For the third consecutive year, Cyprus has experienced a drop in its ranking according to the IMD World Competitiveness Centre.
Falling from the 40th position to 45th out of the 64 countries evaluated, this marks the lowest position Cyprus has reached since its participation in the rankings, as stated in a press release by the University of Cyprus’ Economic Research Centre (ERC).
The decline can be attributed to a deterioration in all four aspects that contribute to the overall competitiveness assessment: economic performance, government efficiency, business efficiency, and infrastructure.
Cyprus’ economic performance has been negatively impacted primarily by reduced foreign direct investment flows, a deficit in the current account balance, a further decline in the terms of trade, and limited goods exports. Weaknesses in the institutional framework, including factors like capital cost, transparency, and bureaucracy, have hindered government efficiency. Additionally, deficiencies in the country’s basic and technological infrastructure, which had already affected previous rankings, have become more prominently reflected in this year’s evaluation.
The low efficiency of businesses has emerged as a significant burden in this year’s ranking, largely due to weaknesses in administrative practices and the implementation of digital transformation in enterprises.
According to the ERC, Cyprus’ current ranking underscores the importance of timely addressing the country’s weaknesses through reforms and investments in infrastructure and human capital that align with the needs of a modern economy. It emphasizes that the long-standing deficiencies that have hindered Cyprus’ competitiveness in previous years not only persist but have significantly intensified under external disruptions such as the Russia-Ukraine conflict, sanctions against Russia, economic slowdown, and uncertainty, which have further lowered the country’s competitiveness.
In the 2023 Opinion Survey, the five most significant factors that make the Cypriot economy attractive are the competitive tax regime, business-friendly environment, high level of education, skilled workforce, and positive attitudes of the people, listed in order of importance.
Regarding economic performance, Cyprus now ranks 47th among the 64 countries, experiencing a drop of nine positions compared to the previous year. The decline in this year’s ranking can be attributed to a significant deterioration in the evaluation of international investments in Cyprus and, to a lesser extent, the worsening performance in the subcategories of international trade and employment.
Nevertheless, Cyprus has seen a significant improvement in the assessment of its domestic economy in 2023, which has had positive implications. The country has demonstrated strong performance in criteria such as tourist revenues, foreign investment reserves, and service exports, somewhat mitigating its descent in the rankings.