Review of Cyprus EconomyEssay Preview: Review of Cyprus EconomyReport this essayREVIEW OF CYPRUS ECONOMYCyprus is a small, services oriented (services account for approximately 76% of GDP) free market economy with a record of successful economic performance Ð- Rapid growth, full employment conditions, low inflation & external and internal stability. In terms of per capita income, currently estimated at US $ 18,500, Cyprus is classified among the high income countries. It has good business and financial services, modern telecommunications, an educated labor force and a sound legal system. Cyprus geographical location, tax incentives, and modern infrastructure also make it a natural hub for companies looking to do business with the Middle East, Europe, the former Soviet Union and North Africa.
CURRENT LIVING AND HOUSING
Cyprus is a member of the Organization of Petroleum Exporting Countries, with a population of about 6.7 million. However, the rate of inflation and a steady fall in oil production have contributed to the recent drop. The decline has taken most of the country by storm, as local and foreign financial institutions have been unable to prevent it from falling beyond expectations. However, the government has started to develop new infrastructure and a new budget (2011) aimed at raising wages. It has also begun providing new housing units for those residents of neighboring states (2011), as the government is using “market reforms to improve the quality of life around the country, which has improved to be an exceptional source of capital” (2011) which is being paid off.
The public debt in Cyprus is estimated at more than $ 5,000 billion that exceeds the level of GDP in the euro area, a level that has been previously exceeded during a period of sustained international concern. Cyprus also is one of the leading economies in North Africa, with a population of over 18 million. For further details, see our Global Index. Cyprus may be considered a ‘banking safe haven’ that is likely to experience additional volatility in the near future.
Government Finance has implemented new policies which are aimed at addressing debt and borrowing problems in the country. It has initiated a “rebalancing” of the minimum amount that is required to pay into the government accounts since 2012, which ensures that households and companies with assets under the current government reserve funds can afford to run a large portion of the household and business loans. This has helped the government with its budget as it balances the budget without introducing much in the way of major reforms.
Cyprus is also making some efforts to diversify its banking sector. An official statement on the project said: “”According to private sector investment and private capital investments, approximately 5.8 billion Cypriot Tratis will be required in 2017. Cypriot banking is an important economic tool and contributes to all domestic and international efforts to encourage economic growth.” The central bank’s announcement did not specify what percentage would be required to pay into government accounts, but the official statement stated that a “new banking system from a fiscal perspective” would be needed to “promote the economic well-being of Cypriot households and businesses.” The statement emphasized in great detail that “the government can implement its own financial policies that are more sustainable by investing in a national, fiscal plan and to encourage local financial stability, while at the same time reducing the likelihood of a repeat of past economic challenges such as the euro area troubles, Cyprus is a central target for international efforts to promote economic growth.””
In addition, the government announced a plan for a more flexible repayment plan in the upcoming financial year, aiming to increase GDP growth by “up to 2% per annum” or as much as $ 3 trillion in total over the coming years. In light of the recent debt crisis, the government was very clear that it was prepared for further risks from default. The new budget also outlined “planning measures, which are intended to stimulate the economy while mitigating risks of default” that could
CURRENT LIVING AND HOUSING
Cyprus is a member of the Organization of Petroleum Exporting Countries, with a population of about 6.7 million. However, the rate of inflation and a steady fall in oil production have contributed to the recent drop. The decline has taken most of the country by storm, as local and foreign financial institutions have been unable to prevent it from falling beyond expectations. However, the government has started to develop new infrastructure and a new budget (2011) aimed at raising wages. It has also begun providing new housing units for those residents of neighboring states (2011), as the government is using “market reforms to improve the quality of life around the country, which has improved to be an exceptional source of capital” (2011) which is being paid off.
The public debt in Cyprus is estimated at more than $ 5,000 billion that exceeds the level of GDP in the euro area, a level that has been previously exceeded during a period of sustained international concern. Cyprus also is one of the leading economies in North Africa, with a population of over 18 million. For further details, see our Global Index. Cyprus may be considered a ‘banking safe haven’ that is likely to experience additional volatility in the near future.
Government Finance has implemented new policies which are aimed at addressing debt and borrowing problems in the country. It has initiated a “rebalancing” of the minimum amount that is required to pay into the government accounts since 2012, which ensures that households and companies with assets under the current government reserve funds can afford to run a large portion of the household and business loans. This has helped the government with its budget as it balances the budget without introducing much in the way of major reforms.
Cyprus is also making some efforts to diversify its banking sector. An official statement on the project said: “”According to private sector investment and private capital investments, approximately 5.8 billion Cypriot Tratis will be required in 2017. Cypriot banking is an important economic tool and contributes to all domestic and international efforts to encourage economic growth.” The central bank’s announcement did not specify what percentage would be required to pay into government accounts, but the official statement stated that a “new banking system from a fiscal perspective” would be needed to “promote the economic well-being of Cypriot households and businesses.” The statement emphasized in great detail that “the government can implement its own financial policies that are more sustainable by investing in a national, fiscal plan and to encourage local financial stability, while at the same time reducing the likelihood of a repeat of past economic challenges such as the euro area troubles, Cyprus is a central target for international efforts to promote economic growth.””
In addition, the government announced a plan for a more flexible repayment plan in the upcoming financial year, aiming to increase GDP growth by “up to 2% per annum” or as much as $ 3 trillion in total over the coming years. In light of the recent debt crisis, the government was very clear that it was prepared for further risks from default. The new budget also outlined “planning measures, which are intended to stimulate the economy while mitigating risks of default” that could
Cyprus entry into the EU in May 2004 marked the crowning point of protracted efforts over the years of its most important political and economic policy objective. As regards the economy, the harmonization process has transformed the whole economic structure of Cyprus and full accession is expected to bring a number of positive results. At the same time, EU membership is a challenge to the business community to strive for increased competitiveness and the upgrading of quality of products & services.
Economic growth in 2003 remained at the same levels as the previous year with the economy growing by 2% in real terms, mainly due to the containment of tourist demand. The low rate of economic growth for a second year in a row was reflected in the labour market with a small increase of the unemployment rate to 3.5%. Inflation was up to 4.1% from 2.8% in 2002 as a result of higher consumer taxes, particularly on petrol and an increase in VAT. The fiscal deficit rose to 6.3% from 4.6% of GDP, overshooting the Maastricht convergence criteria of 3%.
The agricultural sector grew by 1.5% and its contribution to GDP remained unchanged at 3.9%. Manufacturing shrank by 2% and its contribution to GDP slipped to 9.4%.
The construction sector posted a growth of 4% and its contribution to GDP climbed to 8% as a result of increased investment in private and public construction projects.
The hotel and restaurant sector shrank by 3.9% as tourist arrivals and revenues both fell. This sectors contribution to GDP fell to 8.2%. Wholesale & retail trade grew by 0.5% (approximately 13% of GDP) while the financial sector also made only marginal gains contributing 6.3% to GDP. The remaining tertiary sectors saw growth, particularly property management as well as health and social welfare.
Tourist arrivals in 2003 fell by 4.76% to 2.303 million. The drop was attributed to the negative climate in the region because of conflict and threats of terrorist attacks and to the further slowdown in rates of growth in Cyprus main markets.
BI-LATERAL COMMERCIAL TIESIn recent years, Israel has become one of the major trading partners of Cyprus. The volume of trade between the two countries has increased considerably and there is strong potential for further increase in the coming years.
Total imports from Israel