Foreign direct investment (FDI) in Cyprus has seen a notable influx from countries such as Russia, the United States, the United Kingdom, and Luxembourg in 2024. According to the Central Bank of Cyprus (CBC), Europe remains the largest contributor to FDI, with inward stock from the continent reaching €295.29 billion this year.
The CBC’s annual Foreign Direct Investment report outlines not only the financial facts but also the shifts in investment patterns that have emerged in the past year. The report indicates that inward FDI stock has declined to €373.62 billion in 2024, down from €400.86 billion in 2023. This drop is largely attributed to reduced equity holdings, even as debt instruments experienced a slight increase.
Despite the overall decline in FDI, the central bank emphasised the importance of understanding these figures within the context of Cyprus’ economic landscape. “The Foreign Direct Investment publication provides an overview of the major developments in the FDI of Cyprus and examines the level, the fluctuations, the associated income, the geographical breakdown and the sectors of economic activity related to these investments,” the CBC noted.
In 2024, Cyprus experienced a net FDI stock decline to €41.86 billion, a shift from €34.86 billion in 2023. This indicates that inward FDI continues to exceed outward FDI, although a significant fall in outward FDI stock has been observed, dropping to €331.75 billion from €366.00 billion. This decline has been primarily driven by lower equity instruments.
Equity investments account for a substantial portion of both inward and outward FDI stocks. In 2024, equity represented 94% of inward FDI stock, while 89% of outward FDI stock comprised equity. The stability of this structure over time has been a notable feature of Cyprus’ FDI landscape.
The CBC highlighted the role of special purpose entities in these movements. Their cross-border assets and liabilities tend to shift in tandem due to their limited interaction with the domestic economy. Consequently, the report indicates that changes in FDI stocks are influenced by various factors, including transactions, exchange rate movements, and other volume effects such as reclassifications and write-offs.
In 2024, Cyprus recorded net FDI transactions at negative €5.11 billion, marking the sixth consecutive year of negative net FDI. Outward FDI transactions totalled €22.47 billion, driven by negative equity flows. Conversely, inward FDI transactions were recorded at €17.36 billion, reflecting negative equity flows offset by positive reinvested earnings and debt instruments.
Despite the negative net FDI income of €3.43 billion in 2024, compared to €2.62 billion in the previous year, the overall income from both inward and outward FDI has seen an uptick. Income from outward FDI rose to €25.87 billion, while income from inward FDI increased to €29.30 billion. This indicates a strengthening in FDI returns, with both inward and outward rates of return rising to 7.8% in 2024 from 6.7% in 2023.
When examining FDI from a regional perspective, Europe dominates as the partner for Cyprus, constituting the bulk of both inward and outward stocks. Inward FDI stock from Europe decreased to €295.29 billion, while outward FDI stock to Europe fell to €202.64 billion in 2024. The report also noted that outward FDI was spread across at least 146 countries, while inward FDI originated from 176 countries.
Russia has retained its position as the largest partner for both inward and outward FDI, followed closely by the United States, Luxembourg, and the United Kingdom. In a new addition to the report, an analysis of inward FDI based on the ultimate investing economy revealed that Europe remains the primary source at €212.87 billion, followed by America at €87.28 billion.
Sector-wise, FDI stock continues to be concentrated in the tertiary sector, especially within financial and insurance activities, which underscores Cyprus’ role as a financial services hub. Outward FDI stock in this sector has decreased to €216.01 billion, while inward stock dropped to €367.35 billion.
The CBC’s report aims to provide a more objective picture of FDI developments by including adjusted series that exclude the distortive effects of special purpose entities. This nuanced analysis allows for a clearer understanding of Cyprus’ foreign investment landscape.
