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Cyprus has an open free market economy. The role of government is limited to regulation and the provision of public utilities. The island is often aptly referred to as a European country in the Middle East. Per capita GNP is about USD14.000, one of the highest in the Mediterranean. Considering other socioeconomic indicators such as the excellent housing conditions, the pollution free environment and the low crime rate, one may conclude that the quality of life is better than that reflected by per capita income alone. Furthermore, the cost of living is substantially lower than in most countries offering a comparable standard and quality of life. Nicosia ranks as seventh least expensive of the leading 56 international business centres surveyed in Prices and Earnings Around the Globe, published by the Union Bank of Switzerland in August 1997. The economy is driven by thriving tourist and service sectors and a fast growing export-oriented industry. In terms of their contribution to GNP the 3 most important sectors of the economy are: trade, restaurants and hotels; finance, insurance and business services; and manufacturing. The performance of the economy has been such that it has combined high real growth with low inflation and low unemployment. Moreover, the economy is characterised by a low external debt service to exports ratio and a high international reserves to imports ratio. Of the USD 4,5 billion annual gross foreign exchange earnings, 38 percent originate from tourism, 22 percent from exports, 9 percent from transportation and over 9 percent from international business and shipping companies. Trade, hotels and restaurants is the economy' s most important sector. In fact, earnings from tourism have, in general, grown faster than domestic exports. Over 75 percent of tourist arrivals originate from the European Union. Cyprus' main exports are potatoes, citrus fruit, clothing, chemicals and toiletries, machinery and transport equipment, cigarettes, wood and metal products, cement and footware. Manufactured goods and agricultural products account for 75 and 20 percent of domestic exports, respectively. With regard to imports, intermediate inputs and consumer goods are the most important categories, each contributing more than 32 percent of total imports. Cyprus' main trading partner is the European Union accounting for about 55 percent of imports and 40 percent of exports. |
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