Building Momentum: EY’s Stelios Demetriou on Cyprus’ Investment Outlook
Insights from the 2024 EY Attractiveness Survey
EY Cyprus, a major player in professional services, has released a significant survey examining the island’s investment allure for 2024. We spoke with Stelios Demetriou, Partner, EY Cyprus Strategy and Transactions Services Leader, and CESA M&A Leader, to learn how the findings reflect the current business landscape.
The 2024 EY Cyprus Attractiveness Survey shows strong investor optimism for the next three years, buoyed by Cyprus’ upgraded credit rating and resilience amid geopolitical tensions. Stelios highlights the island’s favorable tax and legal framework, high quality of life, and rising interest in sectors like manufacturing and R&D. Yet, he underscores the need for streamlined regulations, digitalization, and talent development.
This year’s survey results showcase a positive development in investor sentiment and general optimism toward Cyprus’ attractiveness over the next three years. Despite the geopolitical tensions and conflicts in the region, Cyprus stands out among investors as a relatively secure European investment destination offering across different sectors.
Our survey reveals that investors continue to value factors such as Cyprus' favourable tax, legal framework and good quality of life
The recent upgrades about the island’s credit rating to an investment grade “A” by the main rating agencies also reflect the optimism demonstrating the confidence of the international business community in Cyprus. This is a significant milestone that is a testament of the effort undertaken in recent years towards a strong, resilient and diversified economy.
Our survey reveals that investors continue to value factors such as Cyprus' favourable tax, legal framework and good quality of life. It also emphasizes the need for further improvements in streamlining administrative processes to reduce bureaucracy, implementing talent reforms to address skills mismatches, enhancing access to capital, and further investment in infrastructure. The government has recognized these challenges and is actively pursuing various initiatives to enhance Cyprus’ FDI attractiveness.
The last three years have been marked by lower economic growth, increased energy prices, high inflation, and rising interest rates, leading to a decline in FDI activity across many countries, including Cyprus. However, despite these challenges, Cyprus has demonstrated resilience and adaptability, with its economic growth surpassing the EU average. As an example, the Tourism sector has rebounded strongly in 2024, surpassing the previous records, even after losing key traditional feeder markets such as Russia.
To remain competitive, Cyprus must foster innovation, develop talent, and reduce bureaucracy to sustain investor optimism
To sustain this optimism and country’s competitiveness in the international stage, Cyprus should further improve its investment attractiveness. This includes creating a business environment that fosters innovation and sustainable practices, investing in education reforms and talent development to boost productivity and fill the skills gap of the modern workplace, as well as tackle lengthy paperwork and bureaucracy—an area often cited as a major pain point for many investors.
The increasing interest from foreign investors in establishing manufacturing facilities in Cyprus is largely driven by the trends of reshoring and nearshoring, which have been prompted by supply chain disruptions caused by the pandemic, as well as ongoing geopolitical conflicts in Ukraine and the Middle East. In response to these challenges, many economies and businesses are proactively implementing measures to safeguard against future disruptions by reducing their reliance on foreign markets. Cyprus, with its strategic location and EU membership, is well-positioned to capitalize on this shift to continue attracting significant investments.
In terms of R&D, the heightened interest from investors can be attributed to the government's substantial efforts to enlarge the R&D ecosystem, aiming to position Cyprus as a regional hub for Research, Development, and Innovation. Additionally, Cyprus' continuous improvement in R&D performance, as evidenced by the 2024 European Innovation Scoreboard, further supports its case for being a suitable location for R&D activities.
EY is well-positioned to assist both businesses and the government in capitalizing on these emerging trends. With an extensive network of experts across the globe who possess deep industry knowledge and a solid understanding of market needs, EY can provide valuable insights to facilitate decision-making by the different stakeholders. For the government, EY offers tailored solutions through our infrastructure and public sector advisory services, while for investors, our team provides support throughout the investment journey. We identify promising targets and conduct thorough due diligence to ensure informed decision-making. Our teams can guide investors from initial assessments to the successful completion of investments, including subsequent capital raising efforts.
The regulatory burden and the complexity of lengthy administrative processes continue to be significant factors affecting Cyprus’ attractiveness as an investment destination, as indicated by our survey results. There is a need for simplifying regulatory processes while ensuring compliance with EU regulations and laws, as well as reduce overall administration on the government front.
Accelerating digital transformation in public services is key to addressing regulatory complexity and creating a more business-friendly environment
By accelerating the digital transformation within public services, Cyprus could effectively tackle the above. The government has acknowledged the need for digitalization to address these challenges and has already undertaking several initiatives in this area.
It is also essential that the government introduces additional and targeted initiatives, along with investor-friendly tools. These are expected to align with best practices observed in the EU and globally, while leveraging available EU funding programmes to implement. A notable example is the Business Facilitation Unit (BFU) initiative, established in 2020, which plays a crucial role in fast-tracking the process for foreign investors interested in setting up or expanding their businesses in Cyprus.
Recognizing the pivotal role of foreign direct investment (FDI) in the future economic development of Cyprus, EY can have an important role in promoting FDI opportunities, identifying suitable investors and supporting the implementation of this investments. Central to our efforts is the EY Cyprus Attractiveness Survey which aims in fostering a dialogue among government officials and the investor community to ultimately address investor concerns and enhance Cyprus' appeal as an investment destination.
The EY Cyprus Attractiveness Survey not only presents results that provide insights into current investor perceptions of the island’s attractiveness but also includes a set of recommendations designed to boost this appeal as well as drive critical discussions. EY aims to continue this survey and remain a bridge between foreign investors and the government, ensuring that Cyprus remains an attractive destination for foreign investment.
