The issue is no longer whether artificial intelligence will affect the Cypriot economy. The question is to what extent businesses will be able to convert it into productivity and competitive advantage. Within four years, artificial intelligence has moved from research laboratories to corporate boardrooms. Today, one in five European businesses already uses AI technologies, and the question is no longer who will adopt them, but who will be left behind.

According to Eurostat, 20% of businesses in the European Union with more than 10 employees used AI technologies in 2025, compared to 13.5% in 2024 and just 7.7% in 2021. This is one of the fastest technological transitions that the European economy has experienced in recent decades. Behind the impressive numbers, however, lies a deeper change. Artificial intelligence is not just changing the way businesses operate. It is changing the terms of competition. For Cyprus, this development takes on a special significance. In recent years, the country has evolved into one of Europe's most dynamic technological destinations, attracting international companies, investments, and specialized personnel. The issue is no longer whether artificial intelligence will affect the Cypriot economy. The question is to what extent businesses will be able to convert it into productivity and competitive advantage.

Cyprus is currently faced with an interesting paradox. On the one hand, the technology sector is now one of the most important pillars of the economy. According to a study presented at the TechIsland Summit, the sector's direct contribution reaches €5.9 billion, corresponding to 16.2% of GDP, while its total economic impact is estimated at €11.9 billion. At the same time, approximately 48,200 workers are employed in the broader technology sector, a number that a few years ago would have seemed inconceivable for the data of the Cypriot economy. On the other hand, technological progress does not automatically translate into widespread adoption of new tools by all businesses. The existence of a strong technology ecosystem does not necessarily mean that all businesses are ready to move into the era of artificial intelligence.

Cyprus dedicated much of the last decade to attracting technology companies. The numbers show that the strategy paid off. The ICT sector evolved into one of the most important growth pillars of the economy, creating jobs and attracting foreign capital. The critical question, however, is different. How much of this momentum passes into the real economy? The existence of a strong technological ecosystem does not necessarily mean that traditional sectors are transforming at the same speed. Banks, accounting firms, hotels, and service organizations are already experimenting with AI tools, but the transition from isolated applications to substantial transformation remains an open bet. The discussion about artificial intelligence in Cyprus is no longer about whether the country can attract technology companies. The question is to what extent the economy's businesses themselves can exploit the capabilities being created.

The biggest threat to many Cypriot businesses may not be the lack of artificial intelligence tools, but the fact that they continue to operate with processes designed for an era before digital transformation. Many businesses are discussing artificial intelligence today before even completing their basic digital transformation. There are many cases where critical information remains scattered in emails, spreadsheets, and manual processes. In these cases, AI does not solve the problem, but makes it more visible. Artificial intelligence does not automatically fix problematic processes. Instead, it often highlights pre-existing organizational weaknesses. Businesses with clear processes, reliable data, and a culture of adaptation are more likely to utilize technology effectively. Those businesses that attempt to add AI on top of outdated operating models may find that the results fall short of expectations.

The structure of the Cypriot economy creates additional challenges. The vast majority of businesses are small or medium-sized. This offers flexibility and speed in decision-making, but is often accompanied by limited resources and a lack of specialized executives. Many small and medium-sized enterprises (SMEs) do not have IT departments, data analysis teams, or digital transformation executives. As a result, the adoption of AI often depends on the initiatives of individual employees rather than an organized strategy. This explains why the use of artificial intelligence tools is spreading faster than the actual transformation of businesses.

Despite the significant growth of the technology sector, Cyprus is not yet included among the European countries with the highest rates of artificial intelligence adoption by businesses. The distance between hosting technology companies and the substantial digital transformation of businesses remains one of the key challenges for the Cypriot economy.

The public debate surrounding artificial intelligence focuses mainly on the opportunities. However, there are also serious concerns. The growing reliance on AI systems creates new questions about data security, intellectual property protection, and the reliability of automatically generated information. At the same time, some analysts warn that excessive reliance on AI tools can lead to a gradual degradation of critical skills, particularly in areas based on analysis, writing, and decision-making. The challenge for businesses is not to replace human judgment with algorithms, but to effectively combine the advantages of both. Concurrently, the increasing dependence on large international artificial intelligence platforms creates new questions about data control, algorithm transparency, and the dependence of businesses and economies on a limited number of global technology providers.

