After the financial crisis of 2013, Cyprus is now not only recovering well but also regarded as a rapidly developing country that is attracting serious foreign investors.
As in so many other instances, history is often a great help in forecasting the future – and a quick look at the modern history of the Cyprus economy could make its recent quick and impressive recovery less surprising.
Looking Back on the History of Cyprus
Before Cyprus gained independence, it was the object of various conquests for centuries. The Venetians ruled the island from 1489-1571, before the Ottomans called it their own from 1571 to 1878. It then entered the colonial era and was under British rule from 1878 until the establishment of the Republic of Cyprus in 1960.
Independence was followed the industrial evolution, the construction of hotels and various exports which all together triggered population growth and job creation. Yet this prosperity came to a sudden halt when Turkey invaded the island, the northern districts came under occupation and, in general, the economy was ruined.
The fact that the island could regain its economic health, wealth and prosperity in just over a decade is very telling. As a small island with a total population of around 1,2 million only, the size of the economy is also small – in absolute numbers (current GDP is around USD 20bn). As such, even moderate favourable conditions can have a powerful positive impact on the overall economy. Instability in other countries in the region led to an influx of people and capital, which boosted the economy and took it to new heights in the decades from the 1980s onwards.
Modern History of Cyprus
In the period from 2007 to 2012, when other European countries were in economic decline, Cyprus seemed resilient, almost immune to the recession that was spreading across the Euro zone. In terms of growth, it was for the most part ahead of its fellow member states.
However, the island was not spared. The financial crisis hit it, and hit it badly, in 2012-2013, to a great extent due to its exposure to the Greek sovereign debt crisis. Finally, there was no way out but to agree to the terms of a €10 billion international bailout by the Eurogroup, the European Commission, the European Central Bank and the International Monetary Fund in March 2013. However, only three years later in 2016, Cyprus was able to exit the bailout programme, ahead of schedule and without utilizing some 30% of the allocated funds, thanks to its strict adherence to austerity measures, reforms, and a number of privatization plans.
Defying all predictions, it was able to arrest the slowdown and return to growth a year earlier than most analysts expected.
The Present and Future of Cyprus
In 2018, the Cyprus economy grew by an astounding 4,2%. This rate is expected to level in the coming years. For 2019, the European Commission’s economic forecast shows a 3,8% y-o-y GDP growth in Cyprus, compared with 1,2% in the UK, 1,8% in France and 2,1 in Germany.
A main driving factor of the economic recovery is from the Cyprus Investment Program and Cyprus Permanent Residency Permit – Providing sound investments to individuals who partake whilst granting citizenship or residency that can be extended to the investor’s family.
Once again Cyprus has proved its ability to face and overcome adversity. Today as in the past, local and international investors and entrepreneurs recognize the value of the island’s mild climate, strategic location and ability to serve as a bridge that connects Europe, the Middle East and North Africa. Reinforced with its membership of the European Union since 2004, Cyprus has regained its reputation as a country with healthy economic prospects and a significant investment potential.