COMMISSION STAFF WORKING DOCUMENT 2024 Country Report - Cyprus Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Cyprus
Date: 2024-06-19
Institutions: European Commission, Secretariat-General
Subjects: Cyprus, budget policy, competitiveness, economic policy, economic recovery, economic reform, employment policy, energy policy, social policy, stability pact

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 19.6.2024  SWD(2024) 613 final  COMMISSION STAFF WORKING DOCUMENT 2024 Country Report - Cyprus Accompanying the document Recommendation for a COUNCIL RECOMMENDATION  on the economic, social, employment, structural and budgetary policies of Cyprus {COM(2024) 613 final} - {SWD(2024) 600 final}  
 
 
 
 
ECONOMIC AND EMPLOYMENT SNAPSHOT 

increasing 

particularly  strong  and 
in  real 
estate.  By  contrast,  the  level  of  productivity-
enhancing  investment,  including  research  and 
development,  is  still  low. This  is  not projected 
to  increase,  which  may  undermine  the  long-
term  competitiveness  of  the  country  (see 
Annex 11).     

Export  growth  has  slowed  and  the 
is  changing. 
composition  of  exports 
Revenues  from  total  exports  of  goods  and 
services  remains  almost  stagnant  in  2023, 
following  a  strong  annual  growth  of  around 
20% in the previous two years, in a context of 
a  post-covid  recovery  of  external  trade. 
However,  positive  trends  in  certain  sectors, 
notably  services,  continued.  In  particular,  the 
tourism  sector  bounced  back  significantly  in 
2023, reaching about 97% of the arrival levels 
in  2019.  Export  revenues  related  to  tourism 
recorded  an  annual  increase  of  more  than 
20%  in  2023.  At  the  same  time,  exports  of 
other  services,  such  as  legal  and  accounting, 
fell  sharply,  especially  at  the  beginning  of 
2023,  mainly  due  to  further  consequences  of 
Russia’s  war  of  aggression 
in  Ukraine. 
However,  the  trends  to  diversify  the  economy 
and to increase exports of new service sectors 
continue.  ICT  and  professional  services  have 
played  a  significant  role  in  this  development, 
with their shares in exports of services having 
increased  from  around  21%  in  2016-2019  to 
close to 40% in 2023 (CBC, BoP statistics). The 
share  of  gross  value  added  by  services 
(excluding  sectors  related  to  tourism  and 
public  services) increased from  an  average  of 
almost  53%  in  the  period  2016-2019  to 
around 61% in 2023.  

deficit 

current 

account 

reflecting 

The 
has 
some 
deteriorated, 
vulnerabilities  in  Cyprus'  economy.  The 
current  account  deficit  widened  from  7.9%  in 
2022  to  12.1%%  of  GDP  in  2023.  The  sharp 
deterioration of the external balance highlights 
imports  of  oil,  raw 
the  dependency  on 

The economic outlook is positive 
despite a challenging context 

remain 

following  buoyant  growth 

Economic  growth  in  Cyprus  slowed  in 
2023 
in 
2022 (1).  After  hitting  5.1%  in  2022,  GDP 
growth slowed but remained dynamic at 2.5% 
in 2023. It is expected to continue this strong 
performance  and  grow  by  2.8%  in  2024  and 
2.9%  in  2025.  Domestic  demand  is  expected 
to 
the  main  driver,  with  both 
consumption and investment growing strongly. 
Household  spending  is  supported  by  rising 
employment  and  wages.  In  addition,  growth 
benefits  from  investment  in  both  private  and 
public  projects,  mainly  in  construction.  Net 
exports  were  a  drag  on  growth  as  imports 
continued growing more strongly than exports 
as  a  result  of  high  demand  for  imported 
goods.  Net  exports  are  expected  to  remain 
weak in the medium term due to the economic 
uncertainty  in  many  trading  partners  and  a 
strong demand for imports.  

Private  investment  is  not  expected  to 
increase in the short term. In 2023, private 
investment  in  Cyprus  was  somewhat  below 
the EU average (18.6% of GDP against the EU 
average of 19.2%). A unique feature of private 
investment  in  Cyprus  is  that  the  share  of 
household  investment  is  proportionally  higher 
than  anywhere  else  in  the  EU.  Households 
account  for  close  to  half  of  all  investment  in 
Cyprus,  double  the  EU  average.  Investment 
activity in Cyprus is mainly concentrated in the 
construction  sector, 
the  strong 
demand  for  housing.  Foreign  investment  is 
increasing 
the 
remaining 
economy 

in  many  sectors,  helping 
to 

reflecting 

diversify, 

but 

(1)  The cut-off date for the data used to prepare the 27 

Country Reports was 15 May 2024. 

2 

 
 
 
and 

goods. 

consumer 

The 
materials 
improvement  expected  in  the  overall  current 
account performance is still below target. The 
high  current  account  deficit  is  also  related  to 
resilient  consumer  spending,  contributing  to 
the  historically  low  saving  rate  in  Cypriot 
households.  At  the  same  time,  foreign-owned 
companies,  which  continue  to  provide  a 
significant  boost  to  exports  of  services  from 
Cyprus,  contribute  to  the  high  and  growing 
primary  income  deficit  since  they  repatriate 
their profits. Moreover, the excessive profits of 
the  mostly  foreign-owned  banking  sector 
pushed  primary  income  deficit  above  10%  in 
2023. 

Graph 1.1: Read GDP growth breakdown 

Source: European Commission, Spring 2024 Economic 
Forecast 

Inflation  has  started  to  fall.  Following  a 
peak  of  8.1%  in  2022,  inflation  dropped  to 
3.9% in 2023, thanks to the fall in energy and 
food prices and easing supply-side disruptions. 
It  is  expected  to  slow  further  in  2024  and 
2025  as  pressure  from  high  energy  prices 
abates.  However,  core  inflation  is  expected  to 
be slightly (0.5 pps) higher, which can be partly 
linked to wage indexation. Real wages rose by 
2.4% 
in  2023  and  are  set  to  continue 
increasing  by  1.4%  in  2024.  This  follows  a 
decade  of 
low 
productivity gains.  

low  wage  growth,  amid 

Public  finances  continue  to  improve,  and 
public  debt  has  fallen  swiftly.  Following 
the  challenging  years  of 
the  COVID-19 
pandemic,  Cyprus’s  budget  balance  recovered 
quickly and turned positive in 2022, recording 
a  general  government  surplus  of  2.7%%  of 
GDP.  The  surplus  rose  to  3.1%%  of  GDP  in 

2023  and  is  projected  to  be  2.9%  of  GDP  in 
2024-2025.  Debt  has  been  falling  steeply 
since  peaking  at  close  to  115%  of  GDP  in 
2020. Debt is now expected to fall below 70% 
of  GDP  in  2025.  However,  healthcare  costs 
and ageing are expected to be a drag on public 
finances  in  the  future.  Healthcare  costs  are 
projected to rise by 0.8 percentage points (pps) 
of  GDP  by  2070,  against  the  EU  average  of 
0.6 pps  (see  Annex  16).  Overall,  the  risks  to 
fiscal  sustainability  are  low  in  the short  term, 
medium  in  the  medium  term,  and  low  in  the 
long-term, according to the Commission’s debt 
sustainability analysis.  

Macroeconomic vulnerabilities relating to 
private,  public  and  external  debt  remain, 
but  continue  to  recede.  An 
in-depth 
review (2)  was  carried  out  as  part  of  the 
macroeconomic  imbalance  procedure  earlier 
this  year.  It  found  that  both  household  and 
non-financial  corporate  debt-to-GDP  ratios 
continued  falling  in  2023  but  remain  high. 
However, corporate debt is inflated by the debt 
of Special  Purpose Entities (SPEs),  which pose 
limited risks to the economy. The decline in the 
stock  of  non-performing  loans  held  by  banks 
over the last years has been significant. Action 
to  resolve  these  loans  held  by  the  credit 
acquiring companies is expected to bring down 
private  debt  further.  The  government  debt 
ratio  is  decreasing  swiftly,  mainly  thanks  to 
the  high  budgetary  surplus.  The  current 
account  deficit  remained  high  in  2023  due to 
the  repatriation  of  profits,  continued  robust 
domestic  demand  and  additional  temporary 
factors,  such  as  energy  prices  and  ship 
registration. The deficit is expected to improve 
only  slightly  this  year  and  next.  The  very 
negative Net International Investment Position 
(NIIP) is also inflated by the presence of SPEs. 
The  NIIP,  which  is  currently  falling  thanks  to 
high nominal GDP growth, is set to deteriorate 
in the medium term unless the current account 
improves markedly. 

(2)  See SWD(2024) 81 final. 

3 

-12-8-40481216171819202122232425Net exportsInvestmentPriv. consumptionGov. consumptionInventoriesReal GDP (y-o-y%)forecastpps.  
  
 
 
 
Box 1: 

Cyprus’ competitiveness in brief 

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.  Cyprus'  recovery  and  resilience  plan 
comprehensively  tackles  several  challenges  related  to  improving  the  business  environment.  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 following competitiveness challenges remain:  

• 

• 

• 

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. 

to achieve the twin green and digital transition 
and to diversify its economy.  

is  doing 

relatively  well 

the  principles  of 

in 
Cyprus 
implementing 
the 
European  Pillar  of  Social  Rights,  but  not 
on all fronts. The gender employment gap (9 
pp in 2023) is below the EU average (10.2 pp), 
and  the  gender  pension  gap  is  one  of  the 
widest  in  the  EU  (at  36.7%  in  2022,  against 
the EU average of 26.1%). The share of young 
in  employment,  education  or 
people  not 
training fell in 2023, but it is still above the EU 
average  (see  Annex  14).  Public  funding  for 
long-term care is less than one fifth of the EU 
average,  which 
find 
forces 
alternative  care  solutions  and 
limits  the 
employment rate, notably for women, which is 
limited 
currently  74.6%.  Similarly, 
availability  of  childcare  services  greatly 
reduces  women’s  employment  rate,  including 
older  women,  and  their  capacity  to  build  up 
pension  rights.  The  employment  gap  between 
people  with  and  without  disabilities  has  been 
above  the  EU  average  since  2021.  In  general, 
the risk of poverty or social exclusion is low in 
Cyprus,  but  higher  for  disadvantaged  groups, 
such  as  people  with  disabilities  and  people 
born outside the EU. Vulnerable groups also  

families 

the 

to 

Despite positive developments, 
labour market and social cohesion 
challenges persist 

Labour  market  performance  has  been 
strong,  but  challenges  persist,  notably  in 
terms  of  skills  mismatches  and  basic 
skills.  The  employment  rate  reached  a  peak 
of  78.9%  in  2023  and  is  well  above  the  EU 
average. This puts Cyprus on track to meet its 
national 2030 employment target of 80%. The 
unemployment  rate  fell  to  6.1%  in  2023  and 
is set to fall further in 2024 and 2025. Labour 
shortages  in  the  green  sector,  in  construction, 
and 
science, 
in 
mathematics 
nursing  staff  are  increasing.  However,  Cyprus 
has one of the lowest shares of STEM students 
in  the  EU  (11  vs  EU  25.4%)  (see  Section  3). 
Digital  literacy  in  Cyprus  (49.5%)  also  lags 
significantly  behind  the  EU  average  (55.5%). 
The  2022  OECD  PISA  report  highlighted  that 
the  rate  of  underachievement  among  Cypriot 
students  in  basic  skills  is  rising  and  is  one  of 
the highest in the EU (see Section 3 and Annex 
15).  These  trends  undermine  Cyprus’  capacity 

(STEM)  occupations  and 

engineering, 

technology, 

4 

 
 
Box 2: 

UN Sustainable Development Goals (SDGs)  

Cyprus  continues  to  make  progress  in  almost  all  SDGs,  and  is  above  the  EU  average  and 
continues to  make  progress in 7 of them, thus is achieving  ‘No  poverty’ (SDG 1), ‘Zero hunger’ 
(SDG  2)  ‘Good  health’  and ‘Well-being’  (SDG  3), ‘Clean  water and sanitation’  (SDG  6),  ‘Reduced 
inequalities’  (SDG10),  ‘Life  below  water’  (SDG14)  and  ‘Life  on  land’  (SDG15).  Cyprus  is  making 
progress  on  all  SDG  indicators  related  to  macroeconomic  stability  (SDGs 8,  16,  17).  However, 
efforts need to be stepped up to close the gap with the EU average on all of them. Even though 
Cyprus’s  overall  performance  in  relation  to  ‘Gender  equality’  (SDG  5)  is  worse  than  the  EU 
average, Cyprus is performing  better on gender employment rate and pay gap (see Annex 14). 
Related  to  environmental  sustainability,  Cyprus’s  performance  is  not  improved  in  relation  to 
‘Sustainable  cities  and  communities’  (SDG  11),  while  it  still  needs  to  catch  up  with  the  EU 
average on ‘Affordable and clean energy’ (SDG 7) and ‘Responsible production and consumption’ 
(SDG 12) (see Annex 6).   

Out  of  the  17  indicators,  10  SDGs  remain  below  the  EU  average.  Besides  those  highlighted 
above, these relate to Fairness (SDGs 4 and 5) and Productivity (SDG 9). 

The  transition  to  sustainable  public 
transport  is  still  in  its  infancy  and  the 
number  of  electric  vehicles  and  charging 
stations  remains  very  low  (see  Annex  6). 
Cyprus  is  at  risk  of  missing  both  the  2025 
(55%)  and 
targets  for  municipal  waste 
packaging  recycling  (65%),  with  a  waste 
recycling  rate  of  only  15.3%  in  2021  (see 
Annex  9).  Cyprus  also  has  a  high  degree  of 
vulnerability  to  climate  change.  The  national 
adaptation policies and measures planned are 
insufficient to tackle these vulnerabilities (see 
6).  
Annex 

face persistent barriers to accessing the labour 
market  and  finding  quality  employment.  This 
also 
limits  employment  and  productivity, 
including  in  the  development  of  the  social 
economy.  Despite 
improvements, 
energy  prices  for  heating  and  cooling  houses 
and  for  private  transport  fuel  are  high  in 
Cyprus (see Annex 8).  19.2% of people stated 
that they could not properly heat their homes 
in 2022 (EU average 9.3%).    

recent 

Cyprus is facing significant 
challenges in transitioning to a 
more sustainable economy.  

in 

Cyprus 
its 
is  making  progress 
transition to a green economy and energy 
autonomy, but  it  faces notable  obstacles 
and  delays  (see  Section  3).  Despite  the 
significant  steps  taken  to  accelerate  the  roll-
out  of  renewable  energy  and  to  improve 
energy security, substantial challenges remain 
for  Cyprus.  According  to  the  draft  updated 
National  Energy  and  Climate  Plan  (NECP) 
Cyprus  needs  to  increase  its  targets  for 
reducing  greenhouse  gas  emissions  and  for 
adaptation to climate vulnerabilities and risks. 
The  country  has  implemented  a  series  of 
energy  efficiency  measures  with  the  support 
of several EU funds (see Annex 7).  

5 

 
 
IMPLEMENTATION OF KEY REFORMS AND 
INVESTMENTS USING EU INSTRUMENTS 

Funding from the Recovery and Resilience 
Facility  (RRF)  and  cohesion  policy  are 
mutually  reinforcing  Cyprus’  efforts  to 
boost  competitiveness  and  stimulate 
In  addition  to  the 
sustainable  growth. 
EUR 1.2  billion  of  RRF  funding  described  in 
Annex 3, cohesion policy provides Cyprus with 
EUR 968.6  billion  for  the  2021-2027  period. 
Combined support from these two instruments 
is equivalent to around 7.34% of the country’s 
2023  GDP,  well  above  the  EU  average  of 
5.38% (see Annex 4). 

Under  its  recovery  and  resilience  plan 
(RRP),  Cyprus  has  launched  important 
policy  measures  that  are  expected  to 
boost  the  country’s  competitiveness.  In 
particular, the plan envisages major reforms in 
policies  spanning  justice,  anti-corruption,  the 
job  market  and  renewable  energy  sources. 
Cyprus has also made substantial investments 
in  its  public  health  and  public  education 
system,  in  energy  renovation  of  buildings, 
digital  transition  of  the  public  sector  and  in 
protecting forests from wildfires. 

The  implementation  of  Cyprus’  recovery 
and resilience plan is underway, however 
timely  completion  requires 
increased 
efforts.  Cyprus  has  one  complete  payment 
request  so  far,  while  the  Commission  is 
currently  working  in  collaboration  with  the 
Cypriot  authorities 
to  assess  a  second 
payment  request,  including  the  second  and 
third  instalments.  The  first  payment  request 
corresponded  to  14 milestones  and  targets in 
the  plan  and  resulted  in  the  disbursement  of 
EUR  85  million  on  2  December  2022.  As  of 
mid-May  2024,  EUR  262.7  million  have  been 
disbursed to Cyprus under the RRF (see Annex 
3).  The  high  number  of  remaining  milestones 
and  targets  call  for  addressing  emerging 
delays  while  strengthening  administrative 
capacities 
reforms  and 
investments can be completed on time.  

to  ensure 

that 

growth 

Cyprus’ 

Cohesion  policy  funding  contributes  to 
tackling 
and 
competitiveness  challenges  and  aims  to 
reduce  the  country’s  regional  and  social 
disparities.  During  the  2014-2020  cohesion 
policy programming period, support focused on 
research  and  innovation,  energy  efficiency, 
environmental  protection  and  education.  For 
the  current  2021-2027  programming  period, 
support  focuses  on  developing  a  competitive 
and  innovative  growth  model,  facilitating  the 
transition  to  a  circular  economy,  promoting 
sustainable  urban  transport,  accelerating  the 
energy  transition,  providing  quality  social 
services  and  making  progress  on  the  digital 
transition. 

A lighter administrative burden 
and a better business environment 

The  RRP  funds  action  to  improve  the 
efficiency  of  the  public  administration. 
For instance, Cyprus digitalised key  workflows 
for  public  services  and  will  provide  70  new 
public services by 2026. Under the RRP, Cyprus 
brought in new performance evaluation criteria 
to  improve the efficiency of  the public  sector. 
In  addition,  it  adopted  an  action  plan  to 
modernise  human  resources  management  in 
the civil service. 

Under the RRP, Cyprus has taken steps to 
increase  the  efficiency  of  permitting 
procedures.  For  example,  it  upgraded  its 
digital  platform  for  building  permits 
to 
streamline  the  application  process  for  the 
authorities.  As  of  June  2023,  businesses  can 
access  a  new  digital  platform  to  request 
permits  for  renewable  energy,  such  as  solar 
power.  As  a  result,  the  reform  cut  the 
administrative burden in setting up solar parks 
the 
by  an  estimated  50%.  Streamlining 

6 

 
 
permitting  procedures  in  Cyprus  accelerates 
the  roll-out  of  renewables.  This  is  a  partial 
related  country-specific 
response 
the 
on 
recommendation 
accelerating 
further 
renewables  by 
of 
deployment 
streamlining permitting procedures in Cyprus. 

the 

to 

to 

burden 

improve 

Measures to improve the effectiveness of 
the  tax  system  are  underway.  These 
include digitalising tax services, and easing the 
administrative 
tax 
compliance. A reform to reduce aggressive tax 
planning  has  also  started  and  the  authorities 
are 
the 
effectiveness  of  the  new  framework.  The 
planned 
the 
customs  and  electronic  payment  system  in 
2024  should  simplify  and  accelerate  customs 
procedures,  reduce  administrative  costs  and 
make revenue collection more efficient. 

in  modernising 

investment 

hampering 

tackling 

issues 

Under  the  RRP,  Cyprus  took  measures  to 
improve its anti-corruption framework. In 
February 2022, Cyprus passed a law to protect 
whistle-blowers reporting fraud and corruption. 
In  March  2022,  it  adopted  a  set  of  anti-
corruption  measures,  including  a  law  setting 
for  anti-
independent  authority 
up 
corruption.  Cyprus  also  took  steps  to  use 
blockchain 
protect 
traditional  Cypriot  products  (such  as  dairy, 
honey and spirits) against fraud. 

technology 

and 

the 

to 

the  operating  environment 

Cyprus  took  steps  to  tackle  the  long-
standing  issue  of  non-performing  loans. 
In July 2022, Cyprus adopted two laws, putting 
credit  servicers  under  the  Central  Bank’s 
regulation  and  supervision,  and  giving  digital 
access  to  credit  servicers  and  credit  acquiring 
companies  to  the  Land  Registry.  This  will 
improve 
for 
managing  non-performing  loans.  In  December 
2023, Cyprus amended the law governing the 
sale  of  properties  to  facilitate  the  swift 
transfer  of  property  rights  from  lenders  to 
buyers  as  soon  as  the  contractual  obligations 
of  a  transaction  are  met.  The  sense  of 
ownership 
incentivises  buyers  to  continue 
servicing their loans and partly responds to the 
related  country-specific  recommendation  for 
Cyprus. 

Making  use  of  multiple  funding  sources, 
improve 
Cyprus  has  taken  steps  to 
support  for  research  and 
innovation. 
Cohesion  policy  funds  have  helped  facilitate 
active  cooperation  between  business  and 
research  institutions  and  boosted  the  income 
of  researchers  across  the  country.  Although 
challenges  remain,  the  RRP  includes  reforms 
that aim to attract investment in and people to 
work  in  research  and  innovation  through  tax 
incentive  schemes  and  collaboration  between 
research  institutes  and  public  universities  to 
create  new  education  programmes.  Under  the 
RRP,  Cyprus  also  committed  to  increasing 
research  and  development 
for 
businesses, with a focus on small and medium 
businesses and start-ups. 

funding 

Unlocking investments in the 
energy transition 

its 

The 

RRP 

is  taking 

important  steps  to 
Cyprus 
accelerate  the  energy  transition  and  to 
isolation  from  the  European 
end 
includes 
electricity 
grid. 
investments 
in  developing  the  Great  Sea 
Interconnector,  which  will  bridge  the  national 
electricity  grids  of  Greece  and  Cyprus.  This 
infrastructure will enable the take-up of more 
renewable  energy  sources,  which  will  be 
boosted  by  further  action  under  the  Just 
Transition 
Complementary 
programme. 
in  developing  the  Great  Sea 
investments 
Interconnector  are  also  planned  under  other 
EU  funds,  such  as  the  Connecting  Europe 
Facility. 