The discussion around artificial intelligence often centers on the potential loss of jobs. So far, however, the changes seem to concern skills more than the number of employees. Businesses are increasingly looking for people who can utilize data, collaborate with digital tools, and adapt to new working environments. The demand is rising for specialties related to data analysis, cybersecurity, and digital transformation, while many traditional jobs are gradually changing content. The question is not only which professions will be affected, but which workers and which businesses will manage to adapt faster to the changes.

The importance of technology for the Cypriot economy is now also reflected in economic figures. The technology sector contributes €5.9 billion to the Cypriot GDP, a percentage that corresponds to 16.2% of the economy. When indirect and secondary impacts are factored in, the total contribution of the sector reaches €11.9 billion. At the same time, the sector employs approximately 48,200 workers, confirming that technology is no longer a niche industry but one of the main pillars of the Cypriot economy. According to an economic assessment by KPMG presented at the TechIsland Summit, Cyprus ranks third in the European Union in terms of the ICT sector's contribution to its economy. The same study states that in the period 2016-2025, the sector recorded an increase of 435%, compared to an EU average of 86%. The growing adoption of AI by Europe's largest businesses reinforces the view that technology is evolving into a major factor of competitiveness.

Artificial intelligence is no longer a future promise. It is an economic reality that is already affecting investments, jobs, and business models. Cyprus recently took another important step in this direction with the launch of the new national Artificial Intelligence and Supercomputing infrastructures. Combined with initiatives such as AI Factory Cyprus and Pharos-CY, the conditions are now being created for the development of a stronger ecosystem of research, innovation, and business utilization of artificial intelligence. The importance of this development goes beyond the technological dimension. It is an indication that Cyprus can move with speed and determination in sectors of strategic importance for the future of the economy.

The issue now is for this same momentum to extend to other initiatives related to digital transformation, innovation, and productivity enhancement. The new infrastructures are expected to offer significant opportunities to both the academic community and businesses. Specifically, companies active in the technology sector will be able to utilize advanced computing capabilities to develop new applications, products, and services with an international orientation.

At the same time, member companies of CITEA, which are at the forefront of technological innovation, are expected to exploit the new capabilities to develop advanced applications, new products, and services that will enhance the competitiveness of the Cypriot economy.

The challenge now is not the creation of the infrastructures, but their effective utilization so that they are transformed into innovation, extroversion, and real economic value for the country. Perhaps the most interesting element in the Cypriot case is that the discussion about artificial intelligence begins at a time when many businesses have not yet completed their digital transformation. This does not mean the country is behind. It means, however, that the next phase of development will not be judged by how many technology companies relocate to Cyprus, but by how effectively businesses themselves exploit the tools they now have at their disposal.

Artificial intelligence does not constitute the next chapter of the digital economy. For many businesses, this chapter has already begun. The difference is that this time, the challenge does not concern only the technology sector. It concerns the entire economy. From financial services and tourism to small and medium-sized enterprises and the public sector, the ability to utilize AI is expected to be one of the key factors of competitiveness in the coming years.

Cyprus has already developed a strong technological ecosystem and is investing in new artificial intelligence and supercomputing infrastructures. The coming period is expected to show to what extent these capabilities will translate into broader adoption of AI by businesses and a substantial enhancement of the economy's productivity.

• 20% of businesses in the EU used AI technologies in 2025 • 13.5% used AI in 2024 • 7.7% used AI in 2021 • Over 50% of large enterprises in the EU have already adopted AI

• €5.9 billion is the direct contribution of the technology sector to the Cypriot GDP

• €11.9 billion is the total economic impact of the sector • 48,200 workers are employed in the broader technology sector

• According to a study by KPMG, Cyprus ranks 3rd in the EU regarding the contribution of ICT to the economy • According to the same study, the Cypriot technology sector recorded growth of 435% during the period 2016-2025

• The most widespread uses of AI concern text analysis, content generation, and data processing

• AI Factory Cyprus and Pharos-CY constitute the new national pillars for the development of AI and supercomputing infrastructure.

Source: Brief