Cyprus is losing ground to major economies, as it fell three places to 33 among 64 countries on the 2021 IMD World Competitiveness Ranking index.
According to the University of Cyprus Economics Research Centre, an IMD World Competitiveness Centre partner, Cyprus’ ranking deteriorated in three out of the four categories that make up the overall scores.
The largest drop was registered in the category of business efficiency, dropping from 35 to 43.
The island also slipped in government efficiency, from 21st to 25th and in infrastructure from 38 to 41.
In the category of economic performance, Cyprus maintained its previous position (13).
Innovation, digitalization, welfare benefits, and social cohesion are key to economic performance in the 2021 rankings, topped by Switzerland (1st), Sweden (2nd), Denmark (3rd), the Netherlands (4th), and Singapore (5th).
Experts said Cyprus’ decline is down to the deterioration of the state’s efficiency from the pandemic’s burden on public finances and weaknesses in the institutional framework.
There was significantly reduced business profitability, mainly due to changing market conditions, technological challenges, and the relatively high corporate debt.
The IMD index also found deficiencies in the country’s infrastructure, particularly in science and technology.
“This year’s ranking for Cyprus has highlighted weaknesses that burden the competitiveness of companies and the country.
“Reforms that improve the institutional framework and promote digital transformation are expected to strengthen competitiveness and make the economy more resilient to technological and environmental challenges, but also more resilient to crises,” a statement from the centre said.
The IMD found that the most significant improvements in the overall functioning of the economy recorded in the 2021 evaluation were related to low inflation, the strengthening of the workforce’s long-term growth rate, and an improved university education evaluation index.
In contrast, Cyprus saw a sharp shrinking of fixed capital investment and increased government subsidies due to the pandemic, which have inflated the budget deficit.
The IMD World Competitiveness Ranking ranks 64 economies. It assesses the extent to which a country promotes the prosperity of its people by measuring economic well-being through hard data and survey responses from executives.
This year the rankings expose the economic impact of the pandemic across the globe.
The report finds that qualities such as investment in innovation, digitalization, welfare benefits and leadership resulting in social cohesion have helped economies better weather the crisis, allowing them to rank higher in competitiveness.