Economy of Cyprus ⋆ KiprGuru

201 0 11.02.2025

Content

• A bit of history
• Cyprus today
• Finance
• Tourism
• Industry
• Energy industry
• Agricultural industry
• Export and Import
• Separately about Northern Cyprus

A bit of history

Before gaining independence in 1960, Cyprus regularly became part of one or another large empire (usually as a colony). A tasty piece of land at the crossroads of sea routes from Europe to Asia and Africa. Again, more often than not, Cyprus itself became rich due to its resources, of course, but the metropolis. How did you earn money in Cyprus?

1. Trade and logistics. Large cities on the coast of Cyprus brought money through maritime trade (Salamis, Paphos, Kition/Larnaca). Not only merchant ships stopped in Cyprus. The Crusaders also visited Cyprus during the crusades to Jerusalem, and Equal-to-the-Apostles Helen after finding the True Cross, etc. So we can say that Cyprus became a logistics center in ancient times.
2. Minerals. Cyprus became one of the first lands where copper was mined (III — IV millennium BC). Copper was exported from the island until the beginning of the XXI century. In addition, iron pyrite, gold and silver, natural dyes ocher and umber were mined here.
3. Agricultural industry. According to archaeologists, Cyprus exported not only copper before our era, but also agricultural products: wine, olive oil, and salt, which was mined, in particular, on the salt lakes of Larnaca. By 1960 (independence) Cyprus has become a non-technological agrarian country, in a state complicated by drought and crop failures in previous years. Cyprus inherited the following from Great Britain:
   — a network of excellent roads throughout the island (with left-hand traffic)
   — Oil refinery in Larnaca
   — Electrification of the island has been started in the cities
   — some of the population received a good education in England and Greece
   — The tourism sector was actively developing in the country (at first, the British and Americans mostly stayed in hotels).
   But at the same time, Cyprus has also received a dangerous legacy – a smoldering inter-communal conflict.

In a matter of years, Cyprus has become a fairly technological country (thanks to the good secondary education of Cypriots and the help of England and Greece with mechanization and technology); yields and productivity have increased significantly. The 60-70 years mark the heyday of tourism in Cyprus. At that time, Cyprus was literally the No. 1 resort in Europe. The state was engaged not only in investments in the economy, but also in the development of the social sphere.

The year is 1974. The armed conflict and the division of the island into two states has been a blow to the economy of Cyprus, which is developing at an enviable pace. About 70% of the cultivated land remains in the northern part occupied by Turkey; the main tourist cluster of Cyprus and the best resort in Europe, Varosha (a suburb of Famagusta), is blocked and does not function; the only airport in the suburb of Nicosia falls into the buffer zone and is still closed. There are about 200,000 refugees from the northern part of the island in need of housing and work in the southern part. The economy of Cyprus has gone into complete ruin.

As a result of a number of emergency measures (the construction of the airport in Larnaca, and then in Paphos, the construction of the Ayia Napa – Protaras tourism cluster from scratch, etc.), the service sector (tourism) is coming to the fore in the economy of Cyprus.

Cyprus today

Cyprus today is a high—income economy (according to the World Bank classification). Cyprus has been a member of the EU since 2004 and has been a member of the euro area since 2008.

Cyprus’ economy is based on services, including tourism and banking (over 70% of GDP), followed by industry (about 20%) and agriculture (3.9%). Leading industries: construction, food, pharmaceutical, mining. The main crops are potatoes, citrus fruits, olives, grapes, wheat, melons.

Finance

The Cyprus Pound is the former national currency of the Republic of Cyprus

The first bank in Cyprus, Bank Of Cyprus, was opened back in 1899 by the British. After Cyprus gained independence, its banking sector successfully developed, attracting new customers and new capital.

Contrary to popular stories about “Cyprus offshore companies,” Cyprus has long been an offshore zone. The island was offshore before joining the EU (2004). Transparency of finances was one of the conditions for joining the European Union. Today, Cyprus is a unique jurisdiction offering preferential taxation for registered companies, while ensuring transparency and legality of financial flows (unlike classic offshore companies). Today, Cyprus retains its attractiveness in terms of attracting capital, although the “sediment” of the financial crisis of 2013 will undoubtedly remain for a long time.

