Cyprus has improved its position in the 2026 global competitiveness rankings compiled by the IMD World Competitiveness Center, climbing two places to 42nd among 70 economies, supported by stronger economic performance, a more competitive business environment and improvements in infrastructure.
According to the IMD World Competitiveness Yearbook 2026, which assesses economies on the basis of 341 criteria, Cyprus rose from 44th place in 2025, partially reversing the decline recorded in recent years.
The country ranked 30th in economic performance, 30th in government efficiency, 46th in business efficiency and 42nd in infrastructure. The strongest gains were recorded in economic performance and business efficiency, where Cyprus advanced six places in each category compared with the previous year.
The report attributes the improvement in economic performance to low unemployment, rising employment levels, easing inflation and continued strength in services exports. Cyprus also maintained advantages in attracting foreign direct investment and demonstrated economic resilience.
Among the positive developments highlighted were a reduction in long-term unemployment and improved assessments of the country’s international image, business flexibility and efforts to curb tax evasion.
Cyprus also recorded notable progress in business efficiency, particularly in management practices and business values, areas where it has traditionally lagged. The report linked these gains to greater corporate adaptability, more effective board governance, an improved international reputation and increased openness to innovation and reform.
Despite the overall improvement, the report identifies persistent challenges. Cyprus fell four places in the government efficiency category, mainly due to weaker scores related to the legislative and regulatory framework for businesses. Weaknesses were noted in access to capital markets, incentives for artificial intelligence investment, regulatory burdens, the time required to establish businesses and efforts to tackle the shadow economy.
However, strong public finances, continued budget surpluses, declining public debt and improved creditworthiness helped offset part of the decline.
The report also points to structural weaknesses in infrastructure. While Cyprus improved its overall infrastructure ranking, progress was driven mainly by stronger scientific infrastructure, including better performance in patents, intellectual property protection and knowledge transfer between universities and businesses.
At the same time, Cyprus continues to rank among the weakest performers in basic infrastructure, placing sixth from the bottom among the 70 economies surveyed. Water resource management, energy infrastructure, electricity generation and high energy costs remain longstanding constraints on competitiveness.
The report further notes shortcomings in artificial intelligence skills, environmental sustainability, forest conservation, air pollution and food waste management. It also highlights weaker performance in fixed capital investment, slower long-term labour force growth and persistent concerns regarding the shadow economy, corruption and environmental challenges.
In a survey of business executives accompanying the ranking, the five most attractive features of Cyprus as a business destination were identified as its competitive tax regime, business-friendly environment, highly educated workforce, economic dynamism and open entrepreneurial culture. By contrast, the country scored relatively poorly in research and development, corporate governance quality and government effectiveness.
(Source: CNA)
