Cyprus Experiences Boost in Ranking Due to Increased FDI

Cyprus has seen an improvement in the IMD World Competitiveness Yearbook 2024 rankings, moving from 45th to 43rd place among 67 evaluated countries, according to an announcement by the University of Cyprus’ Economics Research Centre (CypERC).

The evaluation, conducted in collaboration with the Cyprus Employers and Industrialists Federation (Oev) and the IMD World Competitiveness Centre of the IMD Business School in Switzerland, highlighted a significant enhancement in economic performance as a key factor for this improvement. This enhancement is primarily attributed to increased foreign direct investment (FDI) into the country.

The fluctuations in FDI flows and the volume of investment relative to the size of Cyprus’ economy affect the country’s ranking through its economic performance, making it relatively volatile.

The improved economic performance of Cyprus this year was also supported by high growth rates in fixed capital investments, an increase in service exports, reduced inflation, a comparatively low cost of living, and historically strong performance in direct investments.

In the category of government efficiency, Cyprus’ ranking improved slightly in 2024 due to strong fiscal performance and a long-standing advantage in taxation.

However, other categories saw less change, with Cyprus’ evaluations in 2024 remaining as low as in 2023. Low business efficiency continues to be a significant issue, mainly due to weaknesses in managerial practices and the country’s image abroad.

Additionally, the assessment highlighted, more intensely than in previous years, deficiencies in the country’s basic infrastructure, including the energy sector, and weaknesses in the education sector.

Improvements were noted in areas such as technological infrastructure and digital transformation in businesses, which have been gradually improving. Notable improvements in the economy include increased fixed capital investments (in real terms), reduced inflation, and a strengthened fiscal surplus (as a percentage of GDP).

Conversely, a slowdown in GDP growth (both total and per capita) and business dissatisfaction with the legislative framework for employing foreign labour and environmental regulations worsened compared to last year.

Regarding government efficiency in 2024, Cyprus moved up to 28th place, an improvement due to better public finances and an upgraded credit rating, along with a gradual reduction of bureaucracy. However, rankings worsened in tax policy, the legislative framework for businesses, and the social framework, despite the country’s strengths in redundancy costs, new business density, and tax rates.

In business efficiency, Cyprus remained stagnant at 55th place, the same as in 2023, due to ongoing issues with market awareness, board control effectiveness, use of data analytics, and international branding.

In terms of infrastructure, Cyprus ranks 42nd out of 67 countries, unchanged from 2023. Basic infrastructure saw the greatest decline, particularly in water resource management, urban management, and energy infrastructure. Improvements were noted in technological infrastructure, addressing previous issues such as low mobile broadband subscription rates and inadequate cybersecurity, with strong performance in ICT service exports.

Overall, while Cyprus has made progress, particularly in economic performance driven by increased FDI and fixed capital investments, it must address persistent challenges in business efficiency, infrastructure, and legislative frameworks to continue enhancing its competitiveness ranking.