The causes of the 2013 banking crisis were the 2008 European financial crisis (affecting primarily Greece, Ireland and Portugal) and the banking sector, which was extremely bloated for such a small country as Cyprus (the amount of deposits was 835% of GDP, while the average share of deposits in the EU was 354%). Plus an increased tax rate (4.5% versus 1.5% in Germany) and an increase in loan defaults from individuals. The banking sector is starting to look more like a pyramid scheme, the state apparatus is bloated, and the state does not have the means to compensate for expenses. And to top it off, Cyprus decides to help repay the debts of Greece, which is on the verge of default, by buying back its government bonds. After writing off Greek bonds, the debt bubble burst, putting Cyprus on the brink of default.

Very harsh and unpopular measures were taken – all banks in Cyprus suspended their operations, transfers were not made for a long time, deposits with amounts over 100,000 euros were frozen (56% of all deposits worth 38 billion euros; deposits up to 100,000 euros were insured, which made it difficult to withdraw funds from them without acceptance). Subsequently, some of the funds from these deposits (in excess of 100,000 euros) were permanently withdrawn, and some were converted into shares of the Bank of Cyprus. For a long period, the amount of withdrawals from accounts was limited (300 euros per month) – for deposits of less than 100,000 euros, and there was also a ban on the export of more than 1,000 euros from the country (these measures were in effect with some exceptions). Until now, after 12 years, many depositors are trying to recover the remaining funds through the courts.

As a result of the 2013 banking crisis, Cyprus lost one of its two main income items. There was also a huge outflow of capital from the country, which affected the standard of living and provoked the emigration of part of the population. Foreign investment in Cypriot projects decreased (according to various estimates, 23-25% of foreign investment came from Russia).

There are currently 11 commercial banks, 3 specialized financial institutions, and 30 international banking centers operating in Cyprus.

Tourism

The first Cypriot hotels (Famagusta, 1966)

Tourism in Cyprus is no longer just a “service sector”, it is a brand. Great beaches, great hotels, “Aphrodite’s birthplace,” great food, European service, and “360 sunny days a year.”

In 2024, Cyprus was visited by more than 4 million tourists, which exceeded even the record pre-pandemic 2019 (3.98 million tourists). Due to geopolitical changes, the composition of tourists arriving in Cyprus has also changed.:
— of course, the British come first – Cyprus is a convenient and familiar resort for them (left-hand traffic, “English” outlets, widespread use of the English language, English pubs, shops, etc.). The British come to Cyprus “as if they were at home”, usually going to the nearest beach and the nearest pub, They don’t travel much around the island.

In 2019, Russians ranked second in terms of the amount (and first in terms of money spent at the resort). This was due to the simple and inexpensive flight, the ease of obtaining free food (unlike in other Schengen countries), the proximity of culture (in particular, the church), as well as the prevalence of the Russian language in Cyprus. However, after the cancellation of direct flights (and the increase in the cost of flights by an average of 3 times) and the introduction of a visa fee (90 euros per adult), the tourist flow from Russia fell by more than 10 times. I would like to emphasize that although there were significantly fewer tourists from Russia than the British, they left more money on the island (sightseeing trips, entertainment, restaurants, shopping, etc.).

Starting in 2020, Israelis have confidently come out on top, the first in the world to be massively vaccinated against covid and given a travel permit. Due to the short distance (less than 1 hour flight from Tel Aviv to Larnaca) and the low cost of the flight, as well as thanks to popular sea cruises (with visits to Larnaca or Limassol), Israel confidently holds the second place in terms of the number of tourists. The most popular travel format is for weekends or holidays lasting 2-3-4 days.

After the complete shutdown of tourism during the pandemic, the question arose of replacing foreign tourism with domestic tourism in order to save both tourism industry enterprises and air carriers. With the support of the governments of a number of EU countries, cheap flights within the EU were organized, which explains, first of all, the growth of tourists in Cyprus from European countries – Poland, Greece and Germany are leading the way.

Cyprus ranks 11th in the world in terms of the number of tourists per capita. The first place in the world in terms of the tourism industry. All the well-maintained beaches of the Republic of Kazakhstan are regularly awarded the Blue Flag award for cleanliness and comfort. At the beginning of 2025, 706 resort and hotel accommodation enterprises are operating in Cyprus.