Cyprus  has  taken  a  series  of  energy 
efficiency  measures,  thanks  to  support 
from  several  EU  funds.  Cyprus  has  made 
progress in improving the energy efficiency of 
a  significant  number  of  private  and  public 
buildings,  for  instance  through  a  scheme  for 
small  and  medium  businesses  and  non-profit 
organisations.  The 
focuses  on 
reducing  energy  consumption  in  buildings  by 
at least 30% by 2025. Under the RRP, Cyprus 
upgraded the energy efficiency of 405 schools. 

scheme 

7 

 
Box 3:  

 Combined action to boost the impact of EU funds 

To boost economic growth and maximise the impact of EU funding, Cyprus’ RRP includes 
reforms  that  support  investment  under  other  EU  instruments,  creating  important 
synergies and complementarities between the different funds. For example, to stimulate 
investment in the country, an RRF-funded reform is developing a new system to simplify 
the  licensing  and  permitting  procedures  for  strategic  investments,  including  in  health, 
education, social  care, tourism, environment and energy. This  eases the administrative 
burden, streamlines procedures and will greatly increase the take-up of cohesion policy 
and other EU funds, given the limited human resources in Cyprus' public administration. 

Cyprus  is  implementing  RRP  measures 
that  aim  to 
improve  the  education 
prospects for the most vulnerable people. 
In  2023,  Cyprus  inaugurated  the  first  of  four 
public  childcare  centres  currently  being  built 
with  the  aim  of  meeting  the  needs  of 
vulnerable  families,  including  parents  working 
in  industrial  areas.  This  helps  Cyprus  tap  the 
economic  potential  of  parts  of  the  population 
who  have  a  lower  employment  rate,  such  as 
women.  Cyprus  has  also  started  building  a 
technical  school  in  Limassol  to  increase  the 
capacity,  quality  and  attractiveness  of 
vocational education and learning. Works have 
also started to upgrade two of the nine public 
schools for children with special needs. 

The  RRF  and  cohesion  policy  funds 
support  investment  in  modern  medical 
and housing infrastructure to improve the 
quality of and access to health and long-
term care. Under the RRP, Cyprus is focusing 
on modernising and increasing the capacity of 
two  thirds  of  public  hospitals,  on  procuring 
equipment,  and  on  rolling  out  digital  and 
interoperable 
services. 
Complementary  investments  in  digital  health 
services  and  applications  are  also  envisaged 
under the cohesion policy funds for the period 
2021-2027. 
is 
implementing  an  RRP  measure  to  build  or 
renovate at least 18 houses for people in need 
of long-term care, and for other beneficiaries. 

addition, 

e-health 

Cyprus 

In 

Investing in people to boost 
economic growth and resilience 

and 

productivity 

Cyprus  has  implemented  reforms  and 
investments  to  tackle  skills  mismatches, 
improve 
promote 
inclusiveness. Under the RRP, Cyprus adopted 
an  action  plan  to  develop  digital  skills  across 
the entire population. In addition, the RRF and 
the  European  Social  Fund  have  supported 
training initiatives  for  over  150 000 people  in 
Cyprus.  It  has  also  taken  steps,  with  support 
from  the  Technical  Support  Instrument (3),  to 
improve 
integration  of  migrants  by 
creating intercultural networks, which promote 
training  and  job  opportunities.  In  addition,  the 
European  Social  Fund  Plus  helps  fund  the 
employment  of  vulnerable  groups  of  the 
population. 

the 

Making  effective  use  of  multiple  funding 
sources,  Cyprus  has  taken  steps  to 
stimulate  youth  employment  and  help 
young  people  join  the  labour  market.  For 
example,  the  European  Social  Fund  funded 
placements  for  over  8 800  young  people  in 
traineeships  and  jobs  during  the  2014-2020 
programming  period.  Cyprus  also  combines 
RRP  measures  to  provide  over  5 500  young 
people who are not in employment, education 
or training with coaching and career guidance. 
This  lowers  the  barriers  for  young  people 
seeking to join the labour market. 

(3)  1. Enhancing structures and policies for intercultural 
integration in Cyprus, SRSP2020/257, TSI2023/105. 

8 

 
 
 
 
  
FURTHER PRIORITIES AHEAD 

fiscal 

environment, 

Cyprus  faces  challenges  related  to  its 
and 
business 
financial sustainability, skills mismatches 
and  poor  performance  on  basic  and 
digital  skills,  the  green  transition  and 
energy  efficiency.  Tackling  these  challenges 
will 
long-term 
competitiveness  and  make  its  economy  more 
It  will  also  help  make  further 
resilient. 
progress  in  achieving  the  UN  Sustainable 
Development Goals (SDGs). 

Cyprus’s 

boost 

help 

the 
The  policy  assessment  under 
macroeconomic 
imbalances  procedure 
suggests  that  Cyprus  is  making  progress 
on tackling its vulnerabilities. In December 
2023,  Cyprus  took  several  measures  to  help 
resolve  non-performing  loans  (NPLs).  Full  and 
swift  implementation  of  the  recovery  and 
resilience  plan  and  the  measures  to  diversify 
the  economy  and  the  green  transition  are 
expected  to  further  expand  exports  and  ease 
the  country’s  over-reliance  on  oil  imports. 
However,  additional  efforts  would  be  needed 
to  create  investment  opportunities  in  sectors 
that would increase Cyprus’ growth potential. 

It  is  important  to  tackle  the  challenges 
both  at  national  and  at  regional  level  to 
reduce  regional  disparities  and  boost  the 
administrative  and  investment  capacity  in  a 
balanced way across the country. 

Cyprus’ economic transformation 
requires a supportive business 
environment 

rising 
are 

levels  of 
changing 

foreign 
High  and 
investment 
Cyprus’s 
economic  model;  so  far  with  only  a 
limited  impact  on  the  economy’s  growth 
to  promote  company 
potential.  Policies 

headquartering  have  borne  some  fruit  in 
attracting  new  investments  and  diversifying 
the  economy.  In  some  sectors  such  as  retail, 
the presence of foreign companies has given a 
boost  to  competition  and  some  know-how 
transfer  can  also  be  expected  in  technology-
intensive  markets  in  the  future.  The  stock  of 
foreign  direct  investment  today  exceeds  the 
country’s  GDP  by  over  15  times  and  dynamic 
sectors such as ICT have greatly contributed to 
value  added.  However,  a  very  high  share  of 
foreign investment focuses on special purpose 
entities (SPEs). These are typically ship-owning 
(and  deregistering) 
companies 
ships or financial  and holding companies with 
no  real  economic  activity  in  Cyprus,  and  thus 
with  a  low  impact  on  economic  output (4). 
Another  high  share  of  foreign  investment  is 
channelled to existing companies and activities 
such as real estate, which does not expand the 
productive  capacity  of  the  economy.  Overall, 
the  high  and  increasing  number  of  foreign 
companies  in  Cyprus  is  not  yet  proportionally 
reflected  in  an  increase  in  productivity  and 
competitiveness. 

registering 

leaves 

it  also 

Dependence  on  certain  types  of  foreign 
investment  may  compound  the  economic 
vulnerabilities.  The  profits  generated  by 
foreign companies are not reinvested but tend 
to  be  repatriated  abroad.  This  outflow  of 
profits  not  only  drives  up  the  external  deficit 
longstanding  domestic 
but 
investment  needs  unmet.  At  the  same  time, 
high  dependency  on  foreign 
investments 
attracted by low taxes and special tax regimes 
also  entails  risks  related  to  aggressive  tax 
planning  and  anti-money  laundering.  Cyprus’ 
recovery and resilience plan includes a number 
the  business 
of  measures 
environment, 
limiting 
aggressive  tax  planning,  but  a  more  holistic 

improve 
example 

to 
for 

by 

(4)  See the 2024 in-depth review for Cyprus. 

9 

 
 
 
approach  to  tackle  these  issues  is  not  yet  in 
place. 

Cyprus’ 
remains 
capital  market 
comparatively small with a limited role in 
financing domestic companies. The market 
funding  ratio  was  only  22.8%,  significantly 
lower than the EU average of 50.8%, although 
it  has  steadily  increased  in  recent  years. 
According  to  the  Association  for  Financial 
Markets  in  Europe,  Cyprus  has  the  lowest 
share  of  non-financial  corporation  bond  and 
non-financial 
equity 
corporation  financing.  It  also  has  one  of  the 
worst  indicators tracking  the  value  of  venture 
capital investments against GDP in the EU-27. 

issuance 

total 

of 

to 

The 

plans 

limits 

the 
capacity 
Administrative 
potential 
strategic 
reform. 
for 
document, Vision 2035, adopted in 2022, is a 
long-term  strategy 
transform  Cyprus’ 
to 
economic model and is currently being carried 
out (5).  The  administration  often 
faces 
challenges  in  moving  from  strategies  and 
action 
performance-based 
implementation  with  specific  targets  and 
measurable outcomes. This can be linked to a 
lack of human resources and specific skills, but 
also  to  organisational  weaknesses  to  plan 
effectively  and  ensure  financing  and  business 
continuity. Public investment decisions are still 
mainly  driven  by  financing  opportunities 
without  mapping  the  country's 
long-term 
investment needs for infrastructure and know-
how.  The  recovery  and  resilience  plan  tackles 
these issues to  a  certain extent  as  it  includes 
measures to boost the capacity and efficiency 
of the public administration. The government's 
long-term  strategy 
includes  actions  and 
targets  to  that  end,  which  still  need  to  be 
carried out. 

The  administrative  burden  is  a  brake  on 
competitiveness.  The  percentage  of  firms 
reporting  regulation  as  a  major  obstacle  to 
investment  is  not  only  well  above  the  EU 
average,  but  it  has  also  increased  in  Cyprus 
(see  Annex  12).  Despite  the  efforts  made  to 
and 
overall 
improve 

efficiency 

the 

the  public  procurement 
effectiveness  of 
system,  challenges  persist,  particularly  in  the 
competition 
areas 
strategic 
of 
procurement 
(see  Annex  12).  Difficulties 
persist  in  enforcing  the  rule  of  law  and 
accelerating  the  resolution  of  pending  court 
cases (6) (see also Annex 13). 

and 

The  independence  and  accountability  of 
the  prosecution  service  remain  weak. 
Concerns relate to the Attorney General’s dual 
role  as  legal  adviser  to  the  government  and 
head  of  the  prosecution  service,  with  broad 
discretionary powers not subject to any review. 
The  need  to  strengthen  the  independence  of 
prosecution  has  been  highlighted  in  the  past, 
but  these  weaknesses  have  not  yet  been 
tackled. This may undermine the effectiveness 
of the criminal justice system and the broader 
anti-corruption 
framework  and  business 
environment. 

(SOEs) 

governance 

of 
requires 

state-owned 
The 
further 
enterprises 
strengthening.  In  recent  years,  some  policy 
measures were taken to improve the financial 
oversight  of  public  entities,  but  SOE 
is 
performance  monitoring  and  planning 
undermined  by  the 
lack  of  a  complete 
inventory and no obligation to conduct regular 
reporting.  Action  is  also  needed  to  improve 
important  aspects  of  corporate  governance 
such  as  merit-based  nomination  of  boards, 
ownership 
performance-based 
management, transparency  and  accountability 
this 
financial  performance.  Against 
of 
background,  there  are  concerns  about  the 
quality  and  prices  of  services  in  sectors 
dominated  by  SOEs,  such  as  the  electricity 
sector.  The  Ministry  of  Finance  has  received 
technical  assistance  from  the  International 
Monetary  Fund  to  refine  the  current  SOE 
technical 
governance 
in 
assistance 
September 
specific 
recommendations  issued  are  expected  to  be 
translated into a comprehensive reform. 

framework. 
project  was 
and 
2023 

The 
concluded 
the 

policy, 

(5)  A-long-term-strategy-for-sustainable-growth-for-

Cyprus1.pdf (ccci.org.cy) 

(6)  IMF Article IV 2023 Cyprus staff report. 

. 

10 

 
 
 
Safeguarding fiscal and financial 
resilience remain priorities 

recent 

progress, 

Despite 
sound 
government finances remain a priority in 
the coming years. The current and projected 
budget  surplus  is  partly  due  to  temporary 
factors,  such  as  the  withdrawal  of  post-
pandemic  and  energy  support  measures,  but 
also  due  to  growth  driven  taxes,  such  as  on 
strong  consumer  spending,  and  the  resolution 
of  past  tax  cases.  The  inflow  of  foreign 
investment also gave a boost to revenue from 
corporate  income  taxes.  Measures  to  expand 
tax  base,  such  as  self-compliance, 
the 
transparency  and  fairness  in  the  tax  system, 
remain  challenging.  Spending  increases  are 
expected  to  continue  in  the  health  and  social 
sectors, and for public administration wages. 

Cyprus’  debt  sustainability  risks  are  low 
in  the  long  run (7)  and  ageing-related 
costs  are  not  yet  a  major  concern (8). 
Pensions  are  projected to increase  by  2.7 pps 
by  2045,  but  from  a  relatively  low  level 
(against  the  EU  average)  (8.2%  of  GDP). 
Spending on health is projected to increase by 
0.5 pps of GDP over the same period. Spending 
on  long-term  care  remains  very  low  (0.2%  of 
GDP),  with  no  measures  in  place  to  date.  The 
authorities  are  preparing  an  action  plan  to 
improve  these  services.  Further  pressure  on 
government 
from  an  ageing 
population cannot be excluded in the long run. 
Reforms  to 
improve  health  and  pension 
spending  are  ongoing,  but  the  timing  and  the 
scale  of  their  impact  on  government  finances 
is unclear at this stage.  

finances 

Cyprus  could  take  action  to  strengthen 
the  Independent  Fiscal  Institution.  The 
mandate  of  the  Cyprus  Fiscal  Council  focuses 
on  monitoring  the  rules  for  government 
finances  and  assessing  and  endorsing 
forecasts. 
macroeconomic  and  budgetary 
However,  the  nomination  and  appointment 
procedure  are  under  the  responsibility  of  the 

government,  which  appoints  the  Board.  The 
secretariat  is  staffed  by  government  officials 
on  secondment  to  the  Cyprus  Fiscal  Council 
and  staff  numbers  are  limited  by  law,  which 
has  an  impact  on  the  independence  and 
analytical capacity of the institution. 

has 

Private-sector 
fallen 
debt 
significantly in recent years, a trend that 
is  expected  to  continue.  Private  debt 
remains  high  at  199.6%  of  GDP  in  2023. 
Excluding SPEs, private debt in Cyprus totalled 
157%  of  GDP  in  [Q2]  2023 (9).  It  has  fallen 
sharply  in  recent  years  and  is  projected  to 
keep  falling  in  2024  and  2025.  Despite  the 
high  inflation,  high  interest  rate  environment, 
the overall quality of loan portfolios has been 
relatively  resilient.  The  risk  of  asset  quality 
deterioration is mitigated by ample liquidity in 
the banking sector, improving profitability and 
sufficient  capital  buffers  to  withstand  shocks. 
However,  Cyprus  still  has  one  of  the  highest 
ratios  of  non-performing  loans  in  the  EU  (4% 
in  September  2023),  above  the  euro-area 
average of 1.8%. 

to 

resolve  non-performing 

Taking  further  action  to  tackle  non-
loans  remains  a  priority. 
performing 
Banks  have  made  significant  progress 
in 
reducing 
legacy  non-
their  portfolios  of 
performing  loans,  for  example  by  sales  to 
credit-acquiring  companies  and  the  public 
Asset  Management  Company 
(KEDIPES). 
However,  these  transfers  still  burden  the 
economy  through  private  indebtedness.  The 
loans 
process 
through  repayment  by  borrowers  has  been 
slow and frequent suspensions of foreclosures 
have  delayed  plans  to  restructure  loans.  To 
maintain  payment  discipline  and  give  lenders 
leverage  over  uncooperative  borrowers,  it  is 
essential  to  bring  in  an  effective  foreclosure 
framework.  The  new 
legislation  package 
improves 
in  December  2023 
adopted 
transparency  in  loan  resolution  and  will make 
it  easier  and  faster  to  restructure  non-
performing  loans  by  bringing  in  an  out-of-
court  procedure 
Financial 
Ombudsman.  The  Mortgage-to-Rent  Scheme, 
designed  to  protect  homeowners'  primary 

through 

the 

(7)  2024 debt sustainability monitor. 

(8)  2024 ageing report. 

(9)  See also the 2024 in-depth review for Cyprus. 

11 

 
 
 
EU  average  (see  Annex  14),  which  is  another 
brake  on  competitiveness  and  economic 
diversification. In addition, the rate of learning 
digital skills has plateaued, exacerbating skills 
mismatches and labour shortages. It is crucial 
to Cyprus' future prosperity to provide a skilled 
and adaptable workforce able to meet industry 
needs.  These  are  also  bottlenecks  to  higher 
wage growth. Cyprus has had a decade of low 
wage  growth.  Although  a  minimum  wage  has 
now  been  brought  in,  overall  wage  growth  is 
expected to remain weak. 

Progress on the green transition in 
Cyprus is slow 

 Cyprus is not on track to reach its 2030 
effort  sharing  target,  which  is  to  reduce 
greenhouse  gas  emissions  in  the  effort 
sharing  sectors  by  32%  in  2030  from 
2005  levels.  Reliable  long-term  strategies 
and 
investments  are  the  cornerstone  for 
achieving the economic transformation needed 
to  reach  the  EU’s  climate-neutrality  objective 
where  research  and  innovation  could  play  an 
essential  role.  Energy  poverty  remains  a 
challenge 
recent 
Cyprus, 
improvements.  Although  the  share  of  the 
their  homes 
population  unable 
properly  warm  fell  from  28.3%  in  2015  to 
19.2% in 2022, it is still more than double the 
EU average (9.3%). 

to  keep 

despite 

in 

on 

action 

Accelerated 
sustainable 
mobility  remains  a  key  priority.  The 
transport sector accounts for the highest share 
of  energy  consumption  and  it  increased  its 
final energy consumption by 12.2% (see Annex 
7). Cyprus lacks railways, which means that all 
domestic  freight  is  transported  by  road.  In 
addition, public transport is only used for 13% 
(see  Annex  6).  The 
of  passenger  travel 
measures  set  out 
recovery  and 
in 
resilience  plan  on  energy  and  transport, 
particularly  focusing  on  energy  efficiency  and 
electric  transport,  are  moving  in  the  right 
direction. However, alone they are not enough 
to  bridge  the  remaining  gaps,  notably  in  the 
transport sector. The country is still among the 

the 

homes,  also  came  into  effect  in  December 
for  vulnerable 
2023,  making 
it  easier 
loans.  The 
borrowers  to  restructure  their 
scheme 
of 
stage 
early 
an 
at 
implementation, but its impact on reducing the 
overall  legacy  of  household  non-performing 
loans is expected to be minimal as it is above 
all a social scheme. 

is 

Skills challenges are a major 
obstacle to long-term 
competitiveness 

and 

further  decline 

Poor  performance  in  basic  skills,  the  low 
rate  of  science,  technology,  engineering 
and  mathematics  graduates,  and  the 
in 
declining  rate  of  adults  enrolled 
training are the main challenges to tackle 
skills  mismatches  and  labour  shortages. 
The  rate  of  underachievement  of  Cypriot 
students  in  reading,  mathematics  and  science 
has  steadily  worsened  since  2012,  ranking 
among  the  worst  in  the  EU.  The  2022  PISA 
report  highlights  a 
in 
performance across all socio-economic groups 
since the previous results in 2018 (see Annex 
15). Cyprus has not developed a coherent and 
coordinated  provision  of  teacher  education, 
including high quality initial teacher education, 
systematic  support  for  beginning  teaching 
staff 
career-long 
individualised 
professional  development.  Additionally,  the 
of 
development 
competence-based  teaching  methods  such  as 
the  adoption  of  curricula  reforms  focused  on 
developing  key  competences  along  with 
fostering  a  culture  of  evaluation 
is  still 
lagging.  For  the  period  2022-2032,  demand 
for  jobs  in  STEM  occupations  will  constitute 
40%  of  total  demand,  far  exceeding  the 
supply  of  graduates,  particularly  among 
women.  Cyprus' 
is  also 
characterised  by  the  limited  integration  of 
scientific  talent  in  the  workforce,  with  the 
share  of  researchers 
in  both  public  and 
private-sector  employees  significantly  below 
the  EU  average.  The  share  of  people  enrolled 
in  adult  learning  fell  from  44.8%  in  2016  to 
28.3%  in  2022.  The  take-up  of  vocational 
education  and  training  is  also  still  below  the 

labour  market 

implementation 

and 

12 

 
to 

additional 

degradation 

on  habitats  and  ecosystems,  especially  in 
coastal zones. It has comparatively low levels 
of  rainfall  and  high  temperatures,  which 
contribute to the highest level of water stress 
in  the  EU  (see  Annex  6).  Agriculture  is  the 
industry  that  consumes  the  most  water  in 
Cyprus.  The  effects  of  climate  change  subject 
soil 
and 
desertification,  resulting  in  lower  crop  yields. 
Given  the  changing  climatic  conditions,  water 
management  will  need  to  be  prioritised  to 
manage  the  risk  of  electricity  disruption  as 
floods,  heat  and  drought  have  an  impact  on 
energy  production.  Cyprus  is  one  of  the  six 
worst  performers 
in  the  EU  on  private 
insurance  coverage  against  damage  from 
climate  hazards.  Only  5%  of  Cyprus’s 
economic  losses  between  1980  and  2020 
were 
insured.  The  country’s  approach  to 
climate  change  adaptation  is  mostly  non-
binding  for  the  moment.  It  will  be  crucial  to 
improve  institutional  arrangements  to  boost 
climate 
long-term 
competitiveness. 

resilience 

and 

EU’s  worst  performers  on 
passenger fleet distribution (see Annex 5). 

its  electric 

remain 

to  upgrade 

Despite  recent  improvements,  significant 
the 
challenges 
electricity  grid  and  roll  out  renewable 
energy.  The  main  challenges  are  Cyprus’ 
reliance  on  petroleum  products,  which  are 
entirely imported and used to meet over 80% 
of its energy needs, and the state of the grid, 
which  needs  upgrading  and  expanding.  The 
share  of  renewable  energy  in  the  electricity 
mix  in  Cyprus  was  17%  in  2022.  The  draft 
upgraded  national  energy  and  climate  plan 
projects  renewable  electricity  generation  to 
reach  31.5%  by  2030.  Additional  investments 
are needed to improve and modernise the grid, 
including  grid-scale  and  small-scale  storage. 
This  will  be  crucial  to  integrate  the  additional 
renewable  capacity  without  creating  grid 
stability issues. 

Since 
late  2021,  Cyprus  has  taken 
horizontal  and  targeted  measures  to 
cushion  the impact of  rising  prices.  These 
measures included reducing VAT on electricity, 
subsidies for renewables and energy efficiency 
measures, lump-sum payments for vulnerable 
groups, reduced excise duties on fuels, support 
for 
subsidised 
electricity  bills  and  zero  VAT  rates  on  basic 
goods. Most of the measures were phased out 
in  2023;  only  the  subsidised  electricity  bills 
and  the  zero  VAT  rate  on  basic  goods  remain 
in force until the end of June 2024. 

the  agricultural 

sector, 

The  pace  of  Cyprus’  transition  to  a 
circular  economy  is  too  slow  to  achieve 
the  goals  set  out  in  the  EU  circular 
economy  action  plan  (Annex  9).  Cyprus  is 
at  risk  of  missing  the  2025  targets  for  both 
municipal waste and packaging recycling (55% 
and  65%),  despite  additional  measures  on 
household  and  landfill  waste  and  the  action 
taken to improve recycling and user awareness 
(see  Annex  9).  On  this  front,  the  priorities  for 
Cyprus are waste management and the use of 
circular materials in industry and construction. 

