The Information and Communication Technology (ICT) sector has emerged as a pivotal growth engine in Cyprus, as indicated by the latest GDP data from the Statistical Service of Cyprus (CyStat). There has been a notable surge in the ICT sector's performance, reflecting the increasing relevance of technology in economic activities.

Recent statistics from CyStat reveal that over the past decade, the ICT sector has experienced an average growth rate of 15%. This rate surpasses all other economic sectors, with the accommodation and food service sector (largely related to tourism) trailing behind at an average growth of 12.7%, and administrative and support service activities (which include tourism-related activities) at 10%.

Provisional data from CyStat for 2022 shows the ICT sector's contribution to Cyprus' gross value-added rose to 9.6%, ranking third behind Wholesale and Retail Trade (12.2%) and Financial and Insurance Activities (9.8%). A decade earlier, the financial sector led with 12% of the total output, a shift that highlights the diversification of the Cypriot economy following the 2013 financial crisis.

In absolute terms, the ICT sector's contribution to the Gross Value Added (GVA) in 2022 reached €2.33 billion, a substantial 277% increase compared to its output a decade ago. This rise has been particularly steep in the last three years, fueled by incentives encouraging foreign ICT companies to relocate to Cyprus.

Marios Tannousis, CEO of Invest Cyprus, said that the country's success in drawing a significant number of multinational technology firms stems from an attractive incentive package. This initiative, promoted by Invest Cyprus in collaboration with the private sector and government, has been a key factor in this achievement.

Tannousis highlighted that this package is complemented by the effective functioning of the Business Facilitation Unit, launched by the Ministry of Energy. This unit ensures expedited processing of company registrations and work permit provisions, essential for the operations of companies in Cyprus.

Demetris Nissiotis, President of the Cyprus Information Technology Enterprises Association (CITEA), which boasts 89 members, attributed the sector's growth to two main factors. First is the allure of Cyprus for tech companies, a result of Invest Cyprus's persistent efforts, and second, the growing global prominence of technology. He emphasized, "Especially following the Covid-19 pandemic, which was a turning point, this is increasingly evident in Cyprus."

Nissiotis also foresees further growth in the sector, spurred by the government's investments in digitization through the Recovery and Resilience plan and the European Union's policy, which positions digitization alongside green transition as central pillars in strengthening the EU economy.

To sustain this momentum, Tannousis underscored the necessity for international ICT and tech companies investing in Cyprus to operate in an efficient, red tape-free environment. He mentioned that to achieve this, Invest Cyprus and the government regularly organize round table discussions involving the President of the Republic, foreign investors, and key ministers. "Through these dialogues, where investors present challenges, concerns, and proposals and receive responses from the President and ministers, Cyprus's investment climate is further fortified, enhancing economic growth and job creation through foreign direct investments," Tannousis explained.

He further noted the crucial role of digitization in driving economic growth, linking it to advancements in education and productivity improvements.

Nissiotis acknowledged the solid momentum of the sector but pointed out a significant challenge: the shortage of locally skilled staff. "Skilled staff is currently insufficient, necessitating intensified efforts in both the short and long term," he said.

In the short term, Nissiotis suggests initiatives to foster reskilling and up-skilling, enabling staff from other sectors to transition to ICT and attracting skilled staff from abroad. In the long term, he advocates linking the sector with educational institutions to enhance the population's technology skills. This approach, he believes, will increase the number of students pursuing information technology or STEM studies. "We need to start this today, as the longer we delay, the longer it will take to see results," he emphasized.

CyStat's report also highlighted the top five sectors contributing to Cyprus's GDP in 2022. Leading the list was Wholesale and Retail Trade, with almost €3 billion, followed by Financial and Insurance Activities (€2.40 billion), Information and Communication (€2.33 billion), Real Estate Activities (€2.09 billion), and Professional and Scientific Activities (€2.07 billion).