Industry

Photo by @KiprGuru

Cyprus’ industry accounts for less than 20% of GDP. It should be noted that most of the Cypriot enterprises are small family enterprises with a long family history and traditions. The development of large industrial enterprises is hampered by expensive and limited energy (lack of oil, gas, coal deposits, as well as low hydropower potential), and the absence of any significant minerals. Nevertheless, I would like to note the technological development in almost all areas: the use of modern technical means, automation of production.

Leading industries:

• The food industry. In addition to several large companies (such as KEO and LOEL, large producers of juices and alcoholic beverages), representatives of the food industry in Cyprus are small family farms that carry out the entire chain from growing fruits, vegetables, poultry and livestock to processing and receiving final products. Cyprus not only provides basic foodstuffs, but also exports them – about 9% of Cyprus’ exports are agricultural products and the food industry. The main items of “grocery” exports are cheeses, cottage cheese and dairy products, juices and potatoes.
• Mining industry. Since the third millennium BC, the main wealth and the first export item of Cyprus was copper. There is still a theory that it was copper that gave our island its name. Today, the role of the mining industry is much smaller – it is mainly about the extraction of open-pit materials for construction: crushed stone, clay, sand, gypsum, limestone.
• The production of building materials and construction is inextricably linked to Cyprus’ main source of income, tourism. New hotels are opening every year, embankments and recreation areas are being built. The second major construction market is pretentious office and residential buildings (mainly in Nicosia and Limassol).
• Thanks to preferential taxation, international firms specializing in finance, consulting and information technology have settled in Cyprus.
• Cyprus also produces an extensive range of consumer goods: clothing and footwear, furniture, cosmetics and pharmaceuticals, mineral fertilizers, tires, electric motors, etc.

Energy industry

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Large-scale electrification of Cyprus started in 1952-1953. The first electric generator appeared on the island in 1903 to meet the needs of the governor’s residence in Nicosia, and later generator stations began to appear in cities and agricultural centers – Limassol (1913), Larnaca, Morphou, Pedoulas, Lefkara (1922).

Cyprus has no proven (or developed) fossil fuel deposits. And although there is reason to assume a fairly large gas field in the sovereign waters of Cyprus, its development is not possible in the foreseeable future. Exploration drilling in 2011 almost provoked another round of the Turkish-Cypriot conflict (since, according to Turkey, the development of the field is planned without taking into account the Turkish Cypriot community).

Cyprus’ energy sector is based on burning only imported fuels (fuel oil and diesel) and on renewable energy sources. Until recently, Cyprus had an oil refinery in the Larnaca area (by the way, the export of petroleum products was one of Cyprus’ income items). But its work was suspended in 2004 (after joining the EU), and at the moment Cyprus is forced to purchase petroleum products from the EU to ensure the operation of power plants. Thus, the cost of electricity in Cyprus remains one of the highest in the EU.

Two power plants provide 65% of the consumed electricity of the Republic of Cyprus: Vasiliko Thermal Power Plant (Paphos region, 2428 MW) and Deca thermal Power Plant (Larnaca region, 360 MW).

Agricultural industry

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Agriculture in Cyprus, although it does not contribute much to GDP, always remains the basis for the welfare and food security of the state.

Before gaining independence from Britain in 1960, Cyprus experienced all the delights of colonial rule. Agriculture was limited to the primitive cultivation of technical and exotic crops for the needs of the metropolis, without investments in machinery, agriculture and irrigation, which was so necessary in Cyprus. Independent Cyprus has refocused on meeting the internal needs of the state – poultry farming, animal husbandry, and grain cultivation have begun to develop; agricultural mechanization is developing, mineral fertilizers are being widely used, irrigation systems and dams are being built; wage labor (in particular, seasonal labor) is being used everywhere. As a result, an incomparably smaller number of workers employed in agriculture provides a much greater result.

The events of 1974 caused a major blow to the agriculture of the Republic of Cyprus, when the state lost almost half of the cultivated areas: vast lands for growing wheat and barley (Mesaoria valley, Nicosia), most of the citrus plantations (Kyrenia and Morphou), tobacco plantations (Karpas).