Cyprus has a high degree of vulnerability 
to climate change; its national adaptation 
policies  and  measures  are  insufficient. 
Cyprus is experiencing high anthropic pressure 

13 

 
 
 
Box 4: 

The mid-term review of cohesion policy funding for Cyprus 

The  mid-term  review  of  cohesion  policy  funding  is  an  opportunity  to  assess  cohesion  policy 
programmes and tackle emerging needs and challenges in EU Member States and their regions. 
Member  States  are  reviewing  each  programme  taking  into  account,  among  other  things,  the 
challenges  identified  in  the  European  Semester,  including  in  the  2024  country-specific 
recommendations.  This  review  forms  the  basis  for  a  proposal  by  the  Member  State  for  the 
definitive allocation of 15% of EU funding included in each programme. 

Cyprus has made progress in implementing cohesion policy programmes and the European Pillar 
of Social Rights, but challenges remain as outlined in this report, including Annexes 14 and 17. In 
particular, there is still a socio-economic divide in Cyprus between urban and non-urban areas. In 
this context, it is important to continue implementing the planned priorities, focusing on:  

(i) 

(ii) 

(iii) 

(iv) 

(v) 

(vi) 

the  energy  transition,  including  renewable  energy,  storage  solutions  and  energy 
efficiency;  

the  circular  economy  and  improved  water  management,  especially  wastewater 
treatment  to  comply  with  the  Urban  Wastewater  Treatment  Directive  and 
environmental protection;  

sustainable urban transport;  

activation and skills development based on the comprehensive active labour market 
strategy to enable people join the labour market and promote the social integration 
of  vulnerable  groups,  including  people  not  in  employment,  education  or  training, 
women and persons with disabilities;  
strengthening 
implementation  of 
implementing the European Child Guarantee;  

learning  accounts 

(ILAs)  and 

individual 

providing  quality  and  affordable  long-term  care  services  and  social  housing  and 
developing the social economy. 

The increasingly pressing needs to prevent damage and prepare for climate change-related risks 
merit  specific  analysis  in  preparation  for  the  mid-term  review.  Cyprus  could  draw  on  the 
opportunities  provided  by  the  STEP  initiative (10)  to  support  its  energy  transition  through  clean 
and resource efficient technologies, including net-zero technologies.  

(10)  Regulation (EU) 2024/795 

14 

 
 
 
KEY FINDINGS 

Cyprus’  recovery  and  resilience  plan 
(RRP)  is wide in  scope and  equipped with 
a substantial budget. Its measures tackle 
a  series  of  structural  challenges, 
in 
synergy  with  other  EU  funds,  including 
cohesion policy funds. They include: 

•  accelerating  the  green  transition  and 
reducing  dependence  on  imports  of 
fossil  fuels  by  promoting  the  use  of 
renewable  energy  and  boosting  energy 
efficiency by renovating buildings; 

•  supporting  the  digital  transition  by 
investing  in  the  digitalisation  of  public 
administration,  educational  facilities  and 
businesses, in digital skills and by ensuring 
access for all; 

• 

improving the effectiveness of the tax 
system  by  digitalising  tax  services  and 
modernising the customs and the electronic 
payment system; 

•  accelerating  the  resolution  of  non-
performing 
the 
loans  by 
operating  environment  to  manage  loans 
transfer  of 
and  facilitating 
property rights from lenders to buyers; 

the  swift 

improving 

• 

improving the business environment by 
cutting  red  tape,  streamlining  permitting 
procedures,  promoting  a 
robust  anti-
corruption  framework  and  by  creating 
incentives for RD&I; 

•  developing  a  skilled  workforce  by 
improving  infrastructure  for  pre-primary, 
primary  and  secondary  school  students, 
promoting  inclusive  training  programmes 
and  implementing  active  labour  market 
policies; 

• 

improving 
and 
inclusiveness by strengthening the quality 

protection 

social 

15 

developing 

of  and  access  to  health  and  LTC  systems, 
and 
gradually 
reduce 
community-based 
poverty 
integrate 
disadvantaged groups.  

family 
to 

services 

helping 

and 

to 

The  implementation  of  Cyprus’  RRP  is 
increasing  challenges.  Renewed 
facing 
efforts 
successful 
implementation  of  all  measures  by  August 
2026. 

key 

are 

for 

a 

to 

the 

In  addition 
reforms  and 
investments  in  the  RRP  and  cohesion 
policy programmes, Cyprus would benefit 
from: 

•  pursuing  sound  budgetary  policies  to 
boost  its  fiscal  resilience  and  tackle  the 
challenges  related  to  future  costs  of 
ageing; 

• 

improving the business environment by 
making  it  easier  for  companies  to  access 
financing on capital markets, improving the 
governance  of  SOEs  and  by  boosting 
innovation; 

•  maintaining 

an 

operational 

and 
efficient  foreclosure  framework 
to 
reduce the stock of non-performing loans in 
the economy; 

• 

improving  basic  skills  and  educational 
outcomes, and adapting adult learning 
to labour market needs to alleviate skills 
mismatches, boost the labour supply, foster 
business  investment  and  social  economy, 
and accelerate the twin transition; 

•  accelerating  the  green  transition  by 
further 
sustainable 
advancing 
mobility, 
increasing 
of 
energy 
renewable 
energy, 
efficiency,  tackling  energy  poverty  and 
to  climate  change. 
boosting 

the 
improving 

resilience 

share 

 
 
ANNEXES 

 
 
 
LIST OF ANNEXES 

Cross-cutting indicators 

A1.  Sustainable Development Goals 

A2.  Progress in the implementation of country-specific recommendations 

A3.  Recovery and resilience plan – implementation 

A4.  Other EU instruments for recovery and growth 

A5.  Resilience 

Environmental sustainability 

A6.  European Green Deal 

A7.  Energy transition and competitiveness 

A8.  Fair transition to climate neutrality 

Productivity 

A9.  Resource productivity, efficiency and circularity 

A10.  Digital transformation 

A11.  Innovation 

A12.  Industry and single market 

A13.  Public administration 

Fairness 

A14.  Employment, skills and social policy challenges in light of the European Pillar of Social Rights 

A15.  Education and training 

A16.  Health and health systems 

A17.  Economic and social performance at regional level 

Macroeconomic stability 

A18.  Key financial sector developments 

A19.  Taxation 

A20.  Table with economic and financial indicators 

A21.  Debt sustainability analysis 

LIST OF TABLES 

A2.1.  Summary table on 2019-2023 CSRs 
A3.1.  Key facts of the Cypriot RRP 

19 

23 

23 

26 

30 

32 

35 

37 

37 

42 

47 

50 

50 

52 

54 

57 

61 

63 

63 

65 

67 

69 

71 

71 

73 

75 

76 

27 
30 

 
 
 
Indicators tracking progress on the European Green Deal from a macroeconomic perspective 

A3.2.  Measures in Cyprus' RRP 
A4.1.  Support from EU instruments in Cyprus 
A4.2.  EU / euro area loans under the 2010-2018 financial assistance programmes 
A5.1.  Resilience indices across dimensions for Cyprus and the EU-27 
A6.1. 
A7.1.  Key Energy Indicators 
A8.1.  Key indicators for a fair transition in Cyprus 
A9.1.  Circularity indicators 
A10.1.  Key Digital Decade targets monitored by the Digital Economy and Society Index indicators 
A11.1.  Key innovation indicators 
A12.1.  Industry and the Single Market 
A13.1.  Public administration indicators 
A14.1.  Social Scoreboard for Cyprus 
A14.2.  Situation of Cyprus on 2030 employment, skills and poverty reduction targets 
A15.1.  EU-level targets and other contextual indicators under the European Education Area strategic framework 
A16.1.  Key health indicators 
A17.1.  Main socio-economic indicators by degree of urbanisation, Cyprus, 2022 (%) 
A18.1.  Financial Soundness Indicators 
A19.1.  Taxation indicators (to be updated once new data are available) 
A20.1.  Key economic and financial indicators 
A21.1.  Debt sustainability analysis - Cyprus 
A21.2.  Heat map of fiscal sustainability risks - Cyprus 

LIST OF GRAPHS 

A1.1.  Progress towards the SDGs in Cyprus 
A2.1.  Cyprus’ progress on the 2019-2023 CSRs (2024 European Semester) 
A3.1.  Total grants disbursed under the RRF 
A3.2.  Total loans disbursed under the RRF 
A4.1.  Distribution of cohesion policy funding across policy objectives in Cyprus 
A4.2.  Distribution of RRF funding by pillar in Cyprus 
A6.1.  Greenhouse gas emissions from the effort sharing sectors in Mt CO2eq, 2005-2022 
A6.2.  Changes in livestock density and organic farming 
A6.3.  Environmental investment gap, annual average 
A7.1.  Cyprus' energy retail prices for households and industry & service 
A7.2.  Trends in electricity prices for non-household consumers (EU and foreign partners) 
A7.3.  Cyprus' installed renewable capacity (left) and electricity generation mix (right) 
A8.1.  Fair transition challenges in Cyprus 
A8.2.  Job vacancy rate in transforming sectors and mining and quarrying 
A9.1.  ETS emissions by sector since 2013 
A9.2.  Treatment of municipal waste 
A11.1.  R&D expenditure (as % of GDP) 
A12.1.  Labour productivity (GDP per person employed) [% of EU-27] 
A12.2.  Labour productivity (GDP per hour worked) by sector [2015=100] 
A13.1.  Government effectiveness 
A13.2.  a) Use of public authorities’ websites or apps (left side); b) e-government maturity (centre); c) share of individuals with 

basic or above basic overall digital skills (right side) 
A15.1.  Underachievement rates by field, PISA 2012, 2018 and 2022 
A16.1.  Life expectancy at birth, years 
A16.2.  Projected increase in public expenditure on healthcare over 2024-2070 
A18.1.  Lending for house purchases and changes in house prices 
A19.1.  Tax wedge for single and second earners as a % of total labour costs, 2023 
A19.2.  Total outgoing dividends by Member State as % of GDP, 2022 

31 
34 
34 
35 
41 
46 
48 
51 
53 
55 
60 
62 
63 
64 
66 
68 
70 
72 
73 
75 
78 
78 

23 
26 
30 
31 
33 
33 
37 
39 
40 
42 
43 
44 
47 
48 
50 
51 
54 
57 
57 
61 

62 
65 
67 
68 
71 
74 
74 

20 

 
 
 
 
 
CROSS-CUTTING INDICATORS 
ANNEX 1: SUSTAINABLE DEVELOPMENT GOALS 

of 

four 

dimensions 

This Annex assesses Cyprus’ progress on the 
Sustainable Development Goals (SDGs) along 
the 
competitive 
sustainability.  The  17  SDGs  and  their  related 
indicators  provide  a  policy  framework  under  the 
UN’s  2030  Agenda  for  Sustainable  Development. 
The  aim  is  to  end  all  forms  of  poverty,  fight 
inequalities  and  tackle  climate  change  and  the 
environmental crisis, while ensuring that no one is 
left  behind.  The  EU  and  its  Member  States  are 
committed  to  this  historic  global  framework 
agreement  and  to  playing  an  active  role  in 
maximising  progress  on  the  SDGs.  The  graph 
below  is  based  on  the  EU  SDG  indicator  set 
developed  to monitor progress  on  the  SDGs  in  an 
EU context. 

Cyprus  is  improving  on  most  SDG  indicators 
related to environmental sustainability and it 
is  well  above  the  EU  average  for  SDGs  14 
and  15  (Life  under  water  and  Life  on  Land)  and 
for  SDGs  2  and  6  (Zero  hunger;  Clean  water  and 
sanitation), and it is slightly moving away from the 

Graph A1.1: Progress towards the SDGs in Cyprus 

for  SDG 11 

target 
(Sustainable  cities  and 
communities).  However,  it  needs  to  catch  up 
with  the  EU  average  on  SDG 7  (Affordable 
(Responsible 
and  clean  energy),  SDG 12 
consumption  and  production)  and  SDG 13 
(Climate action). Per capita energy consumption 
in Cyprus is below the EU average, and the country 
has  made  progress  on  energy  consumption 
indicators.  These  include  the  share  of  renewable 
energy in gross final energy consumption (SDGs 7 
and  13),  up  from  10.5%  in  2017  to  19.4%  in 
2022.  However,  Cyprus  remains  below  the  EU 
average  of  23.0%  on  affordable  energy  (SDG 7), 
the percentage of the Cypriot population unable to 
keep  their  homes  adequately  warm  was  much 
higher than the EU average in 2022, at 19.2% (EU 
9.3%),  even  if  the  figure  dropped  from  2017 
(22.9%).  While  the  concentration  of  nitrates  in 
groundwater  significantly  dropped  (7.8 mg/litre  vs 
EU  20.5 mg/litre  in  2021),  ammonia  emissions 
from  agriculture  are  high  (46.6 Kg/ha  vs  EU 
18.8 Kg/ha).  This,  combined  with  a  low  recycling 
rate  of  municipal  waste  (14.8%  vs  EU  48.6%  in 

For detailed datasets on the various SDGs, see the annual Eurostat report ‘Sustainable development in the European Union’; for 
details on extensive country-specific data on the short-term progress of Member States: Key findings – Sustainable development 
indicators - Eurostat (europa.eu). A high status does not mean that a country is close to reaching a specific SDG, but signals that it 
is doing better than the EU on average. The progress score is an absolute measure based on the indicator trends over the past 5 
years. The calculation does not take into account any target values as most EU policy targets are only valid for the aggregate EU 
level. Depending on data availability for each goal, not all 17 SDGs are shown for each country. 
Source: Eurostat, latest update of 25 April 2024. Data refer mainly to the period 2017-2022 or 2018-2023. Data on SDGs may 
vary across the report and its annexes due to different cut-off dates. 

21 

 
 
 
 
 
 
2022;  SDG 11)  and  a  high  material  footprint  (in 
2022,  24.0 tonnes  per  inhabitant,  vs  14.9 tonnes 
for the EU; SDG 12), pose considerable challenges 
for  the  environment.  The  average  CO2  emissions 
per  km  from  new  passenger  cars  (SDG 13)  were 
136.8 g CO2 per km, well above the EU average of 
109.8.  Measures  in  the  recovery  and  resilience 
plan (RRP) (Policy Axis 2) such as energy efficiency 
renovations  of  public  and  private  buildings  and 
investments  in  sustainable  water  management 
and transport, will help achieve further progress on 
these  SDGs.  Coastal  water  bathing  sites  with 
excellent  water  quality  amount  to  99.2%  (vs 
88.9%  in  the  EU)  and  the  share  of  terrestrial 
protected area is at 37.7% (vs 26.0 in the EU).   

While  Cyprus  is  improving  on  several  SDG 
indicators related to fairness, it still needs to 
catch  up  on  SDGs 4,  5,  7,  8 (11).  Cyprus 
outperforms  the  EU  average  on  most  indicators 
related to poverty, health and equalities (SDGs 1, 3 
and 10). However, it is moving away from the EU 
average  on  indicators  related  to  migration,  basic 
education  and  gender  equality.  Asylum  first-time 
applications  per  million  inhabitants  increased  by 
50%    in  5  years  and  6-fold  the  EU  level.  The 
EU/non-EU  citizenship  gap  for  early  leavers  from 
education and training was 21.3 percentage points 
(pps), vs the EU average of 17.1 pps in 2023, while 
the  EU/non-EU  citizenship  gap  for  young  people 
not in employment, education or training was 11.5 
pps  in  2022  (EU  average:  11.1  pps).  Furthermore, 
on  SDG 4  (Quality  education),  the  significant  low 
achievement  of  15-year-old  students  in  basic 
skills  (53.2%  of  low  achievers  in mathematics,  vs 
EU 29.5%) (see Annex 15) poses challenges in the 
field of opportunities for young people. This is also 
reflected  in  the  higher  numbers  of  young  people 
aged  15-29  not  in  education,  employment  or 
training  (10.5%  vs  EU  9.5%  in  2023).  On  gender 
equality,  while  the  gender  gap  fell  below  the  EU 
average  (9.0  pps,  vs  EU  10.2  pps  in  2023),  the 
share  of  senior  management  positions  held  by 
women  was  much  lower  than  in  the  EU  (8.2%  vs 
EU  33.8%  in  2023).  Reforms  and  investments 
under Policy Axis 5 of the RRP aim to improve the 
quality  of  education  and  training,  reach  out  to 
young  people  not  in  education,  employment  or 
training,  and  improve  access  to  early  childhood 
education  and  care  and  to  flexible  working 

(11)  For more information, see Annex 12 ‘Employment, skills and 
social policy challenges in light of the European Pillar of 
Social Rights’. 

arrangements. This will provide equal opportunities 
for  all  children  and  make  it  easier  for  women  to 
participate in the labour market.  

Cyprus is improving on productivity (SDGs  8, 
9),  but  still  needs  to  catch  up  compared  to 
the EU. On digital skills, Cyprus remains below the 
EU  average,  with  49.5%  of  adults  aged  16-74 
having basic digital skills (EU: 55.6%). The country 
is  making  progress  on  SDG 8  (Decent  work  and 
economic  growth). However, it still needs to catch 
up  on  investments,  as  their  share  of  GDP,  at 
20.4%,  in  2022  was  below  the  EU  average  of 
22.7%  in  2023.  On  SDG 9  (Industry,  innovation 
and infrastructure), the country needs to catch up 
on R&D  expenditure, which remains low at 0.77% 
of  GDP  in  2022  –  one  of  the  lowest  in  the  EU 
(where  the  average  is  2.24%).  The  share  of 
households  with  a  high-speed  internet  connection 
in  Cyprus  was  60.0%  in  2022,  well  below  the  EU 
targeting 
average  of  73.4%.  The  RRP 
bottlenecks,  especially  in  digitalisation  and  the 
diversification  of  the  economy,  and  investing  in 
R&D to facilitate further progress on these SDGs.  

is 

Cyprus  is  improving  on  all  SDG  indicators 
related  to  macroeconomic  stability  (SDGs 8, 
16, 17) but still needs to catch up compared 
to  the  EU.  Real  GDP  per  capita  is  below  the  EU 
average  (EUR 27 720,  vs  an  EU  average  of 
EUR 28 940  in  2023).  Cyprus  is  improving  on 
SDG 16  (Peace,  justice  and  strong  institutions), 
with  a  lower  share  of  people  reporting  crime, 
violence or vandalism in 2020 (10.4%, vs 12% in 
2015  and  the  EU  average  of  10.7%  in  2020). 
Moreover, numbers of victims of human trafficking 
are  lower  than the  EU  average  (1.8  per  100  000, 
vs  2.3  per  100 000  in  the  EU).  Also,  government 
expenditure on the law courts is well below the EU 
average (EUR 43.1 per capita, vs EUR 113.8 for the 
EU in 2022). Although the perceived independence 
of  the  justice  system  (very  good  and  fairly  good) 
has increased to above that of the EU (54% of the 
population,  vs  EU  53%  in  2023),  the  Corruption 
Perceptions  Index  scores  worse  in  Cyprus  (53  in 
2023,  vs  64  in  the  EU,  with  0  highly  corrupt  and 
100  very  clean).  The  RRP  includes  reforms  and 
investments  under  Component  3.4  (Modernising 
public  and  local  authorities,  making  justice  more 
efficient  and  fighting  corruption)  to  address  long-
standing challenges in the areas of justice and the 
fight against corruption. 

22 

 
 
As the SDGs form an overarching framework, any 
links  to  relevant  SDGs  are  either  explained  or 
depicted with icons in the other Annexes. 

23 

 
ANNEX 2: PROGRESS IN THE IMPLEMENTATION OF COUNTRY-SPECIFIC 
RECOMMENDATIONS 

Graph A2.1: Cyprus’ progress on the 2019-2023 
CSRs (2024 European Semester) 

Source: European Commission 

The Commission has assessed the 2019-2023 
country-specific  recommendations  (CSRs) (12) 
addressed to Cyprus as part of the European 
Semester.  These  recommendations  concern  a 
wide  range  of  policy  areas  that  are  related  to  14 
of  the  17  Sustainable  Development  Goals  (see 
Annexes  1  and  3). The  assessment  considers  the 
policy  action  taken  by  Cyprus  to  date (13)  and  the 
commitments  in  its  recovery  and  resilience  plan 
(RRP) (14).  At  this  stage  of  RRP  implementation, 
71%  of  the  CSRs  focusing  on  structural  issues 
from  2019-2023  have  recorded  at  least  ‘some 
progress’,  while  29%  recorded  ‘limited  progress’ 
(see  Graph  A2.1).  As  the  RRP  is  implemented 
further,  considerable  progress 
in  addressing 
structural CSRs is expected in the years to come. 

(12)  2023 CSRs: EUR-Lex - 32023H0901(13) - EN - EUR-Lex 

(europa.eu) 

2022 CSRs: EUR-Lex - 32022H0901(07) - EN - EUR-Lex 

(europa.eu) 

      2021 CSRs: EUR-Lex - C:2021:304:TOC - EN - EUR-Lex 

(europa.eu) 
2020 CSRs: EUR-Lex - C:2020:282:TOC - EN - EUR-Lex 
(europa.eu) 
2019 CSRs: EUR-Lex - 32019H0905(13) - EN - EUR-Lex 
(europa.eu) 

(13)  Including policy action reported in the national reform 

programme and in Recovery and Resilience Facility (RRF) 
reporting (twice a year reporting on progress in implementing 
milestones and targets and resulting from the payment 
requests assessment). 

(14)  Member States were asked to effectively address in their 
RRPs all or a significant subset of the relevant country-
specific recommendations issued by the Council. The CSR 
assessment presented here considers the degree of 
implementation of the measures included in the RRP and of 
those carried out outside of the RRP at the time of 
assessment. Measures laid down in the Annex of the 
adopted Council Implementing Decision on approving the 
assessment of the RRP, which are not yet adopted or 
implemented but considered credibly announced, in line with 
the CSR assessment methodology, warrant ‘limited progress’. 
Once implemented, these measures can lead to 
‘some/substantial progress or full implementation’, 
depending on their relevance. 

