetary Fund (IMF) offered Cyprus a €10 billion loan to rescue the Cypriot banks, which had incurred heavy losses arising from a very large exposure to Greek debt. This deal required the government to raise a further €5.8 billion. Parliament then voted against the government’s initial proposals for a levy on all the banks’ customers. The banks remained closed while discussions continued between the government, EU and IMF. A deal was agreed on 24 March 2013, under which the banks were to be restructured; the levy paid only by customers with deposits of at least €100,000; and Cyprus was to remain in the eurozone.