2023-Cyprus-Country-Report

CYPRUSCOUNTRY REPORT 2023
dropping by only 3.4% in 2020 and rocketing back to 9.9% growth in 2021. It has also
quickly diversified into new markets following Russian sanctions after the war in
Ukraine. During the past decade, the banks have consolidated, boosted and diversified
their capital base and cut non-performing loans by over 90%. At the same time, the
government has brought debt below 90% of GDP and paid off its debt to the IMF five
years early. These achievements give the government the fiscal space to invest for a
sustainable future.
Substantial financial support for the EU’s green and digital transition agenda has
given renewed impetus to digitisation, liberalisation and green investments, while
new incentives continue to be launched to attract a broad array of quality foreign
investment. This fresh focus is set to raise the economy’s competitiveness further and
leverage the eurozone economy’s highly educated population.
KEY SECTORS
The Cyprus economy is dominated by services, which accounted for 84.4% of gross
value added in 2022, while industry accounted for 8.3%, construction 5.4% and
agriculture, forestry and fishing 1.8%. Over the past two decades the economy has
diversified. While tourism remains one of the most significant sectors – especially
because of its wider impact on retail, transport, construction and employment –
its value-added contribution, when narrowly defined as accommodation and food
services, has now been overtaken by professional services, communications, financial
services and real estate.
Diversification has been made possible by the longstanding importance of Cyprus
as an international business centre and a growing innovation hub. Cyprus has
more than 850 start-ups and is home to seven of 38 of the EU’s evolving Centres of
Excellence, helping the information and communication services sector to expand
rapidly from a low base, as the country takes advantage of its geostrategic location
at the intersection of three continents. As in many advanced countries, the largest
single sector is wholesale and retail trade, serving the general population as well as
incoming tourists.
CHALLENGES AND OPPORTUNITIES
Important structural support in Cyprus’ efforts to stay on its robust growth path is
coming from the Deputy Ministry of Research, Innovation and Digital Policy, which
was established in March 2020. The government has also launched a raft of initiatives
to support competitiveness and the green transition. These include incentives for
renewables, public and private non-car transport, film production and the island’s
budding wine sector.
Key prospects lie in energy, innovation, interconnectivity, tourism and
headquartering. Energy prospects arise from heavy investment in renewables
and offshore natural gas finds, while opportunities for interconnectivity will
come from the submarine data and electricity cables that will link Cyprus to other
continents. Investment opportunities from start-ups and research centres are
expanding, upgrading the island’s tourism offering will continue, while prospects for
headquartering have been boosted by the country’s reputation as a safe eurozone
location in which to do business.
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