24 

Limited progress29%Some progress51%Substantial progress10%Full implementation10% 
 
 
 
   
 
       
 
Table A2.1:  Summary table on 2019-2023 CSRs 

(Continued on the next page) 

25 

CyprusAssessment in May 2024*RRP coverage of CSRs until 2026**Relevant SDGs2019 CSR 1Limited progressAdopt key legislative reforms to improve efficiency in the public sector, in particular as regards the functioning of the public administrationSome progressRelevant RRP measures being implemented as of 2022.SDG 16 and the governance of State-owned entities Limited progressSDG 9and local governments.Substantial progressRelevant RRP measures planned as of 2024 and 2025.SDG 16Addressfeaturesofthetaxsystemthatmayfacilitateaggressivetaxplanningbyindividualsandmultinationals,inparticularbymeansofoutbound payments by multinationals.Limited progressRelevant RRP measures planned as of 2022.SDG 8, 162019 CSR 2Some progressFacilitate the reduction of non-performing loans including by setting up an effective governance structure for the State-owned asset management company, Some progressRelevant RRP measures being implemented as of 2022.SDG 8taking steps to improve payment discipline Limited progressRelevant RRP measures being implemented as of 2022.SDG 8and strengthening the supervision of credit-acquiring companies.Full implementationRelevant RRP measures being implement as of 2021SDG 8Strengthen supervision capacities in the non-bank financial sector, including by fully integrating the insurance and pension-fund supervisors.Limited progressRelevant RRP measures planned as of 2022 and 2023.SDG 82019 CSR 3Some progressComplete reforms aimed at increasing the effectiveness of the public employment services and reinforce outreach and activation support for young peopleSome progressRelevant RRP measures planned as of 2022.SDG 8Deliver on the reform of the education and training system, including teacher evaluation, and increase employers' engagement and learners' participation in vocational education and training,Limited progressRelevant RRP measures being implemented as of 2021.SDG 4and affordable childhood education and care.Some progressRelevant RRP measures planned as of 2022 and 2024.SDG 4, 5Take measures to ensure that the National Health System becomes operational in 2020, as planned, while preserving its long-term sustainability.Substantial progressRelevant RRP measures planned as of 2022, 2023 and 2024.SDG 32019 CSR 4Limited progressFocus investment-related economic policy on sustainable transport,Limited progressRelevant RRP measures planned as of 2023 and 2024.SDG 10, 11environment, in particular waste and water management, Limited progressRelevant RRP being implemented as of 2021.SDG 6, 10, 11, 12, 15energy efficiency and renewable energy, Some progressRelevant RRP being implemented as of 2021.SDG 7, 9, 10, 11, 13digitalisation, including digital skills, Some progressRelevant RRP being implemented as of 2021.SDG 4, 9, 10, 11andresearchandinnovation,takingintoaccountterritorialdisparities within Cyprus.Some progressRelevant RRP being implemented as of 2021.SDG 9, 10, 11Adoptlegislationtosimplifytheproceduresforstrategicinvestorstoobtain necessary permits and licences.Limited progressRelevant RRP measures planned as of 2022, 2023 and 2024.SDG 8, 9Improve access to finance for SMEs,Some progressRelevant RRP being implemented as of 2022.SDG 8, 9and resume the implementation of privatisation projects.Limited progressRelevant RRP measures planned as of 2024.SDG 92019 CSR 5Some progressStepupeffortstoimprovetheefficiencyofthejudicialsystem,includingthefunctioningofadministrativejusticeandrevisingcivilprocedures,increasingthespecialisationofcourtsandsettingupanoperationale-justicesystem.Takemeasurestostrengthenthelegalenforcement of claimsSome progressRelevant RRP being implemented as of 2022.SDG 9, 16andensurereliableandswiftsystemsfortheissuanceandtransferof title deeds and immovable property rights.Limited progressRelevant RRP measures planned as of 2022.SDG 8, 9Accelerateanti-corruptionreforms,safeguardtheindependenceofthe prosecution and strengthen the capacity of law enforcement.Some progressRelevant RRP being implemented as of 2022.SDG 162020 CSR 1Some progressInlinewiththegeneralescapeclause,takeallnecessarymeasurestoeffectivelyaddressthepandemic,sustaintheeconomyandsupporttheensuingrecovery.Wheneconomicconditionsallow,pursuefiscalpoliciesaimedatachievingprudentmedium-termfiscalpositionsandensuringdebtsustainability,whileenhancinginvestment. Not relevant anymoreNot applicableSDG 8, 16Strengthentheresilienceandcapacityofthehealthsystemtoensurequalityandaffordableservices,includingbyimprovinghealthworkers’ working conditions.Some progressRelevant RRP measures planned as of 2022, 2023 and 2024.SDG 3 
 
 
 
  
 
Table (continued) 

(Continued on the next page) 

26 

2020 CSR 2Some progressProvide adequate income replacement and access to social protection for all. Some progressRelevant RRP measures planned as of 2023.SDG 1, 2, 8, 10Strengthen public employment services, Some progressRelevant RRP measures planned as of 2022.SDG 8promote flexible working arrangements andLimited progressRelevant RRP measures planned as of 2023.SDG 8improve labour market relevance of education and training.Limited progressRelevant RRP being implemented as of 2021.SDG 42020 CSR 3Some progressSecure adequate access to finance and liquidity, especially for small and medium-sized enterprises. Some progressRelevant RRP being implemented as of 2022.SDG 8, 9Front-load mature public investment projects Limited progressRelevant RRP being implemented as of 2022.SDG 8, 16and promote private investment to foster the economic recovery. Some progressRelevant RRP being implemented as of 2021.SDG 8, 9Focusinvestmentonthegreenanddigitaltransition,inparticularonclean and efficient production and use of energy, Some progressRelevant RRP being implemented as of 2021.SDG 7, 9, 13waste and water management,Limited progressRelevant RRP being implemented as of 2021.SDG 6, 12, 15 sustainable transport, Limited progressRelevant RRP measures planned as of 2023 and 2024.SDG 11digitalisation, Some progressRelevant RRP being implemented as of 2021.SDG 9research and innovation.Some progressRelevant RRP being implemented as of 2021.SDG 92020 CSR 4Limited progressStepupactiontoaddressfeaturesofthetaxsystemthatfacilitateaggressive tax planning by individuals and multinationals. Limited progressRelevant RRP measures planned as of 2022.SDG 8, 16Improve the efficiency and digitalisation of the judicial systemSome progressRelevant RRP being implemented as of 2022.SDG 9, 16and the public sector.Some progressRelevant RRP being implemented as of 2022.SDG 9, 162021 CSR 1Not relevant anymoreIn2022,maintainasupportivefiscalstance,includingtheimpulseprovidedbytheRecoveryandResilienceFacility,andpreservenationally financed investment.Not relevant anymoreNot applicableSDG 8, 16Wheneconomicconditionsallow,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositionsandensuringfiscalsustainability in the medium term.Not relevant anymoreNot applicableSDG 8, 16Atthesametime,enhanceinvestmenttoboostgrowthpotential.Payparticularattentiontothecompositionofpublicfinances,onboththerevenueandexpendituresidesofthenationalbudget,andtothequalityofbudgetarymeasuresinordertoensureasustainableandinclusiverecovery.Prioritisesustainableandgrowth-enhancinginvestment,inparticularinvestmentsupportingthegreenand digital transition. Not relevant anymoreNot applicableSDG 8, 16Giveprioritytofiscalstructuralreformsthatwillhelpprovidefinancingforpublicpolicyprioritiesandcontributetothelong-termsustainabilityofpublicfinances,including,whererelevant,bystrengtheningthecoverage,adequacyandsustainabilityofhealthand social protection systems for all.Not relevant anymoreNot applicableSDG 8, 162022 CSR 1Full implementationIn2023,ensurethatthegrowthofnationallyfinancedprimarycurrentexpenditureisinlinewithanoverallneutralpolicystance,takingintoaccountcontinuedtemporaryandtargetedsupporttohouseholdsandfirmsmostvulnerabletoenergypricehikesandtopeoplefleeingUkraine.Standreadytoadjustcurrentspendingtothe evolving situation.Full implementationNot applicableSDG 8, 16Expandpublicinvestmentforthegreenanddigitaltransitions,andforenergysecuritytakingintoaccounttheREPowerEUinitiative,includingbymakinguseoftheRecoveryandResilienceFacilityandother Union funds.Full implementationNot applicableSDG 8, 16Fortheperiodbeyond2023,pursueafiscalpolicyaimedatachieving prudent medium-term fiscal positions.Full implementationNot applicableSDG 8, 162022 CSR 2Proceedwiththeimplementationofitsrecoveryandresilienceplan,inlinewiththemilestonesandtargetsincludedintheCouncilImplementing Decision of 28 July 2021.SwiftlyfinalisethenegotiationswiththeCommissionofthe2021-2027cohesionpolicyprogrammingdocumentswithaviewtostarting their implementation.2022 CSR 3Limited progressTakemeasurestoimprovethegovernanceofState-ownedentitiesin line with international standards.Limited progressSDG 8, 9RRP implementation is monitored by assessing RRP payment requests and analysing reports published twice a year on the achievement of the milestones and targets. These are to be reflected in the country reports. Progress on the cohesion policy programming documents is monitored under the EU cohesion policy. 
 
 
  
 
Table (continued) 

Note:  
* See footnote  (14).  
** RRP measures included in this table contribute to the implementation of CSRs. Nevertheless, additional measures outside the 
RRP are necessary to fully implement CSRs and address their underlying challenges. Measures indicated as 'being implemented' 
are only those included in the RRF payment requests submitted and positively assessed by the European Commission.  
Source: European Commission 

27 

2022 CSR 4Some progressReduceoverallrelianceonfossilfuelsandfurtherdiversifyenergysupply.Limited progressRelevant RRP measures being implemented as of 2022.SDG 7, 9, 13Acceleratethedeploymentofrenewables,inparticularbyfurtherstreamlining permitting proceduresSome progressRelevant RRP measures being implemented as of 2022.SDG 7, 8, 9, 13and expanding photovoltaics.Some progressRelevant RRP measures being implemented as of 2022.SDG 7, 9, 13Develop energy interconnections with neighbouring countries,Limited progressRelevant RRP measures being planned as of 2023.SDG 7, 9, 13while extending and accelerating energy efficiency measures,Some progressRelevant RRP measures being implemented as of 2022.SDG 7including in the transport sector.Limted progressRelevant RRP measures being planned as of 2023.SDG 112023 CSR 1Substantial progressWinddowntheemergencyenergysupportmeasuresinforce,assoonaspossiblein2023and2024.Shouldrenewedenergypriceincreasesnecessitateneworcontinuedsupportmeasures,ensurethatthesearetargetedatprotectingvulnerablehouseholdsandfirms, fiscally affordable, and preserve incentives for energy savings.Some progressRelevant RRP measures being implemented as of 2021.SDG 8, 16While maintaining a sound fiscal position in 2024,Full implementationRelevant RRP measures being implemented as of 2021.SDG 8, 16preservenationallyfinancedpublicinvestmentandensuretheeffectiveabsorptionofRRFgrantsandotherEUfunds,inparticularto foster the green and digital transitions.Some progressRelevant RRP measure being implemented as of 2023SDG 8, 16Facilitatethereductionofprivatedebt,includingbyimplementinganeffective foreclosure framework.Substantial progressRelevant RRP measures being implemented as of 2022.SDG 8, 16Fortheperiodbeyond2024,continuetopursueinvestmentandreformsconducivetohighersustainablegrowthandpreserveaprudent medium-term fiscal position.Full implementationRelevant RRP measures being planned as of 2025.SDG 8, 162023 CSR 2Acceleratetheimplementationofitsrecoveryandresilienceplan,alsobyensuringanadequateadministrativecapacity,andswiftlyfinalisetheREPowerEUchapterwithaviewtorapidlystartingitsimplementation.Proceedwiththespeedyimplementationofcohesionpolicyprogrammes,inclosecomplementarityandsynergywith the recovery and resilience plan.2023 CSR 3Limited progressTakemeasurestoimprovethegovernanceofthestate-ownedentities in line with international standards.Limited progressSDG 8, 92023 CSR 4Some progressReduce reliance on fossil fuels and diversify the energy supply.Some progressRelevant RRP measures being implemented as of 2022.SDG 7, 9, 13Tobetterexploitalluntappedpotentialforrenewableenergygeneration,acceleraterenewablesdeploymentbyusingsuitableeconomicinstrumentsandmakingfurtherinvestmentstoupgradeand modernise the electricity grid, including energy storage facilities.Some progressRelevant RRP measures being implemented as of 2023.SDG 7, 8, 9, 13Speed up the development of electricity interconnections.Limited progressRelevant RRP measures planned as of 2025.SDG 7, 9, 13Extend and accelerate energy efficiency measures,Some progressRelevant RRP measures being implemented as of 2022.SDG 7, 9, 13also to address energy poverty,Some progressRelevant RRP measures being implemented as of 2021.SDG 7as well as the shift towards sustainable transport.Limited progressRelevant RRP measures planned as of 2023.SDG 11Stepuppolicyeffortsaimedattheprovisionandacquisitionoftheskills needed for the green transition.Limited progressRelevant RRP measures planned as of 2024.SDG 7RRP implementation is monitored through the assessment of RRP payment requests and analysis of the bi-annual reporting on the achievement of the milestones and targets, to be reflected in the country reports. Progress with the cohesion policy is monitored in the context of the Cohesion Policy of the European Union. 
 
 
 
  
 
ANNEX 3: RECOVERY AND RESILIENCE PLAN – IMPLEMENTATION 

Table A3.1:  Key facts of the Cypriot RRP 

Source: RRF Scoreboard 

Cyprus’ RRP includes a REPowerEU chapter to 
phase  out  its  dependency  on  Russian  fossil 
fuels,  diversify 
its  energy  supplies  and 
produce  more  clean  energy  in  the  coming 
years.  To  kick-start  the  REPowerEU  chapter’s 
implementation,  EUR  20.9  million  was  disbursed 
as pre-financing on 25 January 2024. This helped 
launch 
regulatory 
framework  for  the  connection  of  electric  vehicles 
recharging points.  

relevant 

reforms 

like  a 

Graph A3.1: Total grants disbursed under the RRF 

This  Annex  provides  a  snapshot  of  Cyprus’ 
implementation of its recovery and resilience 
plan  (RRP),  past  the  mid-way  point  of  the 
Recovery  and  Resilience  Facility’s 
(RRF) 
lifetime.  The  RRF  has  proven  central  to  the  EU’s 
recovery  from  the  COVID-19  pandemic,  helping 
speed  up  the  twin  green  and  digital  transition, 
while  adapting  to  geopolitical  and  economic 
resilience 
developments, 
against  future  shocks.  The  RRF  is  also  helping 
implement the UN Sustainable Development Goals 
and 
country-specific 
recommendations (see Annex 2).  

strengthening 

address 

and 

the 

The  RRP  paves  the  way  for  disbursing  up  to 
EUR 1 billion in grants and EUR 0.2 billion in 
loans  under  the  RRF  over  the  2021-2026 
period, representing 4.1% of Cyprus’ GDP (15). 
As of mid-May 2024, EUR 262.7 million have been 
disbursed to Cyprus under the RRF, comprising EUR 
236.7  million  in  grants  and  EUR  26  million  in 
loans.  

Cyprus  still  has  EUR  957.3  million  available 
in grants and loans from the RRF. This will be 
disbursed  after  the  assessment  of  the  future 
fulfilment  of  the  remaining  268  milestones  and 
targets (16)  included  in  the  Council  Implementing 
Decision (17)  (CID),  ahead  of  the  2026  deadline 
established for the RRF.   

Cyprus’  progress  in  implementing  its  plan  is 
recorded  in  the  Recovery  and  Resilience 
Scoreboard (18).  The 
scoreboard  gives  an 
overview  of  the  progress  made  in  implementing 
the  RRF  as  a  whole.  Graphs  A3.1  and  A3.2  show 
the  current  state  of  play  as  reflected  in  the 
scoreboard. 

(15)  GDP information is based on 2023 data. Source: 

https://ec.europa.eu/economy_finance/recovery-and-
resilience-scoreboard/index.html?lang=en   

(16)  A milestone or target is satisfactorily fulfilled once a Member 
State has provided evidence to the Commission that it has 
reached the milestone or target and the Commission has 
assessed it positively in an implementing decision. 

(17)  https://data.consilium.europa.eu/doc/document/ST-10686-

2021-ADD-1/en/pdf  

(18)  https://ec.europa.eu/economy_finance/recovery-and-

resilience-scoreboard/country_overview.html 

Note: This graph displays the amount of grants, including pre-
financing, disbursed so far under the RRF. Grants are non-
repayable financial contributions. The total amount of grants 
given to each Member State is determined by an allocation 
key and the total estimated cost of the respective RRP. 
Source: RRF Scoreboard 

The  plan  has  a  strong  focus  on  the  green 
transition, dedicating 45.1% of the available 
funds  to  measures  that  support  climate 
objectives  and  24.6%  of  its  total  allocation 
to support the digital transition. It also retains 
a  strong  social  dimension  with  social  protection 
measures, especially related to health care.    

28 

Initial plan CID adoption date28 July 2021Scope Revised plan with REPowerEU chapterLast major revision8 December 2023Total allocation EUR 1,020 million in grants and EUR 200 million in loans (4.1% of 2023 GDP)Investments and reforms 75 investments and 61 reforms Total number of milestones and targets282Fulfilled milestones and targets14 (5% of total)EUR 236.7million (23.2%)Total allocation: EUR 1020million 
 
 
 
  
 
 
   
 
timely 

its  RRP 

implementation  of 

request  completed, 
With  one  payment 
is 
Cyprus’ 
underway.  However, 
completion 
requires  increased  efforts.  The  Commission 
gave  a  positive  assessment  of  Cyprus’  payment 
request  on  25  October  2022,  taking  into  account 
the  opinion  of  the  Economic  and  Financial 
Committee.  This  led  to  EUR  85  million  being 
disbursed  in  financial  support  on  2  December 
2022 (19).  The  related  14  milestones  and  targets 
covered  reforms  and  investments  such  as  a 
National  E-Skills  Action  Plan,  and  others  in  the 
areas of energy efficiency, circular economy, anti-
corruption,  transparency,  financial  sector,  public 
administration, and digital skills.  

As  of  15  May  2024,  the  Commission  is 
working  in  collaboration  with  Cyprus  to 
assess its second payment request, including 
the  second  and  third  instalments.  Table  A3.2 
highlights  some  relevant  measures  achieved  so 
far,  and  some  that  will  be  implemented  before 
2026  to  keep  making  Cyprus’  economy  greener, 
more digital, inclusive, and resilient. 

Table A3.2:  Measures in Cyprus' RRP 

Graph A3.2: Total loans disbursed under the RRF 

Source: FENIX 

Source: RRF Scoreboard 

(19)  When requested payments are disbursed, the pre-financing 
is cleared proportionally. The net amounts are quoted here.  

29 

EUR 26.04million (13%)Total allocation: EUR 200millionReforms and investments implemented• Improvement of the legal and institutional framework for fighting corruption• Digital One-Stop Shops to streamline Energy Renovation in Buildings• National centre for excellence in agri-techUpcoming reforms and investments• Law for flexible work arrangements in the form of telework• Expansion of Gigabit-ready internet connection take-up by households• Installation of photovoltaics system at the Nicosia General Hospital 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
ANNEX 4: OTHER EU INSTRUMENTS FOR RECOVERY AND GROWTH 

EU funding instruments provide considerable 
resources for recovery and growth to the EU 
Member States. In addition to the EUR 1.2 billion 
of  Recovery  and  Resilience  Facility  (RRF)  funding 
described in Annex 3, EU cohesion policy funds (20) 
provide EUR 968.6 million to Cyprus for the 2021-
2027 period (21). 
two 
instruments combined represents around 7.34% of 
the  country’s  2023  GDP,  compared  to  the  EU 
average  of  5.38%  of  GDP (22).  Cohesion  policy 
supports  regional  development,  economic,  social 
and  territorial  convergence  and  competitiveness 
through  long-term  investment  in  line  with  EU 
priorities and with national and regional strategies. 

Support 

these 

from 

During  the  2014-2020  programming  period, 
cohesion  policy  funds  boosted  Cyprus’s 
competitiveness, with  tangible achievements 
notably  in  research  and  innovation,  energy 
efficiency,  environmental  protection  and 
education. Over the whole period, which financed 
investments until December 2023, cohesion policy 
funds (23)  made  EUR 877.7  million  available  to 
Cyprus (24),  of  which  EUR 509.6  million  has  been 
disbursed  since  March  2020,  when  the  COVID-19 
pandemic began (25). 
of 
The 
cohesion policy funds over the entire programming 
period  include  support  to  increase  the  number  of 
people  in  direct  employment  by  2 677  full-time 
equivalents  in  businesses.  In  the  research  sector, 
the funds enabled 217 new researchers to take up 
facilitated 
in  several  bodies  and 
positions 
cooperation  between  87  enterprises  and  research 
institutions.  In  terms  of  energy  efficiency,  the 

achievements 

(20)  In 2021-2027, cohesion policy funds include the Cohesion 
Fund, the European Regional Development Fund, the 
European Social Fund Plus and the Just Transition Fund. 

(21)  European territorial cooperation (ETC) programmes are 
excluded from the figure. In 2021-2027, the total 
investment, including national financing, amounts to EUR 1.5 
billion. 

(22)  RRF funding includes both grants and loans, where 

applicable. The EU average is calculated for cohesion policy 
funds excluding ETC programmes. GDP figures are based on 
Eurostat data for 2022. 

(23)  In 2014-2020, cohesion policy funds included the Cohesion 

Fund, the European Regional Development Fund, the 
European Social Fund and the Youth Employment Initiative. 
REACT-EU allocations are included but ETC programmes are 
excluded. 

(24)  In 2014-2020, the total investment, including national 

financing, amounted to EUR 1.0 billion. 

(25) Cut-off date: 14 May 2024. 

30 

policy  yielded  an  improvement  in  the  energy 
consumption  classification  of  1 768  households, 
and a significant reduction of 4 915 689 kWh/year 
in  the  annual  primary  energy  consumption  of 
public  buildings.  In  urban  development,  the  policy 
contributed  to  the  creation  or  regeneration  of 
79 584  square  metres  of  open  space.  On 
environmental conservation, cohesion policy funds 
supported  projects  to  enhance  8 107  hectares  of 
habitats,  aiming  to  improve  their  conservation 
status.  In  the  same  programming  period,  the 
European  Social  Fund  has  supported  training  to 
boost  employability  and  improve  the  education 
involving  over  150 000 
and  training  system, 
people 
the  Youth 
Employment  Initiative  resulted  in  2 500  young 
people  being  hired  in  new  jobs,  and  over  6 300 
young 
in 
people 
traineeships/internships. 

in  Cyprus.  Action  under 

placements 

taking 

up 

In  2021-2027, 

In  the  current  programming  period,  cohesion 
policy  will  provide  a  further  boost  to 
Cyprus’s  competitiveness,  to  the  green 
transition  and  to  social  cohesion,  improving 
the living and working conditions of Cyprus’s 
people. 
the  cohesion  policy 
programme  Thalia  2021-2027  will  focus  on  key 
EU priorities such as the digital transition. The goal 
is  to  reach  133 000  users  of  new  and  upgraded 
public  digital  products  and 
services.  The 
programme  will  also  help  develop  a  new, 
innovative  growth  model, 
competitive  and 
underpinned  by  an  enhanced  smart  specialisation 
strategy.  This  model  is  expected  to  significantly 
boost  job  creation,  business  competitiveness  and 
research capacity. It is expected to contribution to 
885  research  jobs  and  to  creating  an  additional 
1 775  jobs.  The  programme  will  also  invest  in 
projects to improve separate waste collection. This 
initiative  aims  to  facilitate  the  transition  to  a 
circular  economy  and  is  projected  to  result  in 
300 000  tonnes/year  of  waste  being  collected 
separately.  

