Cyprus, due to its small domestic market and the open nature of its economy, considers access to international markets to be of utmost importance. As a result, trade has always been one of the main sectors of the Cyprus economy, contributing considerably to the economic growth of the island. During 2003 exports accounted for about 7% of the country's GDP.
Cyprus has an open free market economy. The island is often referred to as a European country in the Middle East. The per capita income is one of the highest in the region, reaching US $23,000 in 2006. Cyprus also enjoys near full employment conditions with unemployment in 2006 being 4,9%, low inflation rate 2,9% and a strong Balance of Payments position. Within the framework of the harmonization of Cyprus with EU laws, wide-ranging structural reforms have been promoted covering the areas of competition, the financial sector and the enterprise sector. Full liberalization of the foreign direct investment regime in Cyprus has also been implemented, opening new promising business opportunities for foreign investors.
The basic characteristics of the Cyprus economy are the dominant role of the private sector in productions, the small size of most of the business units, as well as its open nature. The favorable business climate is directly related to the prevailing conditions of macroeconomic stability.
The economy is driven by the strong tourist and services sectors and a stable export-oriented industry. Indicatively, the services sector contributes around 75% to the GDP. Apart from tourism, finance, insurance and business services are the main contributors followed by social and personal services.
The trade sector contributes considerably to the economic growth of the island. The importance of the trade sector can act as a major consideration in the endeavor of Cyprus to develop further and strengthen its trade relations with third countries.
With regard to the commodity structure of Cyprus exports, manufactured products account for 59%, agricultural products (raw) for 21% and processed agricultural products for about 16%. The European Union is Cyprus' most important trading partner. In 2004, imports from the EU accounted for approximately 54% while in the same year domestic exports reached around 55%.
Transit cargo enjoys special treatment at the Cyprus ports. A proof of the position of Cyprus as a main transshipment center is the substantial amount of products re-exported which reached 450 million euro in 2004. The main products re-exported from Cyprus were tobacco, processed foodstuffs, beverages, textiles and textile articles, minerals and chemicals. Improvements in port infrastructure and equipment include advancements in operational methods and information systems used for the handling of vessels and cargo. Furthermore, Cyprus has a thriving ship management system