Investors report
European Commission Country Report 2019 – Cyprus
Cyprus’ robust economic recovery has created favorable conditions to correct excessive macroeconomic imbalances and carry out key structural reforms to sustain growth in the long term. The economy is growing rapidly, creating the right conditions to repay the debt. The economic upswing is also an opportunity to reform key areas, such as the business environment, the public sector, the justice system, education and health, the labor market, and innovation, producing increased productivity and a growth model that makes Cyprus currently less vulnerable to external influences.
Poverty and inequality continue to drop, reaching levels almost equivalent to the pre-2012 crisis.
The property market has recovered due to private investment and demand. Strong foreign capital flows in tourism, residences and construction were the primary contributors to Cyprus’ economic growth which continues to be stable.
Now more than ever before, Cyprus is in the right place for property investment, due to the abundant opportunities, the stated policy encouraging foreign investment, and tourism alongside taxation policies that promote investment and investors.
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Cyprus and its economy
Cyprus has been a European Union member since 2004, and adopted the Euro as its national currency in January 2008.
During its first 5 years as an E U member, the Cypriot economy showed a growth rate of some 4%, where unemployment between 2004 and 2008 averaged at around 4%. The economy saw a recession in 2009 when the world financial crisis extended and low demand harmed the tourism and construction markets.
July 2012 saw Cyprus becoming the fifth euro-zone government to request an economic bailout program from the European Commission, European Central Bank and the International Monetary Fund, collectively known as the “Troika.”
Not long after the February 2013 election of President Nikos Anastasiades, Cyprus agreed to a $13 billion Troika bailout that caused a two week bank closure and instated capital controls which remained partially in place until April 2015. Cyprus’ two largest banks merged, the combined organization being recapitalized through conversion of some large bank deposits to shares and losses being imposed on bank bondholders. Paralleling its demands of other EU countries, the Troika’s bailout condition involved Cyprus passing financial and structural reforms, and privatizing state-owned enterprises.
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Cyprus Economy and Competitiveness Council
The Cyprus Economy and Competitiveness Council is an independent advisory body, established by a Council of Ministers’ decision in June 2018. The Council carries out the national productivity board’s functions. Its mandate includes the areas of responsibility listed in the Board of Ministers’ recommendations.
The Council is chaired by Mr T. Klerides, a former Minister of Finance of Cyprus. The council operates autonomously and independently, with full transparency, and publishes all its policy recommendations to the government, as well as annual activity reports. The council also conducts policy analyses in consultation with main interest holders, and makes use of external specialists where necessary, for the purpose of providing recommendations to the government concerning appropriate reforms geared to improving competitiveness and productivity.
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Cyprus: A leading European player
Economic growth in Cyprus continues to improve beyond expectation. As one of the Eurozone’s fastest growing economies, prioritizing in Cyprus is shifting to maintain that strong momentum by improving efficiency, instituting reforms and boosting investor confidence.
Recent years show Cyprus’ ongoing stable growth. This small E U country has stunned international forecasts with a solid economy that can only be described as flourishing. Cyprus bounced back quickly after the 2013 economic crisis due to new construction reforms and economic diversification. Top priority is given to maintaining its competitive advantage. The pro-business Cypriot government is determined to continue unleashing its economic productivity towards achieving its vision of a country that is technologically advanced and innovative.
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Cyprus Economic Freedom Score
The economic freedom score in Cyprus is 68.1, making it the 44th freest economy in the 2019 index.
Its overall score has increased by 0.3 point, with improvements in labor freedom, government integrity, and reduced government spending due to judicial effectiveness. Cyprus is ranked 22nd among 44 countries in the Europe region, and its overall score is just below the regional average but well above the world average.
Despite its strongly rooted economic recovery following the financial crisis, progress decelerated relative to government instituted reforms in fiscal discipline and other structural reforms such as sale of government owned assets towards improving efficiency in plants government owned manufacturing plants, and funds recruitment geared to reducing government debt. Inefficient bankruptcy procedures in courts delayed liquidation of some non-performing loans.
Cyprus is particularly successful in trade freedom and monetary freedom. Its regulatory frameworks are relatively clear and efficient, and the financial sector has stabilized.
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