Cohesion  policy 
funds  will  also  promote 
sustainable,  multimodal  urban  transport  with  an 
expected  4 000  000  additional  annual  users  of 
new  or  modernised  public  transport.  The  Cypriot 
territorial  just  transition  programme  represents  a 
commitment 
to  accelerating  Cyprus’s  energy 
transition  process  and  reach  the  2030  and  2050 
include 
The 
goals. 
strengthening 
transmission  and 
distribution  system,  supporting  SMEs  in  adopting 
new  technologies  and  utilising  renewable  energy 

programme’s 
the  energy 

plans 

 
 
 
 
 
sources,  and  reducing  their  energy  footprint  and 
carbon  dioxide  emissions.  One  of  the  anticipated 
outcomes  is  an  18.3%  increase  in  the  share  of 
renewable energy in Cyprus’s energy mix.  

The  European  Social  Fund  Plus  will  contribute  to 
the  priority  heading  on  social  inclusion  with  a 
budget  of  EUR 77.2  million.  Work  under  this 
priority  will  involve  promoting  active  inclusion 
projects,  with  a  particular  emphasis  on  boosting 
the employment of vulnerable groups of people. In 
addition,  it  will  provide  quality  social  services, 
including care services for people with disabilities, 
independent 
the  community,  early 
childhood  education  and  care  services.  With  this 
work,  cohesion  policy  substantially  contributes  to 
the  UN  Sustainable  Development  Goals  (SDGs)  in 
Cyprus,  in  particular  SDG  7  (Affordable  and  clean 
energy), 
innovation, 
infrastructure)  and  SDG  8  (Decent  work  and 
economic growth). 

(Industry, 

living 

SDG 

in 

9 

Graph A4.1: Distribution of cohesion policy funding 
across policy objectives in Cyprus 

Source: European Commission 

Through combined action, cohesion policy and 
the recovery and resilience plan (RRP) have a 
mutually reinforcing impact in Cyprus. While a 
large  proportion  of  public  investments  in  Cyprus 
are co-financed by cohesion policy funds, they will 
greatly benefit from action to simplify and reduce 
the  administrative  burden  under  an  RRP-funded 
reform. The objective of this reform is to develop a 
new system to support strategic investments, with 
the aim to stimulate investment in the country by 
and  mechanisms, 
rules 
streamlining 
simplifying  the  licencing  and  permit  procedures, 
reducing  the  administrative  burden  and  making 
the  strategic 
investment  environment  more 
in  the 
efficient.  Cohesion  policy 
national  research  and  innovation  system,  its  links 
with the economy, the business world and society 
as  a  whole,  and  new  digital  services  provided  to 

investments 

the 

reforms.  These 

people  and  businesses  will  benefit 
from 
include 
complementary  RRP 
adopting an action plan to implement the national 
strategy for research and innovation and a revised 
smart  specialisation  strategy.  The  contribution  of 
cohesion policy and RRP funding by different policy 
objectives is illustrated by Graphs A4.1 and A4.2. 

Graph A4.2: Distribution of RRF funding by pillar in 
Cyprus 

(1) Each RRP measure helps achieve the aims of two of the 
six policy pillars of the RRF. The primary contribution is shown 
in the outer circle while the secondary contribution is shown in 
the inner circle. Each contribution represents 100% of the RRF 
funds. Therefore, the total contribution to all pillars displayed 
on this chart amounts to 200% of the RRF funds allocated to 
Cyprus. 
Source: European Commission 

The Technical Support Instrument (TSI) helps 
Cyprus invest in its public administration and 
create a better enabling environment for EU 
and  national  investment.  The  TSI  has  funded 
projects  in  Cyprus  to  design  and  implement 
growth-enhancing 
reforms  since  2013.  The 
support provided to Cyprus in 2023 included action 
to  boost  the  economy’s  competitiveness  by 
strengthening 
the  entrepreneurial  ecosystem, 
better  integrate  migrants  by  creating  intercultural 
networks  and  making  steps  towards  sustainable 
finance  by  boosting  the  capacity  of  financial 
supervisors  to  respond  to  challenges  associated 
with  economic,  social  and  governance  risks.  The 
TSI  also  helped Cyprus  achieve  specific  objectives 
in  the  context  of  its  RRP,  such  as  communicating 
the benefits of RRP measures to the public. 

Cyprus  also  receives  funding  from  several  other 
EU  instruments,  including  those  listed  in  Table 
A4.1. For a more complete view of loans, see Table 
4.2 on EU funded loans along with complementary 
bilateral  Member  States-funded  loans  given  to 
Cyprus 
its  past  financial 
assistance  programme  and  their  outstanding 
amounts. 

in  the  context  of 

31 

PO1 Smarter EuropePO2 Greener EuropePO3 Connected EuropePO4 Social EuropePO5 Europe closer to citizensPO8 JTF specific objectiveGreen transitionDigital transformationSmart, sustainable and inclusivegrowthSocial & territorial cohesionHealth & resilienceNext generation 
   
   
Table A4.1:  Support from EU instruments in Cyprus 

(1) RRF implementation period is 2021-2026. 
(2) The public sector loan facility’s programming period is 2021-2025 and the amount reflects the national share in its grant 
component reserved until the end of the period.   
(3) Common agricultural policy programming periods are 2014-2022 and 2023-2027.   
(4) EMFF – European Maritime and Fisheries Fund, EMFAF – European Maritime, Fisheries and Aquaculture Fund. 
(5) Data on the Connecting Europe Facility covers transport and energy and has a cut-off date of 15 May 2024. 
(6) Data on Horizon Europe (2021-2027) has a cut-off date of 13 May 2024. 
(7) 2021-2027 data on the LIFE programme has a cut-off date of 15 May 2024. 
(8) The amount of the EU guarantee signed under the EFSI Infrastructure and Innovation Window was derived based on the 
signed amount of the operations and the average internal multiplier, as reported by the EIB (cut-off date is 31 December 2023). 
(9) The amount of the EU guarantee and of the volume of operations signed under InvestEU includes the EU compartment as well 
as the Member State compartments (cut-off date is 31 December 2023).   
(10) SURE - European instrument for temporary support to mitigate unemployment risks in an emergency. 
Source: European Commission 

Table A4.2:  EU / euro area loans under the 2010-2018 financial assistance programmes 

(1) Data include upfront retained amounts (prepaid margin, service fee). The cut-off date is 15 May 2024. 
Source: European Commission 

32 

Amount 2021-2027 (EUR million)Cohesion policy968.6RRF grants (1)1 020.2Public sector loan facility (grant component) (2)7.7Common agricultural policy (3)374.0EMFF/EMFAF (4)38.3Connecting Europe Facility (5) 40.2Horizon 2020 / Horizon Europe (6) 212.1LIFE programme (7) 5.2Volume of operations (EUR million)European Fund for Strategic Investment 2015-2020 (8) 142.7InvestEU 2021-2027 (9)0PeriodTotal amount available (EUR million)Disbursed amount (EUR million)SURE (10)2020-2022 633.0 633.0RRF 2021-2026200 26.0700EU grantsAmount 2014-2020 (EUR million)877.7-- 48.40EU loans39.7 187.9 319.827EU guaranteesEU Guarantee (EUR million)PeriodTotal amount disbursed (EUR billion)Outstanding amount (EUR billion)European Stability Mechanism2013-20166.36.3EU / euro area loans under the 2010-2018 financial assistance programmes (1) 
 
 
 
 
 
  
 
 
  
 
ANNEX 5: RESILIENCE 

Table A5.1:  Resilience indices across dimensions for Cyprus and the EU-27 

(1) The synthetic indices aggregate the relative resilience situation of countries across all considered indicators. For an indicator, 
each country’s relative situation in the latest available year is compared with the collection of values of that indicator for all 
Member States and all years in the reference period. 
Source: Resilience Dashboards - version spring 2024, data up to 2022 

(RDB) (26) 
resilience 

This  Annex  uses  the  Commission’s  resilience 
to  show  Cyprus’ 
dashboards 
relative 
and 
vulnerabilities (27)  that  may  be  of  relevance 
for  societal,  economic,  digital  and  green 
transformations,  and  dealing  with  future 
shocks and geopolitical challenges. (28) 

capacities 

for 

According  to  the  RDB’s  set  of  resilience 
indicators,  Cyprus  has  medium  resilience 
overall 
and 
vulnerabilities,  with  no  differences  from 
before. Almost 60% of vulnerability indicators are 
medium to high, while even slightly more capacity 
indicators are medium to high.   

capacities 

both 

Compared  to  2023,  Cyprus  has  slightly 
economic 
social 
increased 

and 

its 

(26)  Https://ec.europa.eu/info/strategy/strategic-

planning/strategic-foresight/2020-strategic-foresight-
report/resilience-dashboards_en. Resilience is defined as the 
ability not only to withstand and cope with challenges but 
also to undergo transitions, in a sustainable, fair, and 
democratic manner. 2020 Strategic Foresight Report: 
Charting the course towards a more resilient Europe 
(COM(2020) 493). 

(27)  Vulnerabilities describe features that can exacerbate the 

negative impact of crises and transitions, or obstacles that 
may hinder the achievement of long-term strategic goals, 
capacities refer to enablers or abilities to cope with crises 
and structural changes and to manage transitions. 

(28)  This Annex is linked to Annex 1 on SDGs, Annex 6 on the 
green deal, Annex 8 on the fair transition to climate 
neutrality, Annex 9 on resource productivity, efficiency and 
circularity, Annex 10 on the digital transition and Annex 14 
on the European pillar of social rights. 

33 

vulnerabilities,  and 
its  capacities  have 
remained  stable,  with  both  medium.  Cyprus  is 
among  the  EU’s  weakest  performers  for  active 
labour market policies per person wanting to work, 
average  Programme  for 
International  Student 
Assessment (PISA) scores, and to a less degree for 
the  income  stabilisation  coefficient.  Its  major 
vulnerabilities, compared to other EU countries, are 
antimicrobial  resistance  (see  also  Annex  16)  for 
which  is  the  last  in  the  EU,  and  the  non-financial 
corporation  debt  to  GDP  ratio,  in  which  regard 
Cyprus  is  the  second  last.  Despite  improvements, 
the country is also still far below the EU average in 
terms of young people neither in employment nor 
in education and training (NEET). 

In  the  green  dimension,  Cyprus  has  higher 
vulnerabilities and lower capacities than the 
rest of the EU. In particular, it scores last in the 
EU  in  terms  of  water  exploitation  index,  and  the 
country is still among the EU’s poorest performers 
its  electric  and  hydrogen  passenger  fleet 
in 
distribution,  the  e-waste  recycling  rate,  and  soil 
carbon content. 

In  the  digital  dimension,  Cyprus’  capacities 
are  medium-high  and  its  vulnerabilities  are 
medium-low.  Only  for  a  few  capacity  indicators, 
such  as  judicial  system  e-tools,  the  collaborative 
economy,  the  value  of  e-commerce  sales,  and  e-
healthcare,  Cyprus  is  still  lagging  behind  the  rest 
of  the  EU.  On  a  positive  note  though,  it  has  no 
major vulnerabilities. 

Cyprus’  geopolitical  capacities  are  on  a  par 
with  the  EU  average,  at  medium-high,  but  it 

CYCYEU-272023 RDB2024 RDB2024 RDBHighMedium-highMediumMedium-lowLowHighMedium-highMediumMedium-lowLowDimensionDistribution of indicators by vulnerabilities and capacitiesOverall resilienceVulnerabilities0.470.500.50Capacities0.570.540.67VulnerabilitiesSocial and economicVulnerabilities0.660.590.47Capacities0.600.560.670.610.670.65GreenVulnerabilities0.370.370.44Capacities0.390.390.70CapacitiesGeopoliticalVulnerabilities0.290.330.41Capacities0.620.740.65DigitalVulnerabilities0.660.670.52Capacities0%20%40%60%80%100%Vulnerabilities(56 indicators)Capacities(62 indicators) 
 
 
 
   
 
 
vulnerabilities  are  above  the  EU  average,  at 
medium-high. Of particular concern are indicators 
such  as  supplier  concentration  in  energy  carriers 
import  dependence  in  energy  materials,  Cyprus’ 
net  international  investment  position,  and  net 
lending/borrowing.  For  two  capacity  indicators, 
namely,  value added share of foreign businesses, 
and  the  supplier  diversification  for  base  metals, 
rate of change, Cyprus is the second last in the EU. 

34 

 
ENVIRONMENTAL SUSTAINABILITY 
ANNEX 6: EUROPEAN GREEN DEAL 

Cyprus  has  made  progress  in  the  green 
transition, with more action needed in several 
areas, such as on managing potential losses from 
climate risks, sustainable water management, and 
on  the  circular  economy.  This  Annex  provides  a 
snapshot  of  climate,  energy,  and  environmental 
aspects of the transition in Cyprus (29). 

reduce  its  effort  sharing  emissions  by  0.7%  from 
2005 levels by 2030. Additional policies planned in 
Cyprus’s  draft  updated  NECP  are  projected  to 
reduce  these  emissions  by  23.1%  from  2005 
levels,  falling  short  by  9  percentage  points  of 
Cyprus’s  effort  sharing  target  to  reduce  by 
32% (32). 

Cyprus’  draft  updated  national  energy  and 
climate  plan  (NECP)  includes  information  on 
the  investment  needs  to  achieve  its  2030 
climate  and  energy  targets,  with  a  focus  on 
energy-  and  transport-related  investments.  The 
needs  distinguish  between  public  (national  and 
European)  and  private  investment,  both  for  WEM 
(with existing measures) and WAM (with additional 
measures)  scenarios.  The  description  of  funding 
sources  varies  in  the  level  of  detail  provided  for 
Energy  Union.  On 
the 
each  aspect 
decarbonisation, energy efficiency, energy security, 
and  the  internal  energy  market,  the  plan  outlines 
the  funding  sources  for  the  key  policies  and 
and 
innovation 
research, 
measures.  On 
competitiveness, 
information  on  funding 
sources is rather generic, mentioning only potential 
available  sources  and  EU  funding  programmes.  It 
does  not  provide  an  overview  with  all  budgetary 
information, which means it is difficult to identify 
potential funding gaps (30). 

the 

of 

The additional policies and measures planned 
are  not  sufficient  for  Cyprus  to  reach  its 
2030  effort  sharing  target (31).  Cyprus’s  2022 
greenhouse  gas  emissions  from  its  effort  sharing 
sectors  are  expected  to  come  in  at  2.5%  above 
2005  levels.  Current  policies  are  projected  to 

(29)  This Annex is complemented by Annex 7 on energy transition 

and competitiveness, Annex 8 on the fair transition to 
climate neutrality, Annex 9 on resource efficiency, circularity, 
and productivity, and relevant topics in other annexes to this 
country report. 

(30)  See the Commission’s (2023) assessment of the draft 

national energy and climate plan of Cyprus. 

(31)  The national greenhouse gas emission reduction target is 
laid down in Regulation (EU) 2023/857 (the Effort Sharing 
Regulation). The aim is to align action in the sectors 
concerned with the objective to reach the EU-level economy-
wide target of greenhouse gas reductions of at least 55% 
compared to 1990 levels. The target also applies to the 
sectors outside the current EU Emissions Trading System, 
notably buildings (heating and cooling), road transport, 
agriculture, waste, and small industry (known as the effort 
sharing sectors). 

Graph A6.1: Greenhouse gas emissions from the 
effort sharing sectors in Mt CO2eq, 2005-2022 

Source: European Environment Agency 

and 

energy 

renewable 

There  is  scope  for  increasing  Cyprus  targets 
for 
energy 
its  final  updated  NECP (33). 
efficiency in 
Cyprus’s  renewable  energy  contribution  set  in  its 
draft  updated  NECP,  26.5%  by  2030, 
is 
significantly  below  the  required  33%.  The  draft 
NECP  also  lacks  a  clear  2030  national  energy 
efficiency 
the  expected 
contribution  of  2.28  Mtoe  in  primary  energy 
consumption  is  less  ambitious  than  the  required 
contribution  under the  Energy  Efficiency  Directive, 
the  contribution  of  1.81  Mtoe  in  final  energy 
consumption is aligned.  

contribution.  While 

(32)  The effort sharing emissions for 2022 are based on 
approximated inventory data. The final data will be 
established in 2027 after a comprehensive review. 
Projections on the impact of current policies (‘with existing 
measures’, WEM) and additional policies (‘with additional 
measures’, WAM) as per Cyprus’ draft updated NECP. 

(33)  The EU target set out in the revised Renewable Energy 

Directive is to have 42.5% of gross final energy consumption 
coming from renewable energy sources by 2030, with the 
aspiration to reach 45%. The formula in Annex I to Directive 
(EU) 2023/1791 sets the indicative national contribution for 
Cyprus at 2. 038 Mtoe for primary energy consumption and 
1.807 Mtoe for final energy consumption. See the 
Commission Recommendation of 18.2.2023 to Cyprus. 

35 

0112233445520052022MtCO2eWasteSmall industryAgricultureBuildings (under ESR)Domestic transport (excl. aviation) 
 
 
 
     
 
 
 
In  Cyprus,  the  transition  to  sustainable 
transport is still in its infancy (34). Cyprus has 
no  railways  or  inland  waterways;  all  domestic 
freight transport is carried out on roads. Only 13% 
of  passenger  travel  is  by  public  transport  (buses 
and  coaches).  Traffic  congestion  remains  very 
high (35). With battery electric vehicles constituting 
a  mere  0.1%  of  the  passenger  car  fleet  in  2022, 
Cyprus has one of the lowest adoption rates in the 
EU. In 2023, the island had 190 publicly accessible 
charging points, or one for every 6 electric vehicles 
(the EU average is 1:10). 

Carbon  removals  through  Cyprus'  land  use, 
land-use  change  and  forestry 
(LULUCF) 
sector have declined significantly since 2021, 
though the sector still  provides a net carbon sink. 
To  reach  the  2030  LULUCF  target,  additional 
carbon  removals  of  63 kt CO2eq  are  needed (36). 
According  to  the  latest  projections  for  2030,  its 
carbon  removals  through  the  land  sector  are 
expected to fall short of the target (37). 

the 

risk 

Cyprus  suffers  from  low  levels  of  insurance 
is 
coverage  against  climate  risks  and 
severely  vulnerable  to  climate  change  in 
water  management 
(see  below).  Cyprus’ 
historical share of insured economic losses due to 
climate-related events is about 2%, with wildfires 
highest 
being 
category.  Water 
management 
in  changing  climatic  conditions 
requires  particular  attention  due  to  risks  of 
electricity  disruption  as  floods,  heat,  and  drought 
impact  energy  production.  Further  vulnerabilities 
and  risks  relate  to  sea-level  rise,  coastal  erosion 
and  saltwater  intrusion.  There  are  inconsistencies 
in Cyprus’ estimated costs of adaptation measures 
and 
largely 
voluntary. For example, Cyprus estimates the cost 
of  adaptation  at  EUR 7.2  million  for  water 
resources,  EUR 0.9  million  for  agriculture,  and 
EUR 0.2 million for health, despite reporting water 
and health as the key sectors affected by climate 
change in 2023. It will also be vital to improve the 

to  adaptation 

the  approach 

is 

(34)  Unless otherwise indicated, data in this section refer to 
2021. See European Commission, 2023, EU transport in 
figures, transport.ec.europa.eu. 

institutional  arrangements 
resilience in Cyprus (38). 

to  boost  climate 

Sustainable  water  management  is  a  major 
environmental  issue  for  Cyprus.  The  country 
tops the ranking in the EU (from highest to lowest 
score) for the water exploitation index Plus (WEI+), 
which reached 113% in 2019. The worst seasonal 
water scarcity conditions saw it reach 124% in Q4 
of  2019 (39).  Croplands  are  generally  the  most 
damaged ecosystem by  drought events in Cyprus. 
The  efficient  use  of  water  resources  can  be 
measured  by  water  productivity (40).  In  2020, 
Cyprus’  economy  generated  EUR 240  per  cubic 
meter of water abstracted, below the EU average. 
Between  2000-2020,  on average,  8%  of Cyprus’s 
area was affected by droughts, and 2.1% in 2022. 
Based  on  reporting 
in  the  2nd  river  basin 
management  plan (41),  58%  of  all  surface 
waterbodies were in a good ecological status and 
85%  were  in  a  good  chemical  status.  The  marine 
waters  of  Cyprus  are  not  yet  all  in  a  good 
environmental status as tracked by the descriptors 
used  in  the  Marine  Strategy  Framework  Directive, 
based  on  the  latest  data  reported  for  its  marine 
strategy (42). 

Cyprus 
is  experiencing  high  anthropic 
pressure  on  habitats  and  ecosystems, 
especially in coastal zones. By the end of 2021, 
Cyprus had protected 37.7% of its land and 8% of 
its  marine  areas.  However,  as  a  result  of  land 
development,  the  share  of  protected  ecosystems 
in  good  conservation  status  went  from  98%  over 
the reporting period 2007-2012 to 45% in 2013-
2018 (43), 
than  halved.  The 
conservation  status  of  protected  species  did  not 
experience  the  same  dramatic  drop.  64%  of  the 
records  indicate  that  species  are  in  a  good 

it  more 

i.e. 

(38)  Also see the Commission’s 2023 assessment and 

recommendation on Cyprus’ progress on climate adaptation. 

(39)  WEI+ values above 40% indicate severe stress and 

unsuitable freshwater use. 

(40)  Measured as GDP over total fresh surface water abstracted 

in cubic meters. 

(41)  Data from the 3rd river basin management plan are not 

(35)  In 2020, road vehicle drivers experienced peak-hour delays 

available. 

of 38.5 hours on average (EU average: 29 hours). 

(36)  National LULUCF targets of the Member States in line with 

Regulation (EU) 2023/839. 

(42)  EUR-Lex – 52022XC0314(01) – EN – EUR-Lex (36uropa.eu) ; 
The next report on the state of the marine environment is 
due in October 2024. See also Cyprus – Marine (europa.eu). 

(37)  Projections submitted in Cyprus’s draft updated national 

(43)  According to data collected under Article 17 of the Habitats 

energy and climate plan, 2023. 

