Low productivity is the main structural weakness of the Cyprus economy, according to the Cyprus Competitiveness Report for 2025. Professor Sofronis Clerides of University of Cyprus, who headed the research team and presented the report at a gathering last Monday, said that the issue of productivity remained a problem and Cyprus needed to attract more greenfield and other productive investments that create quality jobs and transfer know-how.

He said competitiveness could no longer be measured only through the traditional economic indicators. In spite these indicators – rate of growth, high employment rates, inflow of foreign workers – being very sound, they were not the only measures of competitiveness. The report said there was a need to increase productivity, to create conditions for business growth and to improve the state’s ability to implement reform.

The discussion, during the presentation of the report, noted that the substantial foreign investment Cyprus attracted had more to do with company relocations, acquisitions and other financial transactions. There was little greenfield investment that set up new business operations from scratch and created new economic value. Admittedly, there are restrictions to attracting greenfield investment because of Cyprus’ size – small market, small labour force – and infrastructure.

There is undoubtedly a certain degree of complacency by governments in the management of the economy, because the economic indicators are very good. There is healthy annual growth, the public debt is low, we have budget surpluses and very low unemployment. The main drivers of the economy, however, remain tourism and construction. The large number of businesses that have set up offices in Cyprus and brought many highly paid workers with them have boosted aggregate demand and ensured unprecedented tax revenues for the government.

This is also investment, but according to Clerides not all investments were the same. “We are a small economy and cannot absorb an unlimited number of new companies without consequences,” he said. We had to attract investments that offered the greatest benefits and the fewest negative side effects, he said, although there was an admission that this was easier said than done.

Without trying, however, nothing will change. At the moment there is no clear strategy for attracting greenfield investment, the government resting on its economic laurels rather than developing a vision for the future of the economy. This would require radical change – public administration currently works as an obstacle to business as does the slow-moving justice system, while we have an antiquated, unionised education system still stuck in the 1970s.

We need a government with a vision. A government that will develop a strategy for realising this vision and move the economy to another level. Maintaining the current economic conditions, which have served us well for many years, might be the path of least resistance but the economy will not progress.