Cyprus has experienced a decline in its competitiveness ranking for the third consecutive year, dropping by five positions according to the IMD World Competitiveness Center. Out of the 64 countries evaluated, Cyprus now holds the 45th position, down from its previous rank of 40th. This decline reflects a continuous deterioration in Cyprus' overall competitiveness.

As a press statement from the University of Cyprus' Economic Research Center (ERC) reveals, Cyprus has reached its lowest position since participating in the rankings. This year's drop can be attributed to the worsening performance across all four key aspects that contribute to the overall competitiveness evaluation: economic performance, government efficiency, business efficiency, and infrastructure.

Cyprus' economic performance has been significantly affected by several factors. These include reduced foreign direct investment inflows, a deficit in the current account balance, a further decline in trade terms, and limited export opportunities. Furthermore, deficiencies in the institutional framework, such as high capital costs, lack of transparency, and bureaucratic hurdles, have hindered the efficiency of the government.

Weaknesses in the country's basic and technological infrastructure have also played a role in this year's decline, exacerbating the overall evaluation. Businesses’ low efficiency, which has emerged as the most significant factor impacting this year's ranking, is also concerning.

The ERC emphasizes the critical importance of addressing these weaknesses promptly through comprehensive reforms and targeted investments in infrastructure and human capital. These measures are essential to meet the demands of a modern economy and boost Cyprus' competitiveness. It should be noted that longstanding deficiencies that have previously hindered Cyprus' competitiveness have not only persisted but have been further intensified due to external disturbances, such as the Russian invasion of Ukraine, resulting in economic slowdown and heightened uncertainty. These factors have pushed Cyprus' competitiveness even lower, exacerbating the challenges the country faces.

In terms of government efficiency, Cyprus now ranks 30th in 2023, marking a significant drop of six positions compared to the previous year. This decline can be attributed to deteriorating evaluations in critical subcategories, including the institutional framework (e.g., cost of capital, transparency, bureaucracy) and the social framework (e.g., gender-specific unemployment rates, justice system). These factors have contributed to the overall decrease in Cyprus' government efficiency, according to the IMD analysis.

Contrarily, the slight improvement in Cyprus' assessment within the business regulatory framework sub-category (e.g., government subsidies, labor cost burden, density of new businesses) has positively influenced this year's ranking. The evaluations in the sub-categories of public finances and tax policy remained at the same levels as in 2022, with tax policy, specifically the criterion for corporate tax rate, contributing favorably to the ranking, as it has in previous years.

In the category of business efficiency, Cyprus dropped from 44th to 55th place compared to last year. The significant decline in its 2023 ranking stems from the worsening assessment in all five examined sub-categories: (a) productivity and efficiency, (b) labor market, (c) financing, (d) administrative practices, and (e) business attitudes and values. Notably, Cyprus displays particular weaknesses in assessing business administrative practices, as it currently occupies the second-to-last position among the 64 countries.

The current ranking clearly indicates that Cyprus significantly lags behind other countries in criteria related to digital transformation in businesses, the ability of boards of directors to exercise effective control, attracting and retaining talented employees, undertaking corporate social responsibility, and utilizing large-scale data and analysis in business decision-making. While Cyprus' weaknesses in some of these aforementioned criteria have been noted in previous years, they are more pronounced this year, as the country occupies lower positions.

On a positive note, Cyprus continues to demonstrate advantages in certain criteria within the labor market sub-category, such as long-term labor force growth rate, the percentage of women in the workforce, and managerial remuneration.

Regarding infrastructure, Cyprus ranks 42nd out of 64 countries, experiencing a two-point drop compared to last year. The decline in the 2023 ranking stems from a less favorable assessment of Cyprus in four out of the five examined sub-categories. The country's position in the basic and technological infrastructure sub-categories, which was already low in previous years, further declined in 2023. Specifically, Cyprus seems to exhibit significant shortcomings compared to most countries in aspects such as energy infrastructure, air transport quality, mobile broadband subscriber penetration rate, cybersecurity, and technological development financing.

Despite the improved assessment of Cyprus in the scientific infrastructure sub-category, the country's position is burdened by long-standing weaknesses, such as the low percentage of graduates in STEM fields and emerging challenges like low knowledge transfer between universities and businesses.

In 2023, Cyprus' position slightly worsened in the health and environment sub-category, as well as in the education sub-category. However, Cyprus continues to outperform other countries in criteria such as the influx of foreign students, the student-to-teacher ratio in secondary education, and the establishment of environmental agreements.