Directive. 

36 

 
 
 
conservation  status (44).  Farmland  birds  were  not 
dramatically  affected  either  and  the  common 
farmland bird index was 115 in 2020.               

is 

Cyprus’  agriculture  sector  has  a  large  scope 
resources  more 
to  manage  water 
sustainably.  The  annual  output  of  Cyprus' 
agricultural  sector  was  EUR 662  million (45)  in 
2023.  Cyprus  is  increasing  its  share  of  organic 
farming, which accounted for 6.3% of total utilised 
agricultural  area  in  2021  against  the  goal  of  at 
least  25%  of  the  EU’s  agricultural  land  under 
organic farming by 2030. Agriculture has a heavy 
impact on water resources. 21% of the total area 
under  agriculture 
irrigated  and  the  water 
abstracted  for  agricultural  purposes  accounts  for 
78.9%  of  all  water  abstracted  in  2019.  Cyprus  is 
the EU country that produces the most food waste 
per  capita.  In  2020,  it  produced  397  kg  of  waste 
per  capita,  three  times  the  EU  average.  The 
composting and digestion rate of municipal waste 
fell  from  21  kg  per  capita  in  2015  to  8  kg  per 
capita  in  2021,  only  1%  of  all  municipal  waste. 
Healthy,  carbon-rich  soils  play  a  crucial  role  in 
preventing  drought.  The  total  estimated  organic 
carbon  content  in  arable  land  in  Cyprus  is  11 
megatons, with an average of 18%, lower than the 
EU average of 24%. However, conservation tillage 
practices, which increase soil organic carbon, were 
used  in  54%  of  all  tillable  area  in  2016,  the 
highest share in the EU. 

Graph A6.2: Changes in livestock density and 
organic farming 

Livestock unit (LSU)/ha of UAA: it measures the stock of 
animals (cattle, sheep, goats, equidae, pigs, poultry and 
rabbits) converted in LSUs per hectare of UAA. 
Source: Eurostat 

Cyprus’ livestock farming sector is gradually 
increasing  in  density.  While  most  EU  Member 
States  lowered  their  livestock  density  indices 
between  2010  and  2020,  Cyprus  recorded  an 
increase (46).  Livestock  farming  is  one  of  the 
activities  that  places  the  highest  burden  on  the 
environment  in  terms  of  ammonia  emissions  into 
the air. The agricultural sector was responsible for 
generating  96.4%  of  all  ammonia  emissions, 
against  the  EU  average  of  90.7%.  Despite  the 
slightly  decreasing  trends,  there  is  scope  to 
improve  Cyprus’s  high  nutrient  surplus.  The  latest 
figures  for 
the  gross  nitrogen  balance  on 
agricultural  land  in  Cyprus  show  an  average 
surplus of 194 kg per hectare per year in 2015. It 
has  gradually  fallen  over  the  years  but  remains 
above  the  EU  average.  The  nitrates  content  in 
groundwater  is  below  the  EU  average  at  7.8 
against  20.5  mg  nitrates/l  and  17%  of 
groundwater  monitoring  stations  indicate  levels 
above the maximum 50 mg nitrates/l. By contrast, 
Cyprus 
the  most  affected  country  by 
phosphorous  surplus,  with  the  gross  phosphorus 
balance  at  32 kg/ha  in  2014.  However,  Cyprus 
performs  better  than  its  EU  peers  on  water 
contamination  from  pesticides. 
In  2021,  no 
monitoring  sites  were  reported  to  have  pesticide 
levels  exceeding  the  thresholds  set  by  the  Water 
Framework Directive. 

is 

(44)  Against the EU average of 15% and 28% respectively. 

(45)  Production value at basic price (2015=100). 

(46)  The livestock density index increased from 1.69% 

to 1.73% in 2020, above the EU average of 0.75%. 

37 

012024681020162020% LSU per hectare% of total utilised agricultural areaLivestock density index Cyprus (% LSU per ha)Livestock density index EU-27 (% LSU per ha)Organic farming Cyprus (% of total utilised agricultural area)Organic farming EU-27 (% of total utilised agricultural area) 
 
       
 
Graph A6.3: Environmental investment gap, annual 
average 

The numbers are computed by the European Commission 
based on the latest internal reports, Eurostat, EIB and national 
data sources. 
Source: European Commission 

Cyprus  would  benefit  from  investing  more  in 
sustainable  water  management,  in  measures  to 
protect biodiversity, and in waste and waste water 
infrastructure.  Between  2014  and  2020,  the 
environmental  investment  gap  was  estimated  to 
be at least EUR 218 million per year, equivalent to 
1.1%  of  GDP.  According  to  the  latest  estimates, 
the  overall  environmental  investment  needs  for 
2021-2027 reach at least EUR 528 million a year 
against the financing baseline of EUR 295 million. 
This  leaves  a  slightly  wider  gap  than  in  the 
previous  financing  period,  equivalent  to  EUR 233 
million.  Sufficient  resources  have  yet  to  be 
allocated, 
to  biodiversity  and 
ecosystem protection (a gap of EUR 82 million), to 
the  circular  economy  and  to  waste  (EUR  53 
million)  and  sustainable  water  management  (EUR 
49 million). 

in  particular 

38 

6618518249495382050100Pollution prevention &controlWater managementCircular economy andwasteBiodiversity andecosystemsmillion EUR2014-20202021-2027 
       
Table A6.1:  Indicators tracking progress on the European Green Deal from a macroeconomic perspective 

Sources: (1) Member States’ emission data for 2019 and 2020 are in global warming potential (GWP) values from the 4th 
Assessment Report (AR4) of the Intergovernmental Panel on Climate Change (IPCC). Member States’ 2005 base year emissions 
under Regulation (EU) 2018/842, emissions data for 2021 and 2022, and 2030 projections are in GWP values from the 5th 
Assessment Report (AR5) of the IPCC. 2021 data are based on the final inventory reports, 2022 data are based on approximated 
inventory reports and European Environmental Agency’s calculation of effort sharing emissions. The final data for 2021 and 2022 
will be established after a comprehensive review in 2027. The 2030 target is in percentage change of the 2005 base year 
emissions. Distance to target is the gap between the 2030 target and projected effort sharing emissions with existing measures 
(WEM) and with additional measures (WAM), in percentage change from the 2005 base year emissions. The measures included 
for the 2030 emission projections reflect the state of play as reported in Member States' draft updated national energy and 
climate plans or, if unavailable, as reported by 15 March 2023 as per Regulation 2018/1999. (2) Net removals are expressed in 
negative figures, net emissions in positive figures. Reported data are from the 2024 greenhouse gas inventory submission. 2030 
value of net greenhouse gas removals as in Regulation (EU) 2023/839 – Annex IIa. (3) The 2030 national objectives for 
renewable energy and energy efficiency are indicative national contributions, in line with Regulation (EU) 2018/1999 (the 
Governance Regulation), the EU-level 2030 renewable energy target set out in Directive EU/2018/2001 amended by Directive 
EU/2023/2413 (the revised Renewable Energy Directive) – 42.5% of gross final energy consumption with the aspiration to reach 
45% –, and the formula in Annex I to Directive (EU) 2023/1791 (the Energy Efficiency Directive). (4) Passenger battery electric 
vehicles (BEV) and fuel cell electric vehicles (FCEV). (5) The climate protection gap refers to the share of non-insured economic 
losses caused by climate-related disasters, based on modelling of the risk from floods, wildfires, windstorms, and the insurance 
penetration rate. Scale: 0 (no protection gap) –4 (very high gap) (European Insurance and Occupational Pensions Authority, 2022). 
(6) Total water consumption in renewable freshwater resources available for a territory and period. (7) Material extractions for 
consumption and investment. (8) Years of potential life lost through premature death due to exposure to particulate matter with a 
diameter of less than 2.5 micrometres. (9) Share of habitats in good conservation status according to the records submitted 
under Art. 17 of the Habitats Directive (Directive 92/43/EEC) for 2013-2018. (10) Multi-species index measuring changes in 
population abundances of farmland bird species. (11) Source: annex 12 of the Commission’s proposal for a soil monitoring law, 
SWD (2023) 417 final. (12) Estimates of organic carbon content in arable land. 

39 

Target200520192020202120222030WEMWAMProgress to climate and energy policy targetsGreenhouse gas emission reductions in effort sharing sectors (1)Mt CO2eq, %, pp4,266.85%1%4%2%-32%-23-9Net greenhouse gas removals from LULUCF (2)Kt CO2eq-221.000-297.000-299.000-235.000-299.000-352n/an/aShare of energy from renewable sources (1) (3)%3%14%17%19%19%33%--Energy efficiency: primary energy consumption (3)Mtoe2.52.52.22.32.52.0Energy efficiency: final energy consumption (3)Mtoe1.81.91.61.71.81.8Projected20182019202020212022202120222030Green transition: mobility         Greenhouse gas emissions: road transportMt CO2e---2.12.1769.0786.61.7Share of zero-emission vehicles in new registrations (4)% 0.30.50.40.83912.1n/aNumber of publicly accessible AC/DC charging points --476067299178446956n/aShare of electrified railways%-----56.1%-n/aGreen transition: buildings         Greenhouse gas emissions: buildingsMt CO2e---0.50.5537.0486.70.6Final energy consumption in buildings2015=100113.9%120.8%112.8%115.6%121.8%104.0%97.2% Climate adaptation         Climate protection gap (5)score 1-4--1.91.61.41.51.5n/a20182019202020212022202020212022State of the environmentWater | Water exploitation index (WEI+) (1) (6)% of renewable freshwater92.5113.0---3.6--Circular economy | Material footprint (7)tonnes per person23.024.623.123.522.314.214.814.9Pollution | Years of life lost due to air pollution by PM2.5 (8)per 100.000 inhabitants482508494536-545584-Biodiversity | Habitats in good conservation status (9)%45.214.7                       Common farmland bird index (10)2000=100115120115--78--Green transition: agri-food sectorOrganic farming% of total utilised agricultural area4.554.984.636.43-9.1--Nitrates in groundwatermg NO3/litre1918.5918.17--20.42--Food waste per capitaKg per capita397--130131-Share of soil in poor health (11)%-41Soil organic matter in agricultural land (12)Mt per ha11----7,904--DistanceEU-27 
 
      
 
ANNEX 7: ENERGY TRANSITION AND COMPETITIVENESS 

Graph A7.1: Cyprus' energy retail prices for 
households and industry & service 

(1) For industry, consumption bands are I3 for gas and IC for 
electricity, which refer to medium-sized consumers and 
provide an insight into affordability 
(2) For households, the consumption bands are D2 for gas 
and DC for electricity 
(3) Industry prices are shown without VAT and other 
recoverable taxes/levies/fees as non-household consumers 
are usually able to recover VAT and some other taxes 
Source: Eurostat 

have 

consumers 

In  relative  terms,  electricity  prices  for  non-
increased 
household 
significantly  compared  to  the  US  and  Japan. 
Although  there  has  been  a  notable  decline  since 
the second half of 2022, Cyprus’ electricity prices 
have  persisted  above  those  of  the  US  and  Japan. 
This  could  potentially  affect  the  international 
competitiveness  of  energy-intensive  industries  in 
the country. 

while 

This  Annex (47)  sets  out  Cyprus’  progress  and 
challenges  in  accelerating  the  net-zero  energy 
transition 
EU’s 
competitiveness  in  the  clean  energy  sector (48).  It 
considers measures and targets put forward in the 
draft  updated  National  Energy  and  Climate  Plans 
(NECP) for 2030 (49) 

bolstering 

the 

Cyprus 

the  visible  progress  made 

in 
Despite 
accelerating  the  installation  of  renewable 
energy  and  implementing  energy  efficiency 
measures, 
significant 
challenges  in  the  energy  sector  also  due  to 
its isolated energy system. Ending its energy 
isolation,  diversifying  its  energy  supply  and 
enhancing  consumer  empowerment  in  the 
electricity  sector  will  be  key  to  achieve  its 
targets.  

faces 

prices 

Unlike the prevailing trends witnessed across 
the  EU,  average  household  electricity  prices 
in 
the  country  have  not  significantly 
decreased,  while  average  industry/service 
electricity  prices  have  experienced  a  small 
decline. This is mainly due to the absence of 
gas  in  the  energy  mix  of  Cyprus,  where 
energy 
of 
follow 
international oil (HFO, Diesel) and ETS prices. 
More  specifically,  in  the  first  half  of  2023, 
household electricity prices increased by 15% even 
though  experiencing  a  8%  decline  by  the  end  of 
the  year.  In  the  industry/service  sector,  there  has 
been a reduction of 13% between the second half 
of  2022  and  the  first  half  of  2023,  remaining 
stable until the end of the year. Electricity prices in 
Cyprus  remained  considerably  above  the  EU 
average. 

trend 

the 

(47)  It is complemented by Annex 6 as the European Green Deal 

focuses on the clean energy transition and by Annex 8 on the 
action taken to protect the most vulnerable groups, 
complementing ongoing efforts under the European Green 
Deal, REPowerEU and European Green Deal Industrial Plan. 

(48)  In line with the Green Deal Industrial Plan and the Net-Zero 

Industry Act 

(49)  Cyprus submitted its draft updated NECP in July 2023. The 
Commission issued an assessment and country-specific 
recommendations on 18 December 2023. Commission 
Recommendation, Assessment (SWD) and Factsheet of the 
draft updated National Energy and Climate Plan of Portugal - 
European Commission (europa.eu) 

40 

0.000.050.100.150.200.250.300.350.40€/KWhElectricity (industry & service) - CYElectricity (industry & service) - EUElectricity (households) - CYElectricity (households) - EU 
 
 
   
 
Graph A7.2: Trends in electricity prices for non-
household consumers (EU and foreign partners) 

(1) For Eurostat data (EU and CY), the band consumption is ID 
referring to large-sized consumers with an annual 
consumption of between 2 000 MWh and 20 000 MWh, such 
as in electricity intensive manufacturing sectors, and gives an 
insight into international competitiveness 
(2) JP = Japan 
Source: Eurostat, IEA 

mix  and  is  in  the  process  of  developing  an  LNG 
terminal  at  the  Vasilikos  port.  The  project  has 
suffered  significant  delays  and  the  completion 
date  is  July  2024.  Cyprus  relies  on  petroleum 
products that are entirely imported for more than 
80%  of  its  energy  needs,  but  it  has  managed  to 
substantially reduce its energy import dependency 
on non-EU countries, from 48% to 31% (50).  

On  fossil  fuel  phase-out,  Cyprus’  draft 
updated  NECP  is  only  partially  consistent 
with  its  commitment  in  its  territorial  just 
transition  plan.  Notably  the  information  on 
phasing  out  the  capacity  of  the  Dhekelia  heavy 
fuel  plant, which is unchanged until  2028, appear 
inconsistent with the territorial just transition plan, 
which  states  that  there  will  be  a  reduction  in 
emissions of 16% by 2026 and zero emissions by 
2050 (51). 

Cyprus  continued  to  apply  support measures 
during 2023 to help consumers mitigate high 
electricity  prices.    Those  measures  aimed  to 
reduce  energy  bills  by  compensating  part  of 
electricity  prices  above  a  set  limit.  For  vulnerable 
consumers,  the  compensation  reached  100%, 
while 
the 
compensation  was  linked  to  consumption  level. 
Reductions  in  excise  duty  on  petroleum  products 
were applied during the first half of 2023. 

for  other 

categories 

consumer 

Consumer  empowerment  in  the  electricity 
sector has not progressed, due to the specific 
features  of  the  market  and  the  lack  of 
technologies that would enable consumers to 
engage  actively  in it.  The  deployment  of  smart 
meters is delayed and energy communities are still 
facing  some 
implementation  challenges.  Until 
2023,  there  was  only  one  active  supplier  for  the 
household  market  (the  dominant  supplier  –  EAC), 
therefore  switching  was  not  available  yet  for  the 
household market.  

energy 

the  green 

isolation  will 
Ending  Cyprus’ 
accelerate 
transition,  boost 
renewables  in  power  generation  and  reduce 
energy  prices  for  consumers.  The  Great  Sea 
Interconnector (former EuroAsia) project which will 
connect 
the 
the  Cypriot  power  grid 
Greek/European electricity market has experienced 
delays but positive developments had taken place 
by  the  end  of  2023.  Moreover,  besides  the  gas 
discoveries  in  its  exclusive  economic  zone  (EEZ), 
Cyprus  aims  to  include  natural  gas  in  its  energy 

to 

Installed  renewable  capacity  surged  by 
30.8% in 2023 compared to 2022, driven by 
a  significant  increase  in  solar,  in  particular 
photovoltaics.  Total  renewable  energy  capacity 
in Cyprus in 2023 stood at 778 MW (52). Total wind 
capacity for 2023 was 158 MW, exactly the same 
as  the  eight  previous  years,  all  of  which  is 
onshore (53). Renewables’ share in the power sector 
in  Cyprus  was  20.2%  in  2023,  with  renewable 
electricity  generation  projected  in  the  draft  NECP 
the 
to 
total 
acceleration  of  solar  deployment, 
installed capacity in 2023 was 606 MW (54). In its 
recovery  and  resilience  plan 
(RRP)  and  the 
REPowerEU  Chapter,  Cyprus  has  committed  to 
regarding 
finalise 
renewable  self-consumption  and  to  create  a  one-
stop-shop  for  renewable  self-consumers,  active 
customers and energy communities.  

regards 
the 

the  secondary 

in  2030.  As 

reach  31.5% 

legislation 

(50)  Eurostat data 

(51)  See the Commission’s assessment of the draft updated 

NECP.  

(52)  IRENA report Renewable Capacity Statistics 2024. The data 
might differ from the Eurostat data because a different 
methodology is used to calculate capacity in AC and DC 

(53)  idem 

(54)  idem 

41 

050100150200250Index ( 2018 S2 = 100)JPUKUSCYEU 
  
 
Graph A7.3: Cyprus' installed renewable capacity 
(left) and electricity generation mix (right) 

water  heating.  The  contribution  of  heat  pumps 
and biomass (wood products) for heating purposes 
and  the  use  of  waste-based  biomass  in  industry 
(cement factory) is also significant.  

to 

on 

grid 

Based 

system 

Cyprus’ 

capacity 

Cyprus  is  facing  major  challenges  in  short-
term 
accommodate 
increasing  renewables,  leading  to  frequent 
Energy 
curtailments. 
Regulatory Authority (CERA) official data, as of the 
end  of  November  2023  there  was  a  total  of 
782.57MW  of  renewables  plants  in  operation  in 
(157.50MW  of  wind, 
the  Cypriot 
625.93MW  of  photovoltaics  and  9.15MW  of 
biomass).  At  the  same  time,  CERA  has  granted 
construction  permits  for  a  total  of  2 383MW  in 
renewables  projects.  Cyprus  needs  to  ensure  that 
its  grid  will  be  able  to  accommodate  at  least  the 
volume  of  planned  capacity  of  renewable  energy 
projects,  especially  considering  self-consumption 
and EVs, which have been intensively promoted in 
recent  years,  especially through  the  Recovery  and 
Resilience  Facility.  However,  the  rolling  out  of 
smart  meters  will  improve  the  flexibility  and  the 
overall efficiency of the system. 

Energy  efficiency  gains  slowed  in  Cyprus, 
although  there  is  still  untapped  potential  in 
this  area.  In  2022  Cyprus  had  a  primary  energy 
consumption  of  2.5  Mtoe  –  a  7.4%  increase 
compared to 2021 and a 0.7% decrease compared 
to 2012. It had a final energy consumption of 1.8 
Mtoe – a 7.7% increase compared to 2021) and a 
3.1%  increase  compared  to  2012.  In  2022,  the 
best results came from the industry sector, which 
energy 
nevertheless 
consumption  by  0.9%,  and  the  worst  from  the 
transport  sector,  which  increased  its  final  energy 
consumption by 12.2%. 

increased 

final 

its 

(1) "Other" includes biogas 
Source: IRENA, Ember 

Cyprus  does  not  have  offshore  wind  but  has 
committed (55)  to  installing  offshore  wind  farms 
starting in 2030 and reaching 100 MW by 2050. In 
May  2023,  Cyprus  expressed  preliminary  interest 
in participating in the 2024 tender as a host state 
in  the  ‘EU  Financing  Mechanism  for  Renewable 
Energy 
on 
spurring 
renewables between Member States. 

cooperation 

Projects’, 

of 

renewables, 

towards 
the  significant  steps 
Despite 
implementing  reforms  to  accelerate  the 
deployment 
significant 
challenges  remain.  Given  that  Cyprus  has  not 
published its long-term schedule  for auctions, the 
visibility  of  the  renewable  energy  project  pipeline 
is  not  clear,  especially  since  it  faces  challenges 
with  its  grid,  which  is  in  need  of  upgrade  and 
to  accommodate  more 
expansion 
renewables.  Cyprus  introduced  legislation  which 
qualifies  all  renewable  energies  for  favourable 
permitting  procedures  and  has  recently  activated 
the  digital  single  contact  point  for  the  electronic 
submission  and  assessment  of  applications  for 
authorisation of RES projects. Furthermore, Cyprus 
is  still  working  on  identifying  and  optimising 
further the introduced permit procedures.  

is 

if 

it 

Cyprus’  relatively  high  share  of  renewables 
in  heating  and  cooling  (41.56%  in  2022)  is 
mainly  related  to  solar  energy,  through  the 
widespread use of solar thermal systems for 

(55)  2023 non-binding agreement on goals for offshore 

renewable generation in 2050, with intermediate steps in 
2040 and 2030 for priority offshore grid corridor South and 
East offshore grids 
https://energy.ec.europa.eu/document/download/6efccbb1-
4439-4f2e-bce9-
511ff999bbb7_en?filename=SE_offshore_non-
binding_offshore_goals_final.pdf  

Cyprus  has  implemented  a  series  of  energy 
efficiency  measures  with  the  support  of 
several  EU  funds.  However,  most  of  the 
schemes are still grant-based and the use of 
financial  instruments  is  still  very  limited. 
Cyprus  registered  progress  in  the  efficiency  of 
buildings,  while  the  measures  to  improve  public 
transport  and  develop  electric  vehicles  show  a 
limited uptake from the public. Both the number of 
electric vehicles and of charging stations are very 
low.  The  structure  of  energy  consumption  is 
dominated  by  road  transport  and  buildings,  both 
residential  and  non-residential,  and  these  are  the 

42 

 
 
 
 
roughly 1.2% of total venture capital investment in 
the country. This figure falls below the EU average 
(approximately  9%  of  venture  capital  investment 
channelled into energy-related firms). 

sectors where the most significant potential is; the 
share from industry is limited. 

