Cyprus economy is confronted to multifaceted challenges as the present global recession has affected the island. However the solid legal framework and beneficial tax system continues to draw international investments to the island.
Cyprus Wealth Management | Economy
Cyprus recent history starts from 1960 when the island got independency from the UK. The independency of the island did not last long as in 1974 the northern part of the island got occupied from Turkey.
The tragic consequences of the war affected the economy evidently and led to a severe real GDP shrinkage of 16.9% in 1974 and 19% in 1975. However the efforts from various stakeholders’, hard work and united energies led to a quick bounce back, followed by a continuous period of growth lasting more than 30 years.
Since independence, the economy has been characterized by several changes. During the period 1961-1973 the island was focusing on export of minerals and agricultural products, in the late 70’s until the beginning of 80s Cyprus economy depended on the manufacture of goods. In the 1980-1990s the island was gradually transforming to an international tourist, business and services centre. Ever since the economy is build upon the services sector which included tourism, financial services and real estate which represents the 83.9% of the island’s total GDP and 74.5% of employment.
Cyprus became a member of the EU in 2004 and entered the European Monetary Union in 2008. Cyprus was also listed by the IMF as one of the 31 advanced economies in the world in 2011.
Cyprus is an important business gateway between Europe, Asia, the Middle East and Africa. Among its advantages are the greatly educated, English-speaking inhabitants, its EU membership and its first-rate infrastructure in information and communications technology (ICT) . The recent discovery of substantial reserves of natural gas in Cyprus’ waters is an additional ace up the sleeve. The above privileges’ has attracted a large number of international business and investments in the island.
More precisely, the services that are dominating are trading and fund administration, company formation, foreign exchange, tax planning and trusts. These services are significant parts of the business services industry.
The numerous double taxation treaties and legal system based on English law has brought thousands of companies to set up in Cyprus and network their investments into several markets through the island.
Shipping and maritime is another sector in Cyprus that have showed great success. Cyprus maintains the largest ship management center in the EU.
The Cyprus Registry is categorized as the 3rd largest merchant fleet in EU and the 10th largest in the world. There are around 1100 ocean going vessels that fleets with the Cyprus flag.
The tourism sector is at current stage improving, many efforts has been made to attract tourist from additional markets. A rebirth of the tourism industry can also boost the injured real estate sector.
Energy will also be a significant new source of growth. US-based Noble Energy has estimated natural gas reserves in just one of the 12 offshore licensing blocks at between 5 and 8 trillion cubic feet, enough to allow Cyprus to become a gas exporter.
FEATURES OF CYPRUS ECONOMY
The island had an advanced, high-income economy with a very high Human Development Index until it was affected by the Eurozone Financial and Banking crisis in 2012.
According to the latest International Monetary Fund estimates, its per capita GDP is today just above the average of the European Union.
Cyprus has been pursued as a base for several offshore businesses for its low tax rates. Tourism, financial services and shipping are significant parts of the economy.
Recently significant quantities of offshore natural gas have been discovered in the area known as Aphrodite in Cyprus' exclusive economic zone (EEZ). Cyprus and Israel has established their maritime border in 2010, and in August 2011, the US-based firm Noble Energy entered into a production-sharing agreement with the Cypriot government regarding the block's commercial development