**Our View: Productivity, Not Growth, is Cyprus’ Real Challenge**
The Cyprus economy faces a pressing challenge: low productivity. This issue has been highlighted in the recently published Cyprus Competitiveness Report for 2025, which was presented by Professor Sofronis Clerides from the University of Cyprus at a gathering last Monday. The report underscores that while traditional economic indicators such as growth rates and employment levels appear robust, they do not fully capture the underlying weaknesses that hinder the country’s economic potential.
Professor Clerides, who led the research team behind the report, emphasized that the focus should shift towards enhancing productivity rather than merely pursuing growth. He pointed out that the current economic landscape, characterized by healthy growth, low public debt, budget surpluses, and low unemployment, can create a false sense of security. Despite these positive indicators, the report asserts that the structural weaknesses in productivity must be addressed to ensure sustainable economic development.
One of the key findings of the report is the need for Cyprus to attract more greenfield investments—new business operations that create economic value from the ground up. While the country has successfully attracted substantial foreign investment, much of it has been through company relocations and financial transactions rather than the establishment of new enterprises. This reliance on existing businesses moving to Cyprus does not necessarily contribute to long-term economic growth or job creation.
The report also highlights the limitations Cyprus faces in attracting greenfield investments, citing factors such as its small market size, limited labor force, and infrastructure challenges. These constraints make it difficult for the island to compete for new investments that could drive productivity improvements and create high-quality jobs.
Professor Clerides noted that there appears to be a degree of complacency among government officials regarding economic management. The current administration seems to be resting on its laurels, buoyed by favorable economic indicators, rather than proactively developing a comprehensive strategy for the future. This lack of vision could hinder the country’s ability to adapt to changing economic conditions and to attract the types of investments that would foster innovation and growth.
The report calls for a reevaluation of how competitiveness is measured. It suggests that Cyprus must create an environment conducive to business growth and enhance the government's capacity to implement necessary reforms. The focus should be on attracting investments that yield significant benefits while minimizing potential negative impacts on the economy.
Moreover, the discussion during the report's presentation pointed to the need for radical changes in public administration, which is often seen as a barrier to business. The slow-moving justice system and an outdated education system, which has not evolved significantly since the 1970s, are additional obstacles that must be addressed to improve the business climate.
As Cyprus navigates these challenges, it is crucial for the government to adopt a forward-thinking approach. This includes developing a clear strategy aimed at enhancing productivity and fostering an environment that attracts greenfield investments. The current economic conditions, while favorable, will not sustain progress without a concerted effort to innovate and adapt.
In conclusion, while Cyprus enjoys a period of economic stability, the emphasis must shift from merely achieving growth to enhancing productivity. The insights from the Cyprus Competitiveness Report for 2025 serve as a call to action for policymakers to rethink their strategies and prioritize long-term economic health over short-term gains. Without such changes, the island risks stagnation in an ever-evolving global economy.