Cyprus Economy

CYPRUS ECONOMY

CYPRUS ECONOMY

Cyprus has a dynamic and flexible economy that has time and time again proven its capacity to adjust to continuously changing conditions.
Before its independence from Britain in 1960, the Cyprus economy was primarily based on agriculture and the export of minerals. However, in the last few decades the country has established itself as a serious business and service center for shipping, financial services and commerce, and is classified by the World Bank as a high-income country.

The island’s accession to the EU in 2004, and the adoption of the euro in 2008, was the catalyst for transforming Cyprus into a financial and business services hub. Following the country’s financial bail-out in 2013, Cyprus has implemented major reforms and although still facing economic challenges, the small nation has proven its resilience. The year 2015 signaled a sooner-than-expected exit from recession and a return to growth, with GDP expected to increase by 1.4% in 2016 and 2% in 2017.

The island’s international financial center has suffered a blow in the wake of the crisis, but with robust restructuring to clean up the banks’ balance sheets and build stronger institutions with better supervision, the country is already reaping the rewards of these reforms. Bank deposits are on the rise and Cyprus has retained and strengthened its reputation as an attractive and effective investment gateway to the European Union and other high-growth markets. Offering a tax-efficient company domicile within the EU, the country is now also emerging as an attractive location for
fund managers and promoters. The latest Credit rating for Cyprus are:

S&P > BB+ Possitive / Moody's > Ba3 Possitive / Fitch > BB Possitive / DBRS > BB (low) Possitive

Leading Maritime Hub

A major success story for Cyprus has been the maritime sector, which accounts for €1 billion in annual revenue and around 7% of the island’s GDP.
Apart from offering ship management and business services to the industry, the Cyprus Registry is classified as the 10th largest merchant fleet in the world, and the third largest fleet in the European Union. Having introduced an advantageous EU approved tonnage tax system in 2010; Cyprus attracted increasing numbers of shipping companies from across the world to explore the unique opportunities it offers.

Upmarket Tourism

Tourism has been a key driving force of the Cypriot economy for decades, and 2017 saw record-breaking numbers of tourist arrivals. New projects are currently underway to boost the tourism sector and encourage year-round visitors, ranging from the construction of brand new golf courses, marina developments and the upgrading of the island’s wellness and medical tourism product. In addition, the country has successfully attracted a number of new carriers to the island, making it even easier and cost effective for visitors to reach Cyprus. A new and exciting prospect is the development of a luxury casino resort – the first of its kind – which has been put out to tender and attracted investors worldwide. The integrated resort is set to exceed five-star status, opening a whole new market for niche tourism on the island.

Cyprus an Emerging Energy Player

Apart from the sun and the sea, Cyprus has few natural resources and has been dependent on oil imports to satisfy its energy demands. However, the world-class discovery of natural gas and potential oil deposits in Cyprus’ Exclusive Economic Zone (EEZ) in the Mediterranean Sea is expected to change all this. Appraisal drilling in block 12 by US Company Noble Energy confirmed natural gas reserves of 4.54 trillion cubic feet (tcf) – enough to meet Cyprus’ domestic gas demand for over 100 years – and has attracted international energy heavyweights, such as Total, Eni and Exxon-Mobil, to explore the island’s waters for new discoveries. Cyprus’ energy sector currently presents one of the best opportunities for foreign investors and for economic growth. The sector saw a further vote of confidence in November 2015, when BG Group acquired a 35% stake in Block 12, following an agreement with concession holder and operator Noble Energy.

Luxury Real Estate

Beyond finance and commerce, Cyprus is also highly attractive to real estate investors and has long been a magnet for international buyers – establishing the real estate and construction sector into an important component of the island’s economy. With new up-market developments, increased foreign investment in hotels and major infrastructure projects springing up, Cyprus’ attractiveness as a property investment location is set to grow. Also the fall in property prices and recently introduced incentives make this an opportune time to invest and buy real estate in Cyprus.

Foreign Direct Investment

Cyprus’ favourable and EU-approved tax regime, its flat rate of 12.5% corporate tax, pro-business government and highly skilled workforce, have long attracted foreign investment into the country. Most capital, predominantly coming from Greece, Russia, the US and UK, has been invested in the real estate, banking and wholesale trade sectors, but the economic crisis has opened new opportunities. With large scale developments, major infrastructure projects in the pipeline, new privatisation plans, and with a restructured banking sector, many international investors are recognising interesting opportunities on the island.

A Bright Future

Cyprus has all the right elements firmly in place, to maintain its reputation as an international center of business excellence in one of Europe’s most interesting investment locations. Offering a professional atmosphere that makes doing business pleasurable as well as profitable, Cyprus’ Mediterranean lifestyle coexists happily with a cutting-edge international business center, allowing investors to enjoy the best of both worlds: a safe and secure environment for family life and a sophisticated infrastructure from which to grow and develop business.

(Sources: The word Factbook – Cyprus Profile)

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