Cyprus dropped five places in the IMD World Competitiveness Center rankings for the third consecutive year, falling from 40 to 45th out of 64 countries.
This year, Cyprus has reached its lowest position since it participated in the rankings, according to the University of Cyprus’ Economic Research Centre (ERC).
The decline is attributed to the deterioration of all four aspects that comprise the overall competitiveness assessment: economic performance, government efficiency, business efficiency, and infrastructure.
Economic performance has been negatively affected primarily by reduced foreign direct investment flows, a deficit in the current account balance, further deterioration of trade, and limited goods exports.
Weaknesses in the institutional framework (capital cost, transparency, bureaucracy) that have hindered government efficiency and deficiencies in the country’s basic and technological infrastructure, which affected the rankings in previous years, are more prominently reflected in this year’s evaluation.
The low efficiency of businesses constitutes the most burdensome factor in the ranking, mainly due to weaknesses in administrative practices and the implementation of digital transformation in enterprises.
According to the ERC, Cyprus’ current ranking highlights the importance of timely addressing weaknesses through reforms and investments in infrastructure and human capital that align with the needs of a modern economy.
“The longstanding deficiencies that have hampered Cyprus’ competitiveness in previous years not only persist but have significantly intensified under conditions of external disruptions, such as the Russia-Ukraine conflict, sanctions against Russia, economic slowdown, and uncertainty, pushing the country’s competitiveness even lower.”
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.
Regarding economic performance, Cyprus ranks 47 among 64 countries, dropping nine positions compared to last year.
The decline in this year’s ranking is attributed to a significant deterioration in the evaluation of international investments and, to a lesser extent, the worsening performance in the subcategories of international trade and employment.
The significant improvement in the assessment of the domestic economy in 2023 had positive implications for Cyprus.
Cyprus demonstrated strong performance in criteria such as tourist revenues, foreign investment reserves, and service exports, somewhat mitigating the country’s descent in the rankings.