Economy of Cyprus

The economy of Cyprus is a high-income economy as classified by the World Bank, and was included by the International Monetary Fund in its list of advanced economies in 2001. Cyprus adopted the euro as its official currency on 1 January 2008, replacing the Cypriot pound at an irrevocable fixed exchange rate of CYP 0.585274 per €1.

The Cypriot financial crisis, part of the wider European debt crisis, dominated the country's economic affairs in the 2010s. In March 2013, the Cypriot government reached an agreement with its eurozone partners to split the country's second biggest bank, the Cyprus Popular Bank (also known as Laiki Bank), into a "bad" bank which would be wound down over time and a "good" bank which would be absorbed by the larger Bank of Cyprus. In return for a €10 billion bailout from the European Commission, the European Central Bank and the International Monetary Fund, the Cypriot government would be required to impose a significant haircut on uninsured deposits. Insured deposits of €100,000 or less would not be affected. After a three-and-a-half-year recession, Cyprus returned to growth in the first quarter of 2015. Cyprus successfully concluded its three-year financial assistance programme at the end of March 2016, having borrowed a total of €6.3 billion from the European Stability Mechanism and €1 billion from the IMF. The remaining €2.7 billion of the ESM bailout was never dispensed, due to the Cypriot government's better than expected finances over the course of the programme.

Cyprus has an open, free-market, service-based economy with some light manufacturing. Internationally, Cyprus promotes its geographical location as a "bridge" between East and West, along with its educated English-speaking population, moderate local costs, good airline connections, and telecommunications.

Since gaining independence from the United Kingdom in 1960, Cyprus has had a record of successful economic performance, reflected in strong growth, full employment conditions and relative stability. The underdeveloped agrarian economy inherited from colonial rule has been transformed into a modern economy, with dynamic services, industrial and agricultural sectors and an advanced physical and social infrastructure. The Cypriots are among the most prosperous people in the Mediterranean region, with GDP per capita in 2025 surpassing $42,000 in nominal terms and $65,000 on the basis of purchasing power parity.

Their standard of living is reflected in the country's "very high" Human Development Index, by which it ranks 29th out of 191 countries in the world.

However, after more than three decades of unbroken growth, the Cypriot economy contracted in 2009. This reflected the exposure of Cyprus to the Great Recession and European debt crisis. Furthermore, Cyprus was dealt a severe blow by the Evangelos Florakis Naval Base explosion in July 2011, with the cost to the economy estimated at €1–3 billion, or up to 17% of GDP.

The economic achievements of Cyprus during the preceding decades have been significant, bearing in mind the severe economic and social dislocation created by the Turkish invasion of 1974 and the continuing occupation of the northern part of the island by Turkey. The Turkish invasion inflicted a serious blow to the Cyprus economy and in particular to agriculture, tourism, mining and Quarrying: 70 percent of the island's wealth-producing resources were lost, the tourist industry lost 65 percent of its hotels and tourist accommodation, the industrial sector lost 46 percent, and mining and quarrying lost 56 percent of production. The loss of the port of Famagusta, which handled 83 percent of the general cargo, and the closure of Nicosia International Airport, in the buffer zone, were additional setbacks.

The success of Cyprus in the economic sphere has been attributed, inter alia, to the adoption of a market-oriented economic system, the pursuance of sound macroeconomic policies by the government as well as the existence of a dynamic and flexible entrepreneurship and a highly educated labor force. Moreover, the economy benefited from the close cooperation between the public and private sectors.