After experiencing a slowdown since 2002, the Cypriot economy growth intensified in 2004: GDP growth rate was 3.7% in 2004 and 3.8% in 2005. The IMF forecasts a 4% growth in 2006. There are two different economies coexisting in Cyprus. The northern part of the island, the Turkish Republic of Northern Cyprus, is not recognized by the international community. Northern Cyprus registers a three times lower average per capita revenue than the southern part of the island (Republic of Cyprus, member of the EU). Currently, slightly no investments are carried out in the Northern part of Cyprus. The Southern part, greek speaking, joined the European Union on the 1st May 2004 and is gradually implementing very profitable tax reforms for companies.
The Cypriot agriculture accounts for around 4% of GDP. Wine is one of the first export products. Mining natural resources are very limited. The manufacturing industry accounts for 10% of the GDP but its competitiveness is declining mainly due to high labor costs. Tourism which provides 22% of GDP and offshore activities which are estimated at 12% of GDP, both are Cyprus economy's pillars. Offshore activities are led by Cyprus based companies with foreign capitals, that carry out their activities exclusively outside Cyprus and are entitled to important tax relief. By 2006, Cyprus has to bring this offshore activity sector into compliance with the European rules and regulations. The shipping industry constitutes another important source of revenue: the fleet under Cypriot flag ranks sixth in the world.
Cyprus is strategically located between the European Union and the Near East. Its top three import partners are Greece, Italy and Germany and its top three export partners are the United Kingdom, Greece and Germany. Cyprus mainly imports hydrocarbons, vehicles and capital goods and exports pharmaceutical products, cigarettes and agricultural product.
