Cyprus drops five places in world competitiveness rankings

Cyprus dropped five places in the IMD World Competitiveness Centre rankings for the third consecutive year, falling from the 40th position to the 45th out of 64 evaluated countries.

This year, Cyprus has reached its lowest position since its participation in the rankings, according to a press release by the University of Cyprus' Economic Research Centre (ERC).

The decline can be attributed to the deterioration of all four aspects that comprise the overall competitiveness assessment: economic performance, government efficiency, business efficiency, and infrastructure.

Cyprus' economic performance has been negatively affected primarily by reduced foreign direct investment flows, a deficit in the current account balance, further deterioration in the terms of trade, and limited goods exports. Weaknesses in the institutional framework (such as capital cost, transparency, bureaucracy) that have hindered government efficiency, as well as deficiencies in the country's basic and technological infrastructure, which had already 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 this year's 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 the country's weaknesses through reforms and investments in infrastructure and human capital that align with the needs of a modern economy. It further emphasises that 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, in order, the competitive tax regime, business-friendly environment, high level of education, skilled workforce, and positive attitudes of the people.

In terms of economic performance, Cyprus ranks 47th 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 in Cyprus 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.

(Source: CNA)