Europe remains Cyprus's largest partner in foreign direct investment. According to the latest data from the Central Bank of Cyprus for 2024, the stock of foreign direct investment from European countries amounted to 295,29 billion euros, confirming the continent's key role in the investment structure of the island state.
Overall picture of foreign direct investment
The data were published in the Central Bank of Cyprus's annual report on foreign direct investment for 2024. The document analyzes in detail changes in investment positions, financial flows, income, geographic distribution, and the sectoral structure of investments. The report emphasizes that the analysis is based on information collected and processed by the bank's statistical unit responsible for external economic and government finance statistics.
By the end of 2024, the net stock of foreign direct investment remained in negative territory and decreased to 41,86 billion euros compared with 34,86 billion euros in 2023. This means that the volume of inward investment continued to exceed outward investment.
Movement of inward and outward investment
The decline in the net indicator was primarily due to a sharper drop in the stock of outward investment. Its total position fell to 331,75 billion euros in 2024 versus 366 billion euros a year earlier. The main reason was a reduction in the share of equity instruments, while debt instruments also showed a decline. In the structure of outward investment, equity instruments accounted for 89%, and debt instruments for 11%, and this ratio has generally remained stable over recent years.
Inward investment also decreased and reached 373,62 billion euros compared with 400,86 billion euros in 2023. The reduction was mainly driven by a decline in equity investment, although the volume of debt instruments showed a slight increase. In the structure of inward investment, equity instruments accounted for 94%, and debt instruments for 6%.
The Central Bank explained that the synchronous changes in inward and outward investment are largely due to the significant presence of special purpose entities. Their cross-border assets and liabilities, as a rule, move in parallel and are weakly connected to the country's real economy.
The role of transactions and currency factors
The report notes that changes in the volume of investment depend not only on the transactions themselves, but also on exchange-rate fluctuations, price changes, as well as factors such as asset reclassifications and write-offs. In 2024, the main impact on the decline in indicators came from investment transactions, while the positive effect of exchange-rate changes partially mitigated the drop. Over the long term, transactions remain the main factor behind changes in investment positions. In the period from 2018 to 2024, they accounted for 68,5% of the total change in the volume of outward investment and 51,6% of inward investment.
Investment flows and income
Net transactions in foreign direct investment in 2024 remained negative for the sixth consecutive year and amounted to 5,11 billion euros of net outflow. Outward investment reached 22,47 billion euros of net outflow, mainly due to negative flows in equity instruments excluding reinvested earnings. At the same time, the volume of reinvested earnings remained positive and amounted to 8,11 billion euros.
Inward investment also recorded a net outflow of 17,36 billion euros. Negative equity flows were partially offset by reinvested earnings of 14,28 billion euros and debt instruments totaling 13,12 billion euros.
Net income from foreign direct investment in 2024 also remained negative and amounted to 3,43 billion euros compared with 2,62 billion euros a year earlier. This means that income payments to foreign investors exceeded the income Cyprus received abroad. Income from outward investment rose to 25,87 billion euros, and income from inward investment increased to 29,3 billion euros.
As a result, investment returns strengthened noticeably. In 2024, for both inward and outward investment, they reached 7,8% versus 6,7% in 2023. The Central Bank noted an almost complete correlation between these indicators over the period 2018 to 2024, which is also related to the structure of special purpose entities.
Geography and sectors of the economy
For the first time, the report presents an analysis of foreign direct investment inflows based on the ultimate investing country economy. This approach makes it possible to reflect the true origin of capital more accurately and complements the traditional classification by the country of the immediate investor.
Overall, the geographic distribution of investment positions remains close to the structure formed on the basis of data by the direct investor. Europe continues to hold a dominant position. In 2024, the volume of foreign direct investment in Cyprus amounted to 295,3 billion euros versus 321,3 billion euros in 2023.
America remains in second place. Investment positions from this region reached 73,2 billion euros in 2024, slightly below the figure of 74,1 euros a year earlier. The volume of foreign direct investment from Asia amounted to 8,2 billion euros versus 8,7 billion euros in 2023. At the same time, investment from Africa showed a small increase and rose to 7,3 billion euros from 7,2 billion euros in the previous year.
Investment from Australia, Oceania, and polar regions reached 4,1 billion euros in 2024, decreasing compared with 4,3 billion euros in 2023. The unallocated portion of inward foreign direct investment retained a negative value and amounted to minus 14,4 billion euros versus minus 14,8 billion euros a year earlier, indicating that inward assets exceeded the corresponding liabilities.
If we look at the data at the level of individual groups of countries, the volume of foreign direct investment from the European Union, comprising 27 member states, amounted to 132,6 billion euros in 2024, decreasing from 147,8 billion euros in 2023. Investment from euro area countries also decreased and reached 123 billion euros compared with 137,2 billion euros a year earlier.
The stock of foreign direct investment from OECD countries amounted to 178,6 billion euros in 2024, below the level of 196,9 billion euros recorded in 2023.
At the country level, the Russian Federation retained its status as one of Cyprus's key investment partners. The volume of foreign direct investment from Russia amounted to 85,7 billion euros in 2024, decreasing compared with 90,6 billion euros in the previous year.
Investment positions from Luxembourg amounted to 73,9 billion euros in 2024 versus 91,5 billion euros in 2023. The United States, by contrast, increased the volume of foreign direct investment to 26,2 billion euros compared with 24,9 billion euros a year earlier. The United Kingdom also showed growth, increasing the figure to 14 billion euros from 12,5 billion euros in 2023.
The volume of foreign direct investment from the Netherlands in 2024 grew to 20,9 billion euros compared with 19 billion euros a year earlier. Investment from Germany amounted to 5,4 billion euros after a negative value of 1,7 billion euros in 2023. Investment positions from Greece also increased from 4,5 billion euros in 2023 to 6 billion euros in 2024.
Data adjustment and the impact of special purpose entities
When special purpose entities are excluded from the calculations, the net stock of foreign direct investment decreased to 50,28 billion euros in 2024 compared with 42,7 billion euros in 2023. In this adjusted presentation, inward investment amounted to 74,98 billion euros, and outward investment to 24,7 billion euros.
The Central Bank of Cyprus noted that the purpose of the report is to reflect the country's real investment picture more objectively. To this end, standard statistical data are supplemented with adjusted series that reduce the impact of special purpose entities and make it possible to assess the contribution of foreign direct investment to the Cypriot economy more accurately.