Cyprus dropped one place in the 2025 IMD World Competitiveness Ranking, down from 43rd among 67 countries last year, to 44th out of 69 countries, due to a deterioration in economic performance and growing weaknesses in the country’s infrastructure.
The IMD report said that the deterioration in economic performance was mainly driven by changes in international investment. However, Cyprus’s position in the 2025 ranking improved in terms of government efficiency and business efficiency.
Switzerland replaced Singapore in the top spot, while Hong Kong moved up two placed to rank third.
Denmark surrendered a place and dropped to fourth, while the UAE rose two to fifth, followed by Taiwan, also up two, to sixth.
Concluding the top ten most competitive were Ireland in seventh (-3), Sweden in eight (-2), Qatar in ninth place (+2) and the Netherlands in tenth (-1).
During the past five years, Cyprus dropped from 33rd in the 2021 rankings, to 40th in 2022, 45th in 2023 and 43rd in 2024.
In ‘economic performance’, the Cyprus ranking deteriorated from 13th in 2021 to 36th this year, in ‘government efficiency’ it was relatively stable (from 25th in 2021 to 26th in 2025), in ‘business efficiency’ it tumbled from 43rd in 2021 to 52nd in 2025, and in ‘infrastructure’ from 41st in 2021 to 46th in 2025.
The five main challenges Cyprus faces, according to the Economics Research Centre of the University of Cyprus, that compiled the local data in collaboration with the employers’ federation OEB, are managing the green transition and climate-related risks through investments and reforms, tackling the economic effects of elevated trade policy and geopolitical uncertainty, implementing tax and education reforms to enhance economic outcomes, addressing skills shortages, improve productivity, and create quality jobs, and, remaining on the expenditure path detailed in the Medium-Term Fiscal-Structural Plan.
The ERC said in its conclusions that, “among the most notable improvements in the overall functioning of the economy, are the decline in unemployment (total, youth, and long-term), the strengthening of the GDP growth rate, and the reduction in the homicide rate.
“Conversely, among the criteria that deteriorated sharply compared to last year’s assessment are the slowdown in the growth rate of fixed capital investment, as well as the significant deterioration of aspects of basic infrastructure, such as water resources management, city management, and the quality of air transport.”
The ERC report said the improvement in government efficiency was due to significantly improved ratings in the institutional framework (e.g., upgrading of sovereign credit ratings, adaptability of government policy, policymaking by freely elected officials), despite weaknesses in transparency and bureaucracy.
“Cyprus’s rating deteriorated considerably in the fiscal policy subcategory, mainly due to the increased tax burden, including contributions to the Social Insurance Fund.”
Finally, there was improvement in public health expenditure, exports of information and communication technology (ICT) services, telecommunications and cybersecurity.
In education, Cyprus’ position strengthened slightly. In 2025, Cyprus continued to outperform most countries in criteria such as student mobility, the student-teacher ratio in secondary education and the percentage of the population with tertiary education.
