Economic Resurgence Drives Climb

Cyprus has strategically improved its standings in the IMD World Competitiveness Yearbook 2026, rising to 42nd place among 70 economies from its 44th position in 2025. This advancement is underpinned by robust economic performance, enhanced business environments, and strategic infrastructure investments.

Enhanced Business Environment And Improved Efficiency

Significant improvements were recorded in key sectors. In economic performance, Cyprus surged six places, fueled by low unemployment, rising employment levels, moderate inflation, and sustained performance in services exports. The business environment mirrored these gains, with companies better positioned to manage risks and opportunities. These changes were bolstered by more effective board practices and a proactive shift in management values.

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Government And Infrastructure Challenges Remain

Despite these positive trends, challenges persist. The report highlights a four-place drop in government efficiency, primarily due to legislative constraints affecting businesses. Access to capital markets, limited incentives for artificial intelligence investment, and prolonged business registration times add to these challenges. Structural issues in infrastructure continue to hamper competitiveness, especially in basic facilities, water resource management, and energy production, where high electricity costs remain problematic.

Balancing Fiscal Strength With Future Investments

Cyprus’ strong fiscal performance, characterized by continued budget surpluses, reduced public debt, and improvements in creditworthiness, has helped to cushion the impact of some of these setbacks. However, lingering issues such as underperformance in research and development, corporate governance, and government effectiveness indicate that further strategic reforms are necessary to sustain long-term growth.

Outlook For A Competitive Future

The yearbook findings also underscore improvements in foreign direct investment, economic resilience, and the country’s international image. Business executives have lauded Cyprus for its competitive tax framework and business-friendly policies, which continue to attract investors. Nevertheless, the ongoing challenges serve as a reminder that a concerted effort in addressing regulatory and infrastructural shortcomings is essential for Cyprus to maintain and build on its competitive trajectory.