Foreign direct investment (FDI) in Cyprus remained in negative territory in 2024, despite an improvement in net transactions and stronger returns, according to the latest annual FDI report published by the Central Bank of Cyprus (CBC).
Based on data compiled by the CBC’s Statistics Department in line with IMF and EU statistical standards, net FDI stock declined further to €-41.9 billion in 2024, from €-34.9 billion in 2023. The negative balance reflects the fact that inward FDI stock continued to exceed outward FDI stock, underlining Cyprus’ role as a major investment hub with significant cross-border financial activity.
Transactions improve but remain negative
Net FDI transactions, while still negative, showed a notable improvement. In 2024, net transactions amounted to €-5.1 billion, roughly half the €-10.4 billion recorded a year earlier, marking the sixth consecutive year of negative net flows but suggesting some stabilisation in investment movements.
According to the CBC, outward FDI stock fell sharply in 2024 to €331.8 billion from €366.0 billion in 2023, mainly due to a reduction in equity instruments. Inward FDI stock also declined, to €373.6 billion from €400.9 billion, driven largely by lower equity positions, although debt instruments recorded a slight increase. Equity continued to dominate both inward and outward FDI, accounting for around 90% of total positions.
Role of special purpose entities
The CBC notes that the parallel movements in inward and outward FDI stocks largely reflect the significant presence of special purpose entities (SPEs) in Cyprus. These entities, which have limited interaction with the domestic economy, tend to hold assets and liabilities of similar size vis-à-vis non-residents, resulting in mirrored movements on both sides of the balance sheet.
When SPEs are treated as non-residents for analytical purposes, net FDI stock falls even further, to €-50.3 billion in 2024, from €-42.7 billion in 2023. Under this adjusted view, inward FDI stock stood at €75.0 billion, while outward FDI stock amounted to just €24.7 billion.
Returns strengthen despite weaker positions
Despite weaker positions, profitability improved. Net income from FDI remained negative at €-3.4 billion in 2024, as income paid on inward investment exceeded income earned on outward investment. However, both inward and outward rates of return strengthened to 7.8% in 2024, up from 6.7% in 2023. The CBC points to a near-perfect correlation between inward and outward returns over recent years, again reflecting the structure of SPEs.
Europe dominates regional FDI links
Regionally, Europe continued to dominate Cyprus’s FDI landscape. In 2024, outward FDI stock to Europe amounted to €202.6 billion, down from €227.6 billion a year earlier, while inward FDI stock from Europe declined to €295.3 billion from €321.3 billion. America remained the second most important partner, with outward FDI stock of €60.0 billion and inward stock of €73.2 billion.
At country level, Russia remained the largest partner for both inward and outward FDI stocks, followed by the United States, Luxembourg and the United Kingdom. Although Cyprus maintains investment links with many countries—at least 146 destinations for outward FDI and 176 sources of inward FDI—more than 60% of total allocated FDI stock is concentrated in the top ten partner countries.
For the first time, the CBC report also includes analysis by ultimate investing economy, which aims to identify the “true” origin of inward FDI rather than the immediate source. Under this approach, Europe again emerged as the leading region, accounting for €212.9 billion of inward FDI stock in 2024, followed by America with €87.3 billion. Asia’s share appeared more significant under this methodology than in standard inward FDI statistics.
Services sector continues to dominate
In terms of economic activity, FDI remained overwhelmingly concentrated in the tertiary sector. Inward FDI stock in services reached €367.3 billion in 2024, down from €395.2 billion in 2023, with financial and insurance activities accounting for the bulk of investment. Outward FDI showed a similar pattern, with €216.0 billion directed to the tertiary sector, reflecting Cyprus’s long-standing specialisation in financial services.
(Source: CNA)
