Cyprus’ labor productivity rose by an average 1.44% a year across the economy between 1996 and 2025, but gains varied sharply by sector, according to a CypERC report.
Information and communication led by a wide margin, with annual productivity growth of 5.27%. Financial and insurance activities grew 2.33%, while wholesale and retail trade increased 1.61%.
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Agriculture, forestry and fishing recorded an average annual decline of 0.90%, followed by real estate at 0.84% and arts and other services at 0.82%. Construction also declined, by 0.10% a year.
Productivity Gains Remain Uneven
Total Factor Productivity, which measures how efficiently labor, capital and other inputs are combined, increased by an average 0.99% annually through 2024. Information and communication again led, with TFP growth of 4.38%, while agriculture, construction, industry, and arts and other services recorded declines.
Pay growth also varied across sectors. Real labor compensation increased by an average 1.10% annually relative to sectoral output prices between 1996 and 2025, and by 1.12% when adjusted for the Consumer Price Index, below the 1.44% productivity growth rate.
Recent Trends Show A Wider Gap
Between 2022 and 2025, economy-wide labor productivity grew by 1.70% annually. Real labor compensation increased 1.30% against sectoral output prices and 1.95% after CPI adjustment.
Information and communication again recorded the strongest gains, with productivity rising 6.51% annually. Real compensation increased 10.37% against sectoral output prices and 9.93% after CPI adjustment.
Agriculture moved in the opposite direction, with productivity falling 4.06% annually. Real compensation declined 1.83% against output prices and 0.74% after CPI adjustment.
Cyprus Needs More Targeted Productivity Policies
CypERC said sustained productivity growth is critical for competitiveness, incomes and living standards. Given the differences between sectors, the center argued that broad economic policies should be complemented by targeted measures.
Innovation, technology adoption and human capital development will be key, alongside investment in digital infrastructure, research and development, education and skills. Addressing shortages of highly skilled workers could also support further growth in information and communications technology.
Recent Eurostat data showed Cyprus’ labor productivity per person increased 1.1% year-on-year in the first quarter of 2026, while productivity per hour rose 0.5%.
Cyprus Fiscal Council President Andreas Charalambous has also warned that growth cannot rely indefinitely on migration-driven employment gains. He said future economic performance will increasingly depend on productivity, supported by investment, AI adoption and continuous workforce training.
CypERC said sector-specific policies will be particularly important for weaker industries, while continued investment in skills, technology and innovation can help sustain gains in knowledge-intensive sect