Cyprus’  current  energy-saving  efforts  in  the 
residential  sector  are  delivering  more 
ambitious results than the target set for the 
whole  building  sector.  In  particular,  between 
2020 and 2022 and given the impact of the covid 
crisis,  the  final  energy  consumption  of  the 
residential  sector decreased  by around 10.2% (56), 
whereas 
its  2020  Long  Term  Renovation 
Strategy  (LTRS),  Cyprus  envisaged  an  increase  by 
10%  in  final  energy  consumption  in  the  building 
sector  by  2030,  compared  to  2020  (8%  saving 
compared to the baseline projections for 2030).  

in 

its  economic  and  geographical 
Due  to 
characteristics,  Cyprus  has  limited  potential 
for  the  development  of  a  fully-fledged  Net-
Zero supply chain, and remains dependent on 
imports  for  renewable  energy  deployment. 
Clean-tech initiatives are currently limited, with the 
majority  of  examples  being  start-ups  or  pilot 
projects (e.g. design of innovative technologies for 
renewable  natural  gas).  Regarding  key  materials 
for  clean  technologies,  Cyprus  is  home  to  a 
hydrometallurgical 
of 
plant 
Skouriotissa  which  processes  laterite  to  recover 
nickel,  an  essential  material 
for  battery 
manufacturing.  The  plant  has  been  operational 
since  2021,  with  an  expected  annual  production 
capacity of 50 000 tones of nickel sulphate. 

the  area 

in 

Despite  notable  progress  within  Cyprus' 
innovation ecosystem, the country still trails 
behind many other EU Member States. Recent 
assessments  of  research  and  innovation  (R&I) 
trends  have  revealed  encouraging  developments. 
However,  private 
investment  in  research  and 
development  aligned  with  Energy  Union  priorities 
remained relatively low at 0.04% of GDP in 2020, 
marking  a  considerable  gap  compared  to  the  EU 
average.  Of  this  expenditure,  approximately  70% 
was  directed  towards  renewable  energy  projects. 
Venture  capital  investment  has  displayed  positive 
trends in recent years, albeit at modest levels (see 
e.g.  Annex  12).  In  2021,  approximately  EUR  3.8 
million  was  invested  in  climate  technology  firms 
within  the  energy  sector  in  Cyprus,  constituting 

(56) Final energy consumption in households from Eurostat, 
climate-corrected by the Joint Research Centre with 
reference period 2005-2022 

43 

 
 
Table A7.1:  Key Energy Indicators 

(1) The ranking of the main suppliers is based on the latest available figures (for 2022) 
(2) Venture Capital investment includes Venture Capital deals (all stages), Small M&A deals and Private Equity (PE) growth deals 
(for companies that have previously been part of the portfolio of a VC investment firm or have received Angel or Seed funding). 
Source: Eurostat, Gas Infrastructure Europe, JRC elaboration based on PitchBook data (03/2024), JRC SETIS (2024) 

44 

20192020202120222019202020212022Import Dependency [%] 92.8%93.2%89.5%92.0%60.5%57.5%55.5%62.5%of Solid fossil fuels 117.2%105.4%97.6%147.3%43.3%35.8%37.3%45.8%of Oil and petroleum products 99.7%101.7%98.4%100.2%96.7%96.8%91.7%97.7%of Natural Gas 0.0%0.0%0.0%0.0%89.7%83.6%83.6%97.6%Dependency from Russian Fossil Fuels [%]of Natural Gas 0.0%0.0%0.0%0.0%39.7%41.3%41.1%21.0%of Crude Oil0.0%0.0%0.0%0.0%28.8%26.7%26.4%19.5%of Hard Coal100.0%100.0%100.0%74.2%43.5%49.1%47.4%21.5%20162017201820192020202120222023Gas Consumption (in bcm)-                   -                   -                   -                 -                 -                 -                 -                 Gas Consumption year-on-year change [%]-                   -                   -                   -                 -                 -                 -                 -                 Gas Imports - by type (in bcm)-                   -                   -                   -                 -                 -                 -                 -                 Gas imports - pipeline-                   -                   -                   -                 -                 -                 -                 -                 Gas imports - LNG-                   -                   -                   -                 -                 -                 -                 -                 20192020202120222023LNG Terminals - storage capacity m3 LNGNumber of LNG Terminals00000LNG Storage capacity (m3 LNG)00000Underground StorageNumber of storage facilities00000Technical Capacity (bcm)0.00.00.00.00.020162017201820192020202120222023Gross Electricity Production (GWh) (2)4,888               5,004               5,061               5,141             4,849             5,119             5,268             -                 Combustible Fuels4,515           4,621           4,640           4,685         4,313         4,405         4,442         -                 Nuclear0000000-                 Hydro0000000-                 Wind227               211               221               239             240             246             224             -                 Solar146               172               199               218             296             468             602             -                 Geothermal0000000-                 Other Sources-0 -0 00-0 -0 0-                 Gross Electricity Production [%]-                 Combustible Fuels92.4%92.3%91.7%91.1%88.9%86.0%84.3%-                 Nuclear0.0%0.0%0.0%0.0%0.0%0.0%0.0%-                 Hydro0.0%0.0%0.0%0.0%0.0%0.0%0.0%-                 Wind4.6%4.2%4.4%4.6%5.0%4.8%4.3%-                 Solar3.0%3.4%3.9%4.2%6.1%9.1%11.4%-                 Geothermal0.0%0.0%0.0%0.0%0.0%0.0%0.0%-                 Other Sources0.0%0.0%0.0%0.0%0.0%0.0%0.0%-                 Net Imports of Electricity (GWh)0000000-                 As a % of electricity available for final consumption 0.0%0.0%0.0%0.0%0.0%0.0%0.0%-                 Electricity Interconnection [%]-                   0.0%0.0%0.0%0.0%0.0%0.0%0.0%Share of renewable energy consumption - by sector [%]-                 Electricity8.6%8.9%9.4%9.8%12.0%14.8%17.0%-                 Heating/cooling24.7%26.4%37.2%35.1%37.1%42.6%41.6%-                 Transport2.7%2.6%2.7%3.3%7.4%7.2%7.2%-                 Overall9.8%10.5%13.9%13.8%16.9%19.1%19.4%0.0%20192020202120222023VC investments in climate tech start-ups and scale-ups (EUR Mln)-                   -                   -                   -                 -                 as a % of total VC investment (3) in Cyprus start-ups and scale-ups-                   -                   -                   -                 -                 Research & Innovation spending in Energy Union R&i prioritesPublic R&I (EUR mln)0.7                0.4                0.2                -                 -                 Public R&I (% GDP)0.003%0.002%0.001%-                 -                 Private R&I (EUR mln)16.2              9.0                -                   -                 -                 Private R&I (% GDP)0.070%0.041%-                   -                 -                 ELECTRICITY/ENERGYCLEAN ENERGYDIVERSIFICATION OF GAS SUPPLIESCyprusEUENERGY DEPENDNCE 
 
   
 
ANNEX 8: FAIR TRANSITION TO CLIMATE NEUTRALITY 

in 

jobs 

in  Cyprus.  Total 

This  Annex  monitors  Cyprus’s  progress  in 
ensuring  a  fair  transition  towards  climate 
neutrality  and  environmental  sustainability, 
particularly  for  workers  and  households  in 
vulnerable  situations.  The  green  economy  is 
expanding 
the 
environmental  goods  and  services  sector  grew  to 
around 12 000 in 2021, which accounted for % of 
total  employment  (EU:  2.7%).  Between  2015  and 
2022,  the  greenhouse  gas  emission  intensity  of 
Cyprus’s  workforce  (see  Graph  A8.1  and  Table 
A8.1)  declined  from  18.2  to  15.6  tonnes  per 
worker  2.  Although  this  is  above  the  EU  average 
(14.3 tonnes per worker in 2022) (57), it indicates a 
positive  trend  in  the  green  transition.  In  line  with 
the  Council  Recommendation  on  ensuring  a  fair 
transition  towards  climate  neutrality (58),  actions 
for  a  fair  green  transition,  including  on  upskilling 
and  reskilling,  are  taking place.  Measures  such  as 
the  construction  of  technical  and  green  schools 
and  related  training  schemes  have  been  outlined 
in  Cyprus’s  recovery  and  resilience  plan  (RRP)  as 
well  as  in  the  Thalia  programme  which  includes 
financing from the European Social Fund Plus and 
the Just Transition Fund (JTF). 

Employment  in  Cyprus’s  sectors  that  are 
most  affected  by  the  green  transition  has 
decreased.  Employment 
in  Cyprus’s  energy-
intensive  industries (59)  comprised  0.8%  of  total 
employment  in  2023  (EU:  3.5%).  Employment  in 
mining  and  quarrying  has  increased  by  16.7% 
since 2015 (to around 700 workers in 2023). The 
job vacancy rate in construction (see Graph A8.2), 
a key sector for the green transition, is lower than 
in  2023). 
the  EU  average 
Nevertheless,  44%  of  small  and  medium-sized 
enterprises (SMEs) in the sector agreed that skills 
shortages  are  holding  them  back  in  general 
business  activities (60).  According  to  the  European 

(2.0%  vs  3.6% 

(57)  Workforce-related calculations are based on the EU Labour 
Force Survey. Note, in the 2023 country report for Cyprus, 
such indicators were calculated based on employment 
statistics in the national accounts. This may result in limited 
comparability across the two reports. 

(58)  Council Recommendation of 16 June 2022 on ensuring a fair 
transition towards climate neutrality (2022/C 243/04) covers 
employment, skills, tax-benefit and social protection 
systems, essential services and housing. 

Labour  Authority  (ELA) (61),  labour  shortages  were 
reported in 2023 for a number of occupations that 
required specific skills or knowledge for the green 
transition (62), 
engineers,  air 
conditioning  and  refrigeration  mechanics,  and 
electricians. 

including 

civil 

Upskilling  and  reskilling  in  declining  and 
transforming  sectors  is  necessary  to  help 
achieve the green transition. In Cyprus, 47% of 
the SMEs think that the skills required for greening 
business  activities  are  becoming  more  important 
(EU:  42%) (60).  If  Cyprus  matches  its  projected 
contribution  to  the  EU’s  2030  renewable  energy 
target,  between  400  and  600  additional  skilled 
workers will be needed for the deployment of wind 
require  an 
and  solar  energy,  which  may 
investment  in  skills  of  EUR  1.4-1.8  million. (63)  In 
Cyprus,  the  Green  Technical  School  supported  by 
the JTF and investments under the RRP will help to 
upskill  and  reskill  the  workforce  through  training 
and  education  and  to  provide  specialised  training 
in related sectors. 

Graph A8.1: Fair transition challenges in Cyprus 

Source: Eurostat, EU Labour Force Survey, EMPL-JRC GD-
AMEDI/AMEDI+ and DISCO(H) projects (see Table A8.1). 

in 

improvements 

recent  years, 
Despite 
energy  poverty  remains  a  challenge 
in 
Cyprus.  Even  though  the  share  of  the  population 
unable  to  keep  their  homes  adequately  warm 
decreased from 28.3% in 2015 to 19.2% in 2022, 
it  is  still  more  than  double  the  EU  average 

(61)  European Labour Authority 2024 EURES Report on labour 

shortages and surpluses in 2023. 

(59)  Mining and quarrying (NACE B), chemicals (C20), minerals 

(62)  Skills and knowledge requirements are based on the 

(C23), metals (C24) and automotive (C29). 

(60)  Eurobarometer on skills shortages, recruitment, and retention 

European Skills Competences and Occupations (ESCO) 
taxonomy on skills for the green transition. 

strategies in small and medium-sized enterprises. 

(63)  EMPL-JRC AMEDI+ project. 

45 

0.00.51.01.52.02.53.03.5Greenhouse gasemissions per workerEmployment inEnergy-IntensiveIndustriesEnergy povertyTransport poverty(proxy)Carbon inequalityCY Latest vs EU LatestEU LatestCY 2015 vs EU Latest 
 
 
  
 
 
Table A8.1:  Key indicators for a fair transition in Cyprus 

Source: Eurostat (env_ac_ainah_r2, lfsa_egan2d, ilc_mdes01), EU Labour Force Survey (break in time series in 2021), EMPL-JRC 
GD-AMEDI/AMEDI+ and DISCO(H) projects. 

(9.3%) (64).  The 
indicator  decreased  by  0.2 
percentage  points  between  2021  and  2022.  In 
particular,  50.6%  of  the  population  at  risk  of 
poverty (AROP) and 19.4% of lower middle-income 
households  in  deciles  4-5  were  unable  to  keep 
their homes adequately warm (vs EU averages of 
20.1%  and  11.6%,  respectively).  On  the  other 
hand, in January 2023, 62.7% of population at risk 
of poverty spent a considerable proportion of their 
budget (more than 6%)  on private transport fuels 
(EU:  37.1%) (65).  There  are  also  significant  energy 
costs related to cooling houses, among the highest 
in the EU. In 2021, space cooling was 10.6% of the 
final 
households, 
compared to the EU average of 0.5%. Cyprus’s RRP 
includes  targeted  investments  to  improve  the 
energy 
buildings, 
especially for vulnerable households. 

consumption 

residential 

efficiency 

energy 

of 

of 

Air  pollution  remains  a  critical  issue  leading 
to  environmental  inequalities  in  Cyprus.  In 
Cyprus, the average levels of air pollution in 2021 
stood  at  14.0  µg/m3  PM2.5  (EU:  11.4),  with  the 
entire  population  exposed  to  critical  levels  of  air 
pollution (66).  This  led  to  a  significant  impact  on 
health,  affecting  vulnerable  groups  in  particular, 
and around 630 premature deaths annually (67). In 
2021,  the  consumption  footprint  for  20%  of  the 
population with the highest income was 1.8 times 
higher than the footprint of the poorest 20% (EU: 

(64)  Energy poverty is a multi-dimensional concept. The indicator 
used focuses on an outcome of energy poverty. Further 
indicators are available at the Energy Poverty Advisory Hub. 

(65)  Affordability of private transport fuels is one key dimension 

of transport poverty. The indicator has been developed in the 
context of the EMPL-JRC GD-AMEDI/AMEDI+ projects. 
Methodology explained in Economic and distributional 
effects of higher energy prices on households in the EU. 

(66)  Two times higher than the recommendations in the WHO Air 

Quality Guidelines (annual exposure of 5µg/m3). 

(67)  EEA- Air Quality Health Risk Assessment 

1.8) (68).  For  both  groups, 
footprint is highest for food and mobility. 

the  consumption 

Graph A8.2: Job vacancy rate in transforming 
sectors and mining and quarrying 

B - Mining and quarrying 
C - Manufacturing 
D - Electricity, gas, steam and air conditioning supply 
E - Water supply; sewerage, waste management and 
remediation activities 
F - Construction 
H - Transportation and storage 
Source: Eurostat jvs_a_rate_r2. 

Cyprus is starting to implement policies for a 
fair  transition  towards  climate  neutrality  in 
the  context  of  the  Council  Recommendation 
introduced  different 
of  June  2022.  Cyprus 
measures  which  are  specifically  focused  on  the 
green  economy,  such  as  awareness-raising 
measures,  the  construction  of  the  new  Green 
Vocational  Education  and  Training  School,  and 
training  programmes  related  to  specific  green 
occupations included in the National Action Plan of 
Cyprus  for  the  European  Year  of  Skills.  There  is 
scope  for  further  efforts  that  focus  on  the  green 
transition,  e.g.  strengthening  the  evidence-base 
and  introducing  measures  on  adequate  income 
security 
In  addition, 
individual  learning  accounts,  currently  rolled  out 

labour  market. 

the 

in 

(68)  Developed in the context of the EMPL-JRC DISCO(H) project. 
Methodology explained in Joint Research Centre, 2024. 
Carbon and environmental footprint inequality of household 
consumption in the EU. JRC137520. The EU average refers to 
EU27 without Italy (household income data not available for 
IT in the HBS) 

46 

0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%BCDEFEU 2023CY 2023CY 2015IndicatorDescriptionCY 2015CYEUGHG per workerGreenhouse gas emissions per worker – CO2 equivalent tonnes18.215.6 (2022)14.3 (2022)Employment EIIEmployment share in energy-intensive industries, including mining and quarrying (NACE B), chemicals (C20), minerals (C23), metals (C24) and automotive (C29)1.2%0.8% (2023)3.5% (2023)Energy povertyShare of the total population living in a household unable to keep its home adequately warm28.3%19.2% (2022)9.3% (2022)Transport poverty (proxy)Estimated share of the AROP population that spends over 6% of expenditure on fuels for personal transport55.1%62.7% (2023)37.1% (2023)Carbon inequalityRatio between the consumption footprint of the top 20% vs bottom 20% of the income distribution1.81.8 (2021)2.7 (2021) 
 
      
 
 
  
 
under  a  pilot  project,  could  be  used  to  encourage 
people to acquire green skills.  

47 

 
PRODUCTIVITY 
ANNEX 9: RESOURCE PRODUCTIVITY, EFFICIENCY AND CIRCULARITY 

The green transition of industry and the built 
environment,  in  particular  decarbonisation, 
resource  efficiency  and 
is 
Cyprus’s 
essential 
competitiveness (69). In this regard, priorities for 
Cyprus  are  waste  management  and  the  use  of 
circular materials in industry and construction. 

circularity, 

boost 

to 

for 

room 

improvements 

The  pace  of  Cyprus’s  circular  economy 
transition  is  insufficient  to  achieve  the  EU 
Circular Economy Action Plan goals, as there 
is 
in  waste 
management  and  resource  efficiency.  The 
material  footprint  increased  from  23  to  25.2 
tonnes  per  capita  between  2018  and  2021,  and 
then decreased to 24.0 tonnes per capita in 2022, 
remaining well above the EU average. By contrast, 
total waste generation per capita is well below the 
EU  average  –  2.5  vs  4.8  tonnes  per  capita  –  and 
decreased  between  2016  and  2020.  There  is  still 
room  to  make  better  use  of  the  potential  of  the 
the 
circular 
decarbonisation of Cyprus’s industry.  

to  drive 

transition 

economy 

Graph A9.1: ETS emissions by sector since 2013 

Source: European Commission 

Greenhouse  gas  emissions  from  the  sectors 
covered  by  the  EU  emissions  trading  system 
(ETS) in Cyprus (70) remained relatively stable 
from 2013 to 2023,  with a consistent structure 
of contributing sectors. In 2023, power generation 
accounted for 70% of total emissions, significantly 
higher than the EU average. This is largely due to 
the  historical  dominance  of  imported  oil  as  the 
primary  energy  source  on  the  island.  The  cement 
and lime sector virtually constituted the remaining 

(69)  See also Annexes 6, 7 and 12. 

(70)  This analysis excludes air travel. For more details and the 
data sources, see Weitzel, M; van der Vorst, C. (2024), 
Uneven progress in reducing emissions in the EU ETS, JRC 
Science for policy brief, JRC138215, Joint Research Centre. 

29%  of  emissions.  From  2019  to  2023,  ETS 
emissions in Cyprus fluctuated only slightly, with a 
total increase by 3%, composed by a 7% decrease 
of  greenhouse  gas  emissions  in  the  power  sector 
(mostly  in  2020)  and  an  increase  by  9%  of 
emissions from cement and lime production. Since 
2013,  Cyprus  has  shown  a  trajectory  of  slightly 
increasing  ETS  emissions,  with  power  generation 
being the dominant contributor. 

the 

of  22.4%,  making 

Cyprus is not keeping up with the EU average 
resource efficiency and productivity levels in 
resource  use  in  the  industrial  sector.  The 
overall  circular  material  use  rate  increased  from 
2.4% in 2017 to 3.2% in 2022 (71). However, it still 
stands  well  below  the  EU  average  of  11.7%. 
Similarly, resource productivity stood below the EU 
average  and  reached  1.7  purchasing  power 
standards  per  kilogram  in  2022.  Furthermore, 
Cyprus  was  reliant  on  imports  for  31.4%  of 
materials  used  in  2022,  compared  with  an  EU 
average 
country 
comparatively  more  vulnerable  to  supply  chain 
disruptions.  The  manufacturing  sector  does  not 
generate as much pressure on water resources as 
other  sectors.  Water  abstracted  for  this  purpose 
less  than  1%  of  total  water 
accounted  for 
abstracted  in  2019.  Cyprus  reuses  95.4%  of 
treated  urban  wastewater 
in 
agriculture  and  other  uses.  The  2022  Eco-
Innovation  Scoreboard  placed  the  country  in  the 
‘catching-up  group’,  with  a  score  of  94.7.  As  of 
September  2023,  Cyprus  totalled  3  awarded  EU 
Ecolabel  licences  and  84  products  with  the  EU 
Ecolabel,  showing  a  low  take-up  of  products  and 
licences.  The  Cypriot  national  energy  and  climate 
plan  mentions  circular  economy  and  its  potential 
only in relation to waste management. 

irrigation 

for 

Cyprus  is  at  risk  of  missing  both  the  2025 
targets  for  municipal  waste  and  packaging 
recycling (72)  and  the  2035  target  for 
landfilling. With a municipal waste recycling rate 
of only 15.3% in 2021, Cyprus already missed the 
EU target of recycling 50% by 2020. Moreover, the 
country  is  still  highly  reliant  on  landfilling,  and 
registered the  highest  amount  of  waste landfilled 
per  capita  in  the  EU.  The  plastic  packaging 

(71)  With a peak of 3.7% in 2020. 

(72)  With specific concern for plastic packaging, aluminium, and 

glass. 

48 

00.20.40.60.811.20123420132014201520162017201820192020202120222023Emissions relative to 2013Mt CO2eCement & LimeChemicalsMetalsRefineriesPower generationOtherCyprus (both axes) 
 
 
  
 
 
 
2016  and  2020  while  being  significantly  higher 
than  the  EU  average,  42.68  versus  36.48 m2  per 
capita  in  2020.  By  contrast,  the  non-residential 
floor area remained well  below the average, 9.34 
versus  15.31 m2  per  capita  in  2020.  In  2020, 
Cyprus submitted a long-term renovation strategy 
aiming to decarbonise the building stock. 

for 

room 

Cyprus  progressed  in  sustainably  managing 
waste from the construction sector but there 
improvement.  Waste 
is  still 
generated  from  construction  and  demolition 
activities  almost  tripled  between  2010  and  2020, 
reaching approximately 430 000 tonnes. However, 
the per-capita figure is well below the EU average. 
The  proportion  of  backfilling  reached  38.5%  in 
2020,  below  the  EU  average  of  52.6%.  Cyprus 
successfully has improved its recovery rate, which 
increased  to  79%  in  2020,  meeting  the  Waste 
Framework  Directive’s 
target  for  2020  but 
remaining below the EU average.  In 2020, 83% of 
the  Cypriot  population  was  connected  to  at  least 
secondary wastewater treatment.  