The conditions for the agricultural sector in Cyprus are moderately satisfactory, i.e. they are not suitable for all crops. The arid climate, the absence of rivers in the foothills and on the coast, sandy soils – all this leads to the fact that irrigation costs reach 1/3 of all investments in agriculture. Nevertheless, the heat and sun (with sufficient watering) do their job – Cyprus consistently harvests at least 2 potatoes per year (the main export agricultural product), all year round on the shelves of not only Cyprus, but also central Europe, there are Cypriot fresh vegetables, herbs, strawberries. Greenhouse and greenhouse farms are developing. And in recent decades, Cyprus has been actively growing crops that are completely exotic even for our sultry climate: bananas, passion fruit, papaya, pitaya, mango, guava.

The two most important cultures that have played a role not only in the economy and gastronomy, but also in the mythology of Cyprus are the olive tree and the carob tree (an ancient olive oil press will be shown to you in any village of Cyprus). Olive trees require virtually no maintenance or watering, as they accumulate moisture in the trunk. The purchase and sale of olives is carried out by the state administration. Up to 90% of domestic needs are covered by 2.5 million trees growing on the island. The carob tree is also unpretentious – thanks to its deep root system, it can grow on rocky slopes and cliffs. Carob fruits are used in the confectionery industry and, out of old habit, are exported to feed cattle in the UK.

The main crops of Cyprus are potatoes, citrus fruits, olives, grapes, wheat, melons.

Animal husbandry, a backward and nomadic industry during the period of colonization, also received a boost after independence, and Cyprus now fully provides itself with poultry, eggs, pork, dairy products, and Cypriot cheeses (in particular, Haloumi, which received a “Protected place of Origin” certificate) are an important export item of the state.

Export and Import

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The main exporting countries are Libya, Lebanon, Bermuda, Greece, the Marshall Islands, Great Britain, Liberia, China, and Nigeria.
The main importing countries are Greece, Great Britain, Italy, China, Germany, Spain, Israel.
Goods for export: oil and petroleum products (33%, some go to transit), ships (28%, some go to transit), pharmaceutical products (8.61%), dairy products, cottage cheese, cheeses (7%), perfumes and cosmetics (3%), telephones, etc. communication equipment (1.87%), juices (0.994%), potatoes (0.948%).

Imports: petroleum products (20%), ships (12.5%), automobiles (6%), medicines (3%), plastics, ferrous metals, alcohol, furniture, telephones, etc.

Turkish Republic of Northern Cyprus

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The Turkish Republic of Northern Cyprus (TRNC) has been in existence for over 50 years. It is a partially recognized country (recognized only by Turkey, an EU candidate). Therefore, the TRNC has external economic relations and flights only with Turkey, which severely restricts exports and imports of goods, as well as tourism, an important component of the economy of Northern Cyprus.

The Republic of Cyprus (“South Cyprus”) joined the European Union as a whole, taking into account the uncontrolled northern territories. The EU and the international community do not recognize the power institutions of the TRNC, but recognize its territories as part of the EU, so the TRNC receives financial assistance from the European Union, and Turkish Cypriots are considered EU citizens. But the TRNC receives the main financial assistance, of course, from Turkey.

Tourism, as in the Republic of Cyprus, is the main source of income. It should be noted that in addition to the magnificent five-star hotels according to the Turkish “all inclusive” model, tourists to Northern Cyprus are attracted by numerous casinos. Most of the tourists come from mainland Turkey, followed by the EU and CIS countries. Also in Northern Cyprus, you can see a lot of vacationers from the southern part.

The second most profitable item of the TRNC is the educational sector. There are currently more than 20 universities operating in Northern Cyprus, mostly private ones. In pre-pandemic 2019, the number of international students exceeded 100,000 (that’s less than 400,000 people, for a minute), of which 45% are students from Turkey, 42% are from third countries, and the rest are Cypriot students. The education system is English, there are many different faculties, the price is lower than the European average, there is a flexible system of grants for training.

Light industry accounts for 7.8% of GDP, agriculture 5.5%,
construction sector – 5.8%.

Industry of the TRNC: food and beverage production, furniture, building materials and construction, clothing.

Agriculture: citrus fruits, olives and olive oil, carob, dairy products, barley, chicken meat.

Imports: petroleum products, vehicles, clothing, food products, construction machinery and equipment. Imports come from Turkey and transit through it from EU countries.

Exports: mainly citrus fruits and dairy products. Exports go to Turkey, Kuwait, Iraq.

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