Economy
Even though the political problem remains
unresolved, the free market economy in the
government-controlled area made remarkable
recovery since 1974. The economic success was
attributed to, among other factors: the adoption of a
market-oriented economic system, the sound
macroeconomic policies of successive governments,
as well as the existence of a dynamic and flexible
entrepreneurial community and a highly educated
labour force. During the last two decades, the Cyprus
economy turned from agriculture to services and
light manufacturing. Cyprus is, today, a major tourist
destination as well as a modern economy, offering
dynamic services with an advanced physical and
social infrastructure. On 1 January 2008, the Republic
of Cyprus joined the Eurosystem and introduced the
euro as its official currency, replacing the Cyprus
pound as the unit of account. Thus, euro banknotes
and coins are the country’s legal tender.
The international economic crisis has had a major
impact on the economy of Cyprus and in 2012,
primarily because of the recapitalization needs of
Cypriot banks, the Government was compelled to
apply for assistance to the support mechanism
provided by the EU Commission, the European
Central Bank and the IMF (the “Troika”). A loan
agreement as well as a macroeconomic adjustment
programme (Memorandum of Understanding) were
concluded with the “Troika” in the spring of 2013,
aiming at restoring economic stability.
The Government’s commitment and determination
to fully implement the provisions of the MoU, along
with the containment of public expenditure, has
meant that the economy of the country is currently
well on its way to recovery. The EU has praised
Cyprus as a model for economic recovery, rating
agencies have upgraded the economy of Cyprus,
while the country was able to return to the
international markets just a year after the signing of
the MoU, with a very favourable interest rate. Overall,
significant progress has been made toward the
creation of a new economic model for the country
with the economy and the banking sector having
already been stabilized.
Moreover, the recent natural gas explorations that
have taken place in the Exclusive Economic Zone of
Cyprus have revealed rich reserves of natural gas,
which will have significant revenue implications for
Cyprus in the medium term. The Government is in
the process of exploring options of best conduct
regarding economic policy surrounding the
exploration, discovery and exploitation of natural
gas, while promoting, at the same time, the
intermediate prospects that are being created for
investments along the entire chain of the
hydrocarbons industry.
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