Macroeconomic performance and policies of Cyprus

Cyprus is located in the Middle East, under Turkey and it is divided into two parts: Greek and Turkish. The island’s economy is dominated by the service sector, which generates the largest share of GDP. There are three main sectors: tourism, financial services, and real estate. As tourism is the most important industry, it strongly influences the economic performances of this country.

Real GDP growth Inflation rates Unemployment Balance of payments Exchange rates Investments Gross National Savings

2007 5,1% 2.2% 4% -1.9 /EUR 1000 million -0.4286 EUR/USD 22.43% 10.68%

2008 3.6% 4.4% 3.6% -2.7/EUR 1000 million -0.6827 EUR/USD 24.22% 7.02%

2009 -1.9% 0.2% 5.4% -1.8/EUR 1000 million -0.7198 EUR/USD 17.34% 9.8%

2010 1.1% 2.6% 6.2% -1.7/EUR 1000 million -0.755 EUR/USD 18.44% 11.42%

2011 0.5% 3.5% 7.8% -1.9/EUR 1000 million -0.7107 EUR/USD 19.92% 11.05%

2012 -1.2% 2.8% 9.5% -1.5/EUR 1000 million -0.785 EUR/USD 20.51% 11.85%

In this table, the main macroeconomic indicators are represented from 2007 to 2012. The first is the Real GDP growth, which was 5.1% in 2007. Next year it decreased to 3.6%, then in 2009, there was deficit , because the rate was -1.9%.This result is probability due to the global recession and European debt crisis. Fortunately, in 2010 the rate rises to 1.1% and in 2011 the country’s GDP growth didn’t produce deficit, it’s rate was 0.5%. Unfortunately, in 2012, there was financial and banking crisis in Greece and Cyprus was also affected by it, because the rate was -1.2%.

1

1.5 1 0.5 0 Real GDP growth -0.5 -1 -1.5 -2 -2.5

2007

2008
2009 2010 2011 2012

From the inflation rates it can be seen in 2008, it was 4.4%, which was the highest from 2007 to 2012. This high rate leaded to higher oil and food prices. In 2009, the inflation decreased, so low inflation means high GDP and low unemployment rates, but in this case due to the global recession it is different from usual rates.

5 4 3 2 1 0 Inflation -1 -2

2007 2008 2009 2010 2011 2012

2

The unemployment indicator illustrates that, from 2007 to 2012 the rates continuously increasing. Unfortunately, due to global recession and actually the Greece situation these are the bad