A WIDENING GAP EMERGING
Whilst Cyprus is considered one of the more prosperous countries within the European Union, evidence suggests that there is a widening gap between affluent and working-class groups all over the island. Prosperity is measured using various factors and some of the metrics used for this evaluation are often not as accurate as they should be. Key indicators used to assess prosperity typically include GDP per capita, economic growth, quality of life, and employment rates. Cyprus ranks among the European Union countries with the lowest poverty rate, recently set at just 2.4% and this is in stark contrast to Romania which has the highest poverty rate, recently set at 19.8%.
A RELATIVELY HIGH GDP
Although Cyprus has a relatively high GDP per capita compared to many other European Union countries, the island nation has faced huge challenges in the recent past. Economic downturns and weak political instability, mainly due to the island’s unique situation regarding its division, have often negated many of its economic benefits from sectors like tourism, financial services, and offshore shipping. Cyprus is also experiencing gradual rises in unemployment rates and this has begun to impact its social benefit responsibilities. These underlying factors are all working against otherwise strong economic returns and because of this, other European Union countries, such as Luxembourg, Ireland, and Denmark typically rank higher in terms of overall prosperity.
WHAT IS GDP?
GDP stands for Gross Domestic Product, and it measures a country’s economic performance. GDP also represents the total monetary value of all finished goods and services produced within a country’s borders in a specific period, usually annually or quarterly. GDP can indicate an economy’s overall health and is often used to compare economic performance between different countries or periods.
The four primary ways to calculate GDP are
1. Production Approach: This approach measures the total output of goods and services, subtracting the value of intermediate goods to avoid double counting.
2. Income Approach: Calculates the total income earned by individuals and businesses, including wages, profits, rents, and taxes, minus subsidies.
3. Expenditure Approach: This approach sums up all expenditures made in the economy, including consumption, investment, government spending, and net exports.
4. Nominal Approach: This is measured using current prices that are adjusted for inflation in real time, providing a more accurate reflection of an economy’s size and how it is growing over time.
