20/06/2024 08:56
The economic outlook for Cyprus is positive despite a challenging context, but the country’s competitiveness faces significant challenges due to a mismatch between skills and labour market needs, insufficient access to finance for companies, and the insufficient roll-out of renewable energy, are some of the findings of the report on Cyprus published as part of the European Commission’s European Semester Spring Package which was presented in Brussels on Wednesday.
The package provides policy guidance to Member States to build a robust and future-proof economy that secures competitiveness, resilience and long-term prosperity for all, while maintaining sound public finances, in the face of a challenging geopolitical environment.
The European Semester approach, presented by Commission Vice President Valdis Dombrovskis, Economy Commissioner Paolo Gentiloni and Jobs Commissioner Nicolas Schmit, aims to enhance the competitiveness of the EU’s economies, through an integrated approach across all policy areas: macroeconomic stability, promoting environmental sustainability, productivity and fairness.
Regarding Cyprus, the report points out that the economic outlook for the country remains positive despite a challenging context. Also, despite positive developments, labour market and social cohesion challenges persist, while the country is facing significant challenges in transitioning to a more sustainable economy.
Also, in the context of an assessment of macroeconomic imbalances in EU member states, the Commission found that Cyprus continues to experience imbalances, with vulnerabilities related to private, government and external debt having overall receded but remain relevant, while the large current account deficit has widened further.
Cypriot economy competitiveness
According to a summary provided in the report on Cyprus on elements related to the competitiveness of the country’s economy, the Commission finds that Cyprus records mixed performance on competitiveness, making no significant progress since 2022 and the pre-pandemic years.
The country performs well on exports of professional, ICT and tourism services and in attracting foreign investment. It is well integrated into the single market and is taking further action to boost its performance, the report says.
Cyprus' recovery and resilience plan "comprehensively tackles several challenges related to improving the business environment," it notes. The measures include reducing red tape in the public sector, streamlining permitting procedures, improving the efficiency of public administration, boosting the effectiveness of the tax system, promoting a robust anti-corruption framework, tackling the issue of non-performing loans and creating incentives for innovation.
However, the report authors point out that the following competitiveness challenges remain for Cyprus:
- skills mismatches, a decline in basic skills and a low level of digital skills which hold back productivity, knowledge valorisation, labour supply and the green and digital transitions;
- insufficient access to finance for companies, especially outside the monetary and financial institution sector, and access to private investment in manufacturing and innovative businesses are limiting the potential for growth;
- insufficient roll-out of renewable energy and the delayed transition to a circular economy pose risks to energy autonomy and efficiency and could potentially undermine the long-term competitiveness of the country.