The Economy of Cyprus

The country of Cyprus has an open, free-market, services-based economy with some light manufacturing. The Greek Cypriot economy is small and prosperous; highly susceptible to external shocks. Internationally, the country promotes its geographical location as a bridge between three continents, along with its educated English-speaking population, moderate local costs, good airline connections, and telecommunications. The economic affairs in Cyprus are dominated by the division of the country into the southern area controlled by the Cyprus Government and the northern Turkish Cypriot-administrated area.

Industry contributes 22% to GDP and employs 25% of the labor force while the service sector contributes 89% to GDP and employs 62% of the labor force. Erratic growth rates in the 1990s reflect the economy’s vulnerability to swings in tourist arrivals caused by political instability on the island and fluctuations in economic conditions in Western Europe.

The economy has shifted from agriculture to light manufacturing and services in the past 20 years. Currently, agriculture makes up only 31% of the GDP and employs 8.5% of the labor force. The industry and construction contribute 18.6% and employ 20.5% of the labor force.

Trade is life-sustaining to the Cypriot economy and most goods are imported. The trade deficit increased in 2007, reaching 5.8 billion USD. The country imports fuels, food, most raw materials, heavy machinery, and transportation equipment. More than 67% of the countries imports come from the European Union, particularly Greece, Italy, and the United Kingdom, while 1.2% comes from the United States.