Background : Cyprus has a record of successful economic performance, reflected in rapid growth, full employment and stability almost throughout the post-Independence period. The underdeveloped economy of 1960 has been transformed into a modern free market economy with dynamic services, industrial and agricultural sectors and advanced physical and social infrastructure. In terms of per capita income, currently estimated at about $12,200,(1994) Cyprus ranks among upper middle income countries. These achievements appear all the more striking in view of the severe economic and social dislocation and the loss of resources caused by the Turkish invasion of 1974.
The 1974 invasion shook the Cypriot economy to its foundations. The Turkish army took control of an area whose economic significance is much more important than its size implies, since it formerly contributed 70% of the island's total gross national product. The occupied area contained: Two-thirds of tourist activity; 60% of industrial activity; 65% of cultivated land; 60% of mining and quarrying activities; 60% of underground water resources; the only deep water port of Famagusta which handled more than 80% of general cargo.
Considering that the main industry in Cyprus is tourism and that the Nicosia International Airport, now in the buffer zone, was shut down, the degree to which the economy was disrupted was quite serious. As a result, GDP dropped sharply and in 1975 it was 33% below the 1973 level in real terms, despite the partial reactivation which took place in the meantime. Furthermore, more than one third of the population had lost their homes and property, let alone their jobs. With well-coordinated and collective action, the area under the control of the Republic of Cyprus was able to overcome the destabilizing effects of the Turkish invasion and to attain a very high degree of economic growth.
In recent years, due to coordinated efforts of the government and the Institute of Certified Public Accountants, Cyprus has become a regional center for offshore companies. A generous tax regime and an appropriate legal framework, combined with the high standard of telecommunications and infrastructure in Cyprus, has played an important role in achieving this result. Currently there are over 2,000 offshore companies in Cyprus. They cover such areas as finance, trust and fund management, trading, construction and engineering, holdings and investment, etc.
Following the 1974 invasion, several Cypriot construction and engineering companies entered the Middle Eastern market much more aggressively than before. There success has been remarkable especially in the Gulf states. One of them, J&P has emerged as one of the largest construction companies in Europe. This expansion of Cypriot businesses to the Middle East, has contributed significanlty to the rebounding of the economy after the 1974 shock. In addition, another development in the Middle East came to favor Cypriot economy. Following the civil war in Lebanon in 1975, thousands of Lebanese, mainly well to do and middle class, settled temporarily in Cyprus and their spending has contributed further to Cypriot economic prosperity.
Tourism continues to be the most important industry in Cyprus despite the losses it sustained in the Turkish invasion of 1974. With the loss of two-thirds of tourist activities and of the Nicosia International Airport, tourism industry was affected profoundly. However that sector of the economy was quick to recover and in the process, Cyprus developed a sound tourist infrastructure with facilities ranging from youth hostels, to hotel apartments, to luxury hotels and recently, golf courses. The advanced road network and the size of Cyprus, make quite easy to travel around the island. Its archeological monuments, its museums, its beaches and mountains resorts in conjunction with its long dry summers, make Cyprus a favorite place for tourists to visit. In 1994, more than 2.5 million tourists visited free Cyprus: that is more than three times the Cypriot population. The number continues to rise yearly. Most of the island's tourism comes from Northern Europe (Scandinavian countries, Germany, Switzerland, Britain) while in recent years there has been a steady increase of tourists from Israel and Italy.
Basic Data on Cypriot economy
Note: Except where indicated, statistics refer to 1993.
Exchange rate [US dollar to Cyprus Pound (CP)] $2.27 (April 18, 1995) Gross Domestic Product (Mln CP) 3,188 (US $7,237 mln) Gross National Product (Mln CP) 3,240 (US $7,355 mln) Per Capita GDP (CP) 5,389 (US $12,233) Labor Force ('000) 267 Organized Labor 80% of total Unemployment Rate 2.6% Inflation Rate 5.3% Budget (Expenditure in Mln CP) 1,070 (US $2,429 mln) Exports (Mln CP) 431.5 (US $979.5 mln) Imports (Mln CP) 1,261 (US $2862.5 mln) External Debt (Mln CP) 635 (US $1441.5 mln) Industrial Production (Mln CP) 407 (US $924 mln) Agriculture (in Mln USD) (US $15 mln)
High educational standard of the labor force.
Labor shortages filled up by foreign workers, who in 1993 made up 5% of the gainfully employed.
Europe absorbed about 57% of exports.
Foreign Economic Aid: 1993: $15m (US aid) 1994: $15m (US aid) 1995: $15m (US aid)
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