Cyprus has experienced a decline in its competitiveness for the third consecutive year, falling from the 40th position to the 45th among 64 evaluated countries, according to the IMD World Competitiveness Centre. The University of Cyprus' Economic Research Centre (CypERC) announced that this year marks Cyprus's lowest position since participating in the ranking.
The decline in competitiveness can be attributed to the deterioration of four key aspects: economic performance, government efficiency, business efficiency, and infrastructure. Cyprus's economic performance has been negatively affected by reduced foreign direct investments, a balance of payments deficit, deteriorating trade terms, and limited goods exports.
The institutional framework in Cyprus, including factors such as the cost of capital, transparency, and bureaucracy, has hindered government efficiency. Furthermore, weaknesses in the country's basic and technological infrastructure, which have burdened the ranking in previous years, have become more pronounced in this year's evaluation.
The inefficiency of Cypriot businesses is a significant factor contributing to the decline in competitiveness. Weaknesses in administrative practices and the implementation of digital transformation plans have hindered business efficiency. The research centre emphasizes the importance of addressing these weaknesses through reforms and investments in infrastructure and human capital that align with the needs of a modern economy.
External disturbances, including the Russian invasion of Ukraine and resulting sanctions, economic slowdown, and uncertainty, have further impacted Cyprus's competitiveness, intensifying the persistent shortcomings identified in previous years.
On a positive note, the 2023 Opinion Survey highlights the factors that make the Cypriot economy attractive. The top five factors, in order, include a competitive tax regime, business-friendly environment, high level of education, skilled workforce, and people's positive attitude. Notably, the competitive tax regime, business-friendly environment, and high level of education have consistently been among the top factors.
In terms of economic performance, Cyprus ranks 47th among the evaluated countries, experiencing a decline of nine positions compared to the previous year. The decline in this year's ranking is primarily attributed to the significant deterioration in the evaluation of Cyprus's international investments, including reduced flows of foreign direct investments to and from the country.
In terms of state efficiency, Cyprus ranks 30th in 2023, dropping six positions compared to 2022. The decline is mainly due to worsened assessments in the institutional framework, including factors such as the cost of capital, transparency, bureaucracy, social framework, and the justice system.
In the category of business efficiency, Cyprus dropped to the 55th position from the 44th it held last year. The significant decline in the ranking resulted from worsened assessments in all five examined subcategories, including productivity and efficiency, the labor market, financing, administrative practices, and business attitudes and values. Particularly notable weaknesses are observed in the administrative practices of businesses.
Regarding infrastructure, Cyprus ranks 42nd out of 64 countries, marking a two-point drop compared to last year. The decline is attributed to unfavorable assessments in four out of the five subcategories examined, including basic and technological infrastructure, energy infrastructure, air transportation quality, and the percentage of mobile broadband subscribers.
Although Cyprus demonstrates certain advantages in criteria such as the influx of foreign students, the student-to-teacher ratio in secondary education, and the signing of environmental agreements, there are ongoing weaknesses in areas such as graduates in STEM fields and the transfer of knowledge between universities and businesses.
The report emphasizes the need for Cyprus to address its weaknesses through reforms and investments in infrastructure and human capital while leveraging its strengths to improve competitiveness in a rapidly evolving global landscape.
By fLEXI tEAM