In 2020, Cyprus’ GDP reached EUR 20.6 billion, representing a 5.1% decline over 2019 (EUR 21.7 billion) and a 5.8% growth from 2010 level (EUR 19.5 billion).
The annual decline in the GDP is mainly due to the outbreak of the global COVID-19 pandemic and the subsequent containment restrictions.
Mirroring the broader economic trend, the number of enterprises in the Cypriot broad construction sector totalled 13,545 in 2020, exhibiting a 0.9% decline since 2010 (13,670), which is driven by 5.4% decline in 2020 in comparison to 2019.
In contrast, the volume index of production in the broad construction sector increased by 88.7% over the 2015 - 2020 period. This was mainly driven by an increase in the index of production in the construction of buildings (+114.6%) and construction of civil engineering (+5.1%) over the same period.
Total turnover of the broad construction sector in 2018 stood at EUR 4.5 billion, a 5.8% decrease since 2010 (EUR 4.8 billion). In 2020, it increased to EUR 4.9 billion, representing a 2.4% increase since 2010 – thus mirroring the increasing production of the sector. However, the gross operating rate of the broad construction sector, which gives an indication of the sector’s profitability, stood at 13.3% in 2018, representing a drop of 6.0 pp (percentage points) since 2010.
With regards to the housing market, the Cypriot government, through the Special Service for the Care and Rehabilitation of Displaced Persons (Υπηρεσία Μερίμνης Αποκαταστάσεως Εκτοπισθέντων - SCRDP), offers several housing support schemes. The affordable housing to low-income people scheme is focused on the needs of young people with growing families and low-income families. In November 2020, the government revised the affordable housing plan by increasing the number of eligible communities from 128 in the original July 2019 plan to 259.
In July 2021, the Ministry of Finance of Cyprus announced the approval of 802 applications for the ESTIA scheme, around 18.0% of the total 4,374 completed application.
The ESTIA scheme boosts borrowers' (households or SMEs) ability to repay their loans, as the government subsidises part of the repayment instalments by one third of the restructured loan.
The non‑residential construction and civil engineering market is driven by the EC and the EIB funding, which play a significant role in supporting infrastructure development in the country. In June 2021, the Republic of Cyprus and the EIB entered into a loan agreement for an amount of EUR 112.0 million for the financing of National Roads III Project. This consists of the construction and improvement of roads and motorways that are prioritised as strategic roads of national importance and includes investment in fixed and mobile speed enforcement cameras.
The Cyprus annual budget for 2021 also includes a total of 50 major infrastructure projects. The projects range from the construction of roads in various districts to schools, water transport provisions and repairs to existing state buildings.
Under the Recovery and Resilience Facility (RRF) Cyprus has been allotted EUR 1.0 billion in grants.
Cyprus will invest 41.0% of the plan’s total allocation in reforms and investments to support climate objectives. It has allocated EUR 89.0 million towards energy efficiency and renewable energy, and EUR 887.0 million for sustainable and green mobility. The country has also planned to invest around EUR 53.0 million for enhancing access to communication infrastructure for all citizens and EUR 133.0 million towards the digitalisation of public services, including justice.
Presently, two main issues hinder the development of the Cypriot construction sector. First, although companies in the sector often have overqualified workers, the sector still faces a shortage of workers with the required skillset, meaning that there might be a mismatch between the level of skills that the workforce currently possesses and the companies’ needs. Around 7.5% of firms in the construction sector reported a labour shortage in 2019, the highest among all sectors. Secondly, the persisting issue of late payments has had an unfavourable impact on the construction sector. As per the Survey on the Access to Finance of Enterprises 2020 report, around 13.2% of SMEs in Cyprus reported facing late payment issues on a regular basis.
Overall, the Cypriot construction sector has a positive outlook in the medium and long term. Public sector infrastructure and transport system upgrades, supported by EU funding, are expected to dominate the broad sector growth.