Low productivity remains the biggest structural weakness of the Cypriot economy, despite high growth rates, low unemployment and the significant inflow of skilled labour in recent years. At the same time, Cyprus is being called upon to redefine its model for attracting foreign investment, focusing on investments that generate real economic activity, create jobs and transfer know-how. Financial transactions or company relocations may be welcome, but on their own they do not resolve the problem of low productivity.
These are the main conclusions emerging from the “Cyprus Competitiveness Report 2025” of the Cyprus Economy and Competitiveness Council.
Presenting the findings, economics professor Sofronis Clerides, who led the University of Cyprus research team that prepared the report, stressed that productivity remains the main weakness of the economy despite positive performance in other indicators.
According to the report, Cyprus continues to lag behind many competing economies in productivity, despite high employment rates and the availability of skilled labour. One of the few exceptions is the Information and Communication Technologies sector, which performs significantly better and is highlighted as an example of successful productivity upgrading.
The report compares Cyprus with 12 reference countries, including Greece, Malta, Israel, Ireland, the Netherlands and Denmark, concluding that a more targeted strategy is needed to boost productivity, support business growth and scaling, and improve the implementation of reforms. The Council also underlines the need to update and systematically monitor Vision 2035 through the creation of a dedicated implementation unit that ensures continuity beyond political changes.
All policies, the report notes, should be assessed based on their contribution to increasing productivity and long-term prosperity. Priority should be given to creating conditions that allow businesses to innovate, grow and compete internationally.
“Not all investments are the same,” Mr Clerides said, explaining that the challenge for a small economy such as Cyprus is to select and attract investments with the highest added value and the least negative impact.
In the same context, Council Vice-President Giorgos Syrichas acknowledged that attracting more productive investment is not easy, particularly due to weaknesses in areas such as energy, infrastructure and the limited size of the market. However, he stressed that there are alternatives and highlighted the importance of targeted strategies.
As he explained, productive investments generate significantly greater value compared to simple asset transfers, as they are linked to job creation, the development of local expertise and the transfer of know-how.
At the same time, the report highlights serious weaknesses in public administration, the justice system and the implementation of reforms, proposing a more coordinated state strategy and systematic monitoring of Vision 2035 through a permanent implementation mechanism.
Particular importance is also given to education and workforce skills. Despite high public spending on education, outcomes remain limited. The report identifies low student performance, a gap in technical education and weak links between universities and the labour market, factors that directly affect the economy’s low productivity.
