Cyprus - Economy

Economy

The Cypriot economy has diversified and become prosperous in recent years, although in 2012 it became affected by the Eurozone financial and banking crisis. In June 2012, the Cypriot government announced it would need €1.8 billion of foreign aid to support the Cyprus Popular Bank, and this was followed by Fitch down-grading Cypus's credit rating to junk status. Fitch said Cyprus would need an additional €4 billion to support its banks and the downgrade was mainly due to the exposure of Bank of Cyprus, Cyprus Popular Bank and Hellenic Bank (Cyprus's 3 largest banks) to the Greek financial crisis.

According to the latest International Monetary Fund estimates, its per capita GDP (adjusted for purchasing power) at $28,381 is just above the average of the European Union. Cyprus has been sought as a base for several offshore businesses for its highly developed infrastructure. Tourism, financial services, and shipping are significant parts of the economy. Economic policy of the Cyprus government has focused on meeting the criteria for admission to the European Union. The Cypriot government adopted the euro as the national currency on 1 January 2008.

In recent years significant quantities of offshore natural gas have been discovered in the area known as Aphrodite in Cyprus' exclusive economic zone (EEZ), about 175 km south of Limassol at 33°5′40″N and 32°59′0″E. Cyprus demarcated its maritime border with Egypt in 2003, and with Lebanon in 2007. Cyprus and Israel demarcated their maritime border in 2010, and in August 2011, the US-based firm Noble Energy entered into a production-sharing agreement with the Cypriot government regarding the block's commercial development. Turkey, which does not recognize the border agreements of Cyprus with its neighbors, threatened to mobilize its naval forces in the event that Cyprus would proceed with plans to begin drilling at Block 12. Cyprus' drilling efforts have the support of the US, EU, and UN, and on 19 September 2011 drilling in Block 12 began without any incidents being reported.

The economy of the Turkish-occupied areas operates on a free-market basis although it continues to be handicapped by the lack of private and public investment, high freight costs and shortages of skilled labor. Despite these constraints the economy turned in an impressive performance in 2003 and 2004 with growth rates of 9.6% and 11.4%. The average income in the area was $15,984 (S₣16,289) in 2008. Growth has been buoyed by the relative stability of the Turkish new lira and by a boom in the education and construction sectors. The island has witnessed a massive growth in tourism over the years and as such the property rental market in Cyprus has grown alongside. Added to this is the capital growth in property that has been created from the demand of incoming investors and property buyers to the island.

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