Table A9.1:  Circularity indicators 

Source: Eurostat, European Environment Agency 

is 

recycling rate was above the EU average in 2021 
– 41.6% versus 39.7%. However, this rate declined 
compared to the last few years. Plastic packaging 
waste  production 
increasing  and  recycling 
facilities  should  be  improved  to  respond  to  this 
trend. However, there are some positive trends. In 
2021, the recycling rate of e-waste was above the 
EU average, accounting for 81.6%. Cyprus did not 
register  any  new  patents  on  waste  recycling  in 
2020. 

Graph A9.2: Treatment of municipal waste 

Source: Eurostat 

The  built  environment  could  be  used  more 
efficiently.  In  2023,  Cyprus’s  building  permits 
index, based on useful  floor area, stood at 261.9, 
showing a strong increase in construction activities 
compared  to  2015 (73).  Cyprus’s  residential  floor 
area per capita remained relatively stable between 

(73)  2015=100. 

49 

662664625650673010020030040050060070080020182019202020212022Kg per capita Waste treatment to be determinedLandfill/disposalTotal incineration (including energy recovery)Composting and digestionMaterial recyclingEU-27201820192020202120222023EU-27Latest yearIndustryResource productivity (purchasing power standard (PPS) per kilogram)1.51.51.51.51.7-2.52022Circular material use rate (%)2.73.13.82.83.2-11.52022Eco-innovation index (2013=100)73.686.078.293.394.7-121.52022Recycling of plastic packaging (%)54.350.548.641.6--40.72021Cost of air emissions from industry (EUR bn)0.80.80.70.7--352.72021Built environmentRecovery rate from construction and demolition waste (%)64.0-79.0---89.02020Soil sealing index (base year = 2006)111.1-----103.42018Non-residential floor area (m2 per capita)26.826.826.8---18.02020Waste backfilled (%)------9.92020 
        
 
 
 
 
      
 
ANNEX 10: DIGITAL TRANSFORMATION 

infrastructure/connectivity 

transformation  by  2030, 

Digital  transformation  is  key  to  ensuring  a 
resilient and competitive economy. In line with 
the  Digital  Decade  Policy  Programme,  and  in 
particular  with  the  targets  in  that  Programme  for 
digital 
this  Annex 
describes  Cyprus’s  performance  on  digital  skills, 
digital 
the 
digitalisation  of  businesses  and  public  services. 
Where relevant, it makes reference to progress on 
implementing  the  Recovery  and  Resilience  Plan 
(RRP).  Cyprus  allocates  24.6%  of  its  total  RRP 
(EUR 274 million) (74).  Under 
budget  to  digital 
Cohesion Policy, an additional EUR 0.1 billion (12% 
of  the  country’s  total  Cohesion  Policy  funding)  is 
allocated 
digital 
transformation (75). 

country’s 

and 

the 

to 

The  Digital  Decade  Policy  Programme  sets 
out  a  pathway  for  EU’s  successful  digital 
transformation  by  2030.  Cyprus’s  national 
roadmap outlines the actions it intends to take to 
reach the objectives and targets at national  level. 
The first Report on the State of the Digital Decade 
highlighted the need to accelerate and deepen the 
collective efforts to reach the EU-wide targets and 
objectives (76).  Among  others,  a  digitally  skilled 
population 
the  development  and 
adoption  of  digital  technologies  and  leads  to 
productivity  gains  and  new  business  models.  It 
also  leads  to  higher  inclusion  and  participation  in 
an environment increasingly shaped by the digital 
transformation (77). 
technologies, 
infrastructure  and  tools  all  play  a  role 
in 
addressing 
the  current  structural  challenges, 
including  strategic  dependencies,  cybersecurity 
and climate change. 

increases 

Digital 

(74)  The share of financial allocations that contribute to digital 
objectives has been calculated using Annex VII to the 
Recovery and Resilience Facility Regulation. 

(75)  This amount includes all investment specifically aimed at or 
substantially contributing to digital transformation in the 
2021-2027 Cohesion Policy programming period. The source 
funds are the European Regional Development Fund, the 
Cohesion Fund, the European Social Fund Plus, and the Just 
Transition Fund. 

(76)  European Commission (2023): Report on the state on the 

Digital Decade 2023, 2023 Report on the state of the Digital 
Decade | Shaping Europe’s digital future (europa.eu). 

(77)  See for example OECD (2019): OECD Economic Outlook, 

Digitalisation and productivity: A story of complementarities, 
OECD Economic Outlook, Volume 2019 Issue 1 | OECD 
iLibrary (oecd-ilibrary.org) and OECD (2019): Going Digital: 
Shaping Policies, Improving Lives – Summary, 
https://www.oecd.org/digital/going-digital-synthesis-
summary.pdf. 

There is still some significant progress to be 
made on basic digital skills in Cyprus. Slightly 
less than half of the population aged between 16 
and  74  has  at  least  basic  digital  skills.  However, 
the  share  of  ICT  specialists  in  the  workforce 
increased  significantly  in  2023  above  the  EU 
average. Cyprus adopted a National Action Plan for 
Digital  Skills  2021-2025  (‘e-skills  Action  Plan’)  to 
improve  the  digital  skills  of  everyone  in  Cyprus, 
including  vulnerable  groups.  This  plan  is  being 
implemented  as  an  RRP  measure  and  includes, 
among  other  initiatives,  training  programmes  for 
the  labour  force  in  the  private  and  public  sector 
the  general  population,  as  well  as  a 
and 
communication  strategy 
lifelong 
learning. 

to  promote 

Cyprus  performs  moderately  well  on  digital 
infrastructure/connectivity.  Despite 
recent 
significant 
in  fixed  very  high 
improvements 
capacity  network  (VHCN)  coverage,  Cyprus  still 
performs  slightly  below  the  EU  average.  In  2023, 
under the RRP, Cyprus launched a voucher scheme 
to  further  improve  fixed  VHCN  connectivity  by 
encouraging the building of fibre cabling in private 
premises.  It  is  also  launching  an  investment  to 
improve  fixed  VHCN  coverage  in  underserved 
areas. On the other hand, Cyprus is one of the few 
Member States that have reached a 100% rate in 
overall 5G coverage.  

fairly  well  on 

technologies,  enterprises 

the 
Cyprus  performs 
digitalisation of businesses. The percentage of 
SMEs with at least a basic level of digital intensity 
(67%)  is  well  above  the  EU  average  (58%); 
however,  compared  to  2021,  not  much  progress 
has  been  made.  Regarding  the  adoption  of 
advanced  digital 
in 
Cyprus  are  also  above  the  EU  average  (55%)  for 
the  three  technologies  monitored  in  the  Digital 
Decade: 58% of enterprises in Cyprus use at least 
one  of  cloud  computing  services,  big  data  or 
artificial intelligence. In 2022, 4.6% of enterprises 
in  Cyprus  reported  ICT  service  outage  due  to 
cyberattacks (e.g. ransomware or denial of service 
attacks).  Over  the  same  year,  21%  of  enterprises 
developed  or  reviewed  their  ICT  security  policy 
within the previous 12 months. 

Digital  public  services  are  an  area  in  which 
Cyprus  performs  well,  though  there  is  still 
room  for  improvement.  The  country  scores 
slightly  above  the  EU  average  on  digital  public 
services  for  business  (86  versus  85)  but  is  still 
below  the  EU  average  in  providing  digital  public 

50 

 
 
 
 
Table A10.1:Key Digital Decade targets monitored by the Digital Economy and Society Index indicators 

(1) The 20 million target represents about 10% of total employment. 
(2) The fibre to the premises coverage indicator is included separately as its evolution will also be monitored separately and taken 
into consideration when interpreting VHCN coverage data in the Digital Decade. 
(3) At least 75% of EU enterprises have taken up one or more of the following, in line with their business operations: (i) cloud 
computing services; (ii) big data; (iii) artificial intelligence. 

Source: Digital Economy and Society Index 

services  for  citizens  (74  versus  79).  Cyprus’s  RRP 
includes  measures  to  provide  high-quality  and 
user-friendly  digital  services,  such  as  the  reform 
electronic 
Factory’. 
‘Digital 
identification  (eID),  Cyprus  has  notified  a  national 
eID scheme under the eIDAS Regulation in 2023. 

Services 

For 

51 

EUDigital Decade target by 2030 2022202320242024(EU)Digital skillsAt least basic digital skills50%50%49%56%80%% individuals20212021202320232030ICT specialists (1)3.9%4.6%5.4%4.8%20 million% individuals in employment aged 15-7420212022202320232030Digital infrastructure/connectivityFixed very high capacity network (VHCN) coverage41%60%77%79%100%% households20212022202320232030Fibre to the premises (FTTP) coverage (2)41%60%77%64%-% households2021202220232023Overall 5G coverage75%100%100%89%100%% populated areas20212022202320232030Digitalisation of businessesSMEs with at least a basic level of digital intensity66%NA67%58%90%% SMEs2021202320232030Data analyticsNANA34%33%-% enterprises20232023Cloud42%42%46%39%-% enterprises2021202120232023Artificial intelligence3%3%5%8%-% enterprises2021202120232023AI or cloud or data analytics (3)NANA58%55%75%% enterprises202320232030Digitalisation of public servicesDigital public services for citizens56647479100Score (0 to 100)20212022202320232030Digital public services for businesses86858685100Score (0 to 100)20212022202320232030Access to e-health recordsNA706879100Score (0 to 100)2022202320232030Cyprus 
 
     
 
 
 
 
 
 
ANNEX 11: INNOVATION 

This  Annex  provides  a  general  overview  of  the 
performance  of  Cyprus’s  research  and  innovation 
system,  which  is  essential  for  delivering  the  twin 
transition and ensuring long-term competitiveness. 

Cyprus’s (78) R&D intensity has stagnated and 
remains  far  below  the  European  average.  In 
2022, R&D investment slightly decreased from the 
previous  year,  coming  to  0.77%  of  GDP.  Both 
public  expenditure  on  R&D  (at  0.36%  of  GDP  in 
2022) and business enterprise expenditure on R&D 
(0.31%  of  GDP  in  2022)  remained  below  the  EU 
average  (0.73%  and  1.48%  respectively).  This 
hinders  the  country’s  ability  to  diversify 
its 
economy  towards  innovation-led  activities  and 
calls  for  a  national  long-term  R&D  vision  with 
well-defined  objectives,  a  monitoring  mechanism 
and financial targets. The country currently lacks a 
long-term R&I strategy that provides a clear vision, 
objectives  and  commitments  to  provide  a  stable 
framework for R&I in line with the country's Vision 
2035. 

Graph A11.1: R&D expenditure (as % of GDP) 

Source: Eurostat 

in 

to 

capital 

science  and 
Weak  human 
technology  continues 
limit  Cyprus’s 
capacity  to  create  new  knowledge  and 
generate further innovations. The share of new 
graduates  in  science  &  engineering  per  thousand 
population aged 25-34 ranks amongst the lowest 
in  Europe  (7.2%,  compared  to  the  EU  average  of 

(78)  Cyprus is among Europe’s strong innovators according to the 
2023 edition of the European Innovation Scoreboard. 2023 
European Innovation Scoreboard, Country profile: Cyprus. 
Web page: ec_rtd_eis-country-profile-cy.pdf (europa.eu) The 
EIS provides a comparative analysis of innovation 
performance in EU countries, including the relative strengths 
and weaknesses of their national innovation systems (also 
compared to the EU average). 

52 

16.9%). Moreover, the rate of science, technology, 
engineering,  and  mathematics  (STEM)  graduates 
as  a  share  of  all  graduates  stood  at  11.2%  in 
2021 (in comparison to the EU average of 25.4%), 
the lowest in the EU (79). The low rate of scientific 
talent integration in the workforce is evidenced by 
the  very  low  share  of  researchers  among  public-
sector  employees  per  thousand  active  population 
(1.9%  in  2021,  against  4.2%  for  the  EU  average) 
and  among  private-sector  employees  (1.2%  in 
2021  against  5.4%  for  the  EU  average)   (80).  This, 
coupled  with  poor  performance  on  secondary 
education  as  evidenced  by  the  Programme  for 
International  Student  Assessment  (PISA)  results 
(see Annex 15), represents a risk for the country’s 
innovation  capacity.  The  recovery  and  resilience 
plan (RRP) includes a reform to digitally transform 
school units with the aim of enhancing digital and 
science,  technology,  engineering  and  maths  skills. 
Notwithstanding  these  measures,  the  update  of 
the skills framework from Cyprus Vision 2035 is a 
key  element  for  addressing  the  skills  shortages 
more  decisively  and  developing  a  thriving  society 
which 
innovative,  resilient,  diversified,  and 
underpinned by the principles of digitalisation and 
the green economy. 

is 

Private  innovation  is  affected  by  very  low 
R&D  investments  and  low  venture  capital. 
Private  R&D  investment  is  very  low,  partially  due 
to  the  economic  structure  of  the  country;  and 
government  support  for  private  R&D  is  equally 
low.  This,  coupled  with  weak  levels  of  venture 
capital  (see  also  Annex  12)  and  the  low  level  of 
access  to  public  research 
infrastructures  by 
companies, hinders the ability of new start-ups to 
flourish  and  of  these  companies  to  scale  up  their 
activities.  According  to  a  study  by  McKinsey  & 
Co (81),  Cyprus  had  503  start-up  companies  in 
2022,  whose  market  capitalisation  represents 
15%  of  the  national  economy,  while  Malta  had 
465 
companies,  whose  market 
capitalisation was 146% of the national GDP; and 
Estonia  had  1 047  start-up  companies  whose 
market  capitalisation  represented  40%  of  the 

start-up 

(79)  2023 Education and training monitor. Cyprus. 
https://op.europa.eu/en/publication-detail/-
/publication/b29d88da-8ce2-11ee-8aa6-
01aa75ed71a1/language-en. 

(80)  COM internal indicators. 

(81)  McKinsey & Company. Reinventing our economy from within. 
How Europe’s start-up ecosystems can learn from each other 
to ignite and scale up entrepreneurship, 2023. 

00.511.522.5R&D IntensityPublic expenditurePrivate expenditureCYEU 
 
   
 
 
 
 
Table A11.1:Key innovation indicators 

(1) EU average for the last available year or the year with the largest number of country data. 
Source: Eurostat, OECD, DG JRC, Science-Metrix (Scopus database and EPO’s Patent Statistical Database), Invest EU 

to 

foster 

foster 

potential 

investment 

national  economy.  These  values  showcase  that 
innovative 
to 
Cyprus’s 
entrepreneurship  and  boost  its  knowledge-based 
economy  can  be  further  developed  in  order  to 
partially  address  these  shortcomings.  The  RRP 
in 
includes  measures 
innovative  companies  and  attract  entrepreneurial 
and scientific human capital from abroad through 
tax  reductions,  the  development  of  a  scientific 
VISA  scheme  for  researchers  and  their  families 
and  the  start-up  VISA  scheme  for  founders  of 
innovative  enterprises  and 
In 
addition,  the  RRP  includes  an  innovation  funding 
to  support  start-ups,  SMEs  and 
programme 
innovative  companies,  as  well  as  supporting 
access 
to 
strengthen  their  competitiveness  and  growth 
potential.  Other  support  measures  in  the  RRP 
include  an  innovation  funding  programme  for 
start-ups,  innovative  companies  and  SMEs  and  a 
scheme to provide consulting services for SMEs to 
strengthen  their  competitiveness  and  business 
growth  potential.  Also,  through  the  RRP,  a  state-
funded equity fund has been set up in Cyprus, and 
a  National  Promotional  Agency  is  in  operation, 

to  consulting  services  for  SMEs 

their  families. 

both  of  which  are  supportive 
to  financing 
innovation. The full and correct implementation of 
RRP objectives thus remains crucial to address this 
long-standing  shortcoming  of  Cyprus’s  business 
environment. 

Academia-business 
linkages  are  weak, 
hampering  the  valorisation  of  research.  The 
share  of  public-private  co-publications  (8%  in 
2022)  has  decreased  but  remains  above  the  EU 
average  (7.6%).  However,  the  business  sector 
involvement in financing public R&D is one of the 
lowest in Europe (0.007% in 2021 compared to an 
EU  average  of  0.054%).  Findings  from  a  recent 
Policy Support Facility study (82) published in 2020 
highlighted  that  businesses  are  not  properly 
benefiting  from  the  research  and  services  that 
universities  and  research  institutes  could  offer. 
The  RRP  includes  measures  to  facilitate  and 
support  closer  university  linkages  by  opening 

(82)  https://ec.europa.eu/research-and-

innovation/en/statistics/policy-support-facility/specific-
support-cyprus. 

53 

R&D intensity (GERD as % of GDP)0.440. 480.840.80.772.24Public expenditure on R&D as % of GDP0.310.30.360.360.360.73Business enterprise expenditure on R&D (BERD) as % of GDP0.080.110.370.340.311.48Scientific publications of the country within the top 10% most cited publications worldwide as % of total publications of the country 8.68.69.92::9.6Patent Cooperation Treaty (PCT) patent applications per billion GDP (in PPS)0.30.50.88::3.4Public-private scientific co-publications as % of total publications10.86.88.08.987.6Public expenditure on R&D financed by business enterprise (national) as % of GDP0.0040.0020.0070.007:0.054New graduates in science & engineering per thousand pop. aged 25-345.28.27.27.2:16.9Total public sector support for BERD as % of GDP0.0220.0140.0540.052:0.204Tax R&D incentives: foregone revenues as % of GDP0000:0.104Green innovation Share of environment-related patents in total patent applications filed under PCT (%)119.716.9 ::14.7Venture capital (market statistics) as % of GDP0.0130.00.0330.0270.0140.085Employment share of high growth enterprises measured in employment (%):2.692.85::12.512021EU average(1)Finance for innovation and economic renewal2020Cyprus20102015Key indicators Quality of the R&I systemAcademia-business cooperationHuman capital and skills availabilityPublic support for business enterprise expenditure on R&D (BERD)2022 
 
 
   
 
access  to  research  infrastructures  from  research 
institutions to the business sector, and the setting 
up  of  a  Knowledge  Transfer  Office.  However,  a 
deeper  reform  of  the  policies  for  knowledge 
transfer  services  will  boost  innovation  that  leads 
to  commercially  viable  patents,  products  and 
services. 

54 

 
ANNEX 12: INDUSTRY AND SINGLE MARKET 

Graph A12.2: Labour productivity (GDP per hour 
worked) by sector [2015=100] 

In  2023,  Cyprus’s  productivity  growth 
remained  positive,  although  productivity 
levels  are  still  well  below  the  EU  average. 
Cyprus’s  labour  productivity  (GDP  per  person 
employed)  grew  by  1%  in  2023  compared  to  the 
previous year, outperforming both the EU and the 
euro area growth (-0.8% and -1% respectively). As 
shown in Graph A12.1, Cyprus’s labour productivity 
is  therefore  slowly  catching  up  with  the  EU  and 
euro  area  average  levels,  although  it  still  stands 
well  below  the  benchmark,  at  89.2%  of  the  EU 
average in 2023. 

Graph A12.1: Labour productivity (GDP per person 
employed) [% of EU-27] 

Source: Eurostat. 

Source: Eurostat. 

in 

differences 

productivity 
Sectoral 
performance,  however,  are  noticeable  (Graph 
A12.2).  The 
information  and  communication 
sector,  for  instance,  continued  its  productivity 
growth  in  2022  and  2023,  largely  outperforming 
the  EU  average.  The  wholesale  and  retail  trade, 
accommodation  and  food  services  sector  also  did 
better  than  the  average  –  possibly  reflecting  the 
catching up of tourism after COVID-19 –, whereas 
in  construction  productivity  started  recovering  in 
2023  after  a  significant  drop  in  the  pandemic 
years.  Professional  services  and  financial  and 
insurance  activities,  instead,  have  experienced 
some productivity fluctuations in recent years, but 
show substantial stagnation compared to the mid-
2010s,  while  in  industry  productivity  growth  has 
been  overall  moderate  in  the  past  few  years, 
although  showing  some  signs  of  recovery  in  the 
course of 2023. 

in 

The  Cypriot  economy  maintains  relevant 
strategic  dependencies,  particularly  due  to 
the  characteristics  of  its  energy  mix  and  to 
its  pattern  of  sectoral  diversification. 
Cyprus’s energy mix is still largely reliant on fossil 
fuels,  in  particular  on  oil,  which  still  makes  up 
around  85%  of  the  country’s  total  energy  supply. 
This constitutes a severe strategic dependency for 
the  current  unstable 
Cyprus,  particularly 
geopolitical  context,  as  it  exposes  the  country  to 
fluctuations  on  global  markets.  Moreover,  despite 
significant  potential,  Cyprus  still  lags  significantly 
behind in the uptake and deployment of renewable 
energy sources, with installed renewable electricity 
capacity  standing  at  only  21.3%  in  2022,  well 
below  the  EU  average.  Given  its  location  and 
climate,  Cyprus  is  instead  well  placed  to  play  a 
relevant role in the green transition, among others 
in the field of solar energy production. Investments 
in  this  field,  including  the  full  implementation  of 
the 
the  measures  already  envisaged  under 
recovery  and  resilience  plan  (RRP),  will  therefore 
be crucial to ensure Cyprus’s competitiveness over 
the  coming  years  and  in  the  transition  towards  a 
net-zero 
country’s 
competitiveness  would  also  benefit  in  the  long 
term from a further diversification of its economic 
is  heavily  skewed 
structure,  which  currently 
towards a limited number of sectors, among which 
tourism  (generating  around  14%  of  the  country’s 

economy (83). 

The 

(83)  Net-Zero Industry Act, COM(2023) 161 final. 

55 

50607080901001101202005200720092011201320152017201920212023GreeceCyprusMaltaEuro area - 19 countries  (2015-2022)507090110130150170190201520162017201820192020202120222023Agriculture, forestry and fishingIndustry (except construction)ConstructionWholesale and retail trade, transport, accommodation and food serviceactivitiesInformation and communicationFinancial and insurance activitiesProfessional, scientific and technical activities; administrative and supportservice activities 
 
      
      
 
 
 
GDP (84)  alone)  and  business  and  professional 
services.  Moreover,  diversification  is  lacking  not 
only  across  sectors,  but  also  within  them,  with 
certain  segments  of  the  economy  over-relying  on 
demand coming from a limited number of foreign 
to  significant 
thus  exposed 
countries,  and 
dependencies in the event of asymmetric demand 
shocks in such countries (85). 

requirements  attached  to  external  financing,  with 
a  four  times  higher  dissatisfaction  rate  in  Cyprus 
than  on  average  in  the  EU (88).  The  Cypriot  RRP 
includes  measures  to  improve  access  to  finance 
for businesses: the full and correct implementation 
of  RRP  objectives  therefore  remains  crucial  to 
address this long-standing shortcoming in Cyprus’s 
business environment. 

Given the largely service-based character of 
its  economy,  Cyprus  has  been  much  less 
affected than other EU countries by material 
shortages,  with  only  1.3%  of  Cypriot  firms 
reporting constraints in finding materials in 2023, 
against an EU average of 17.2%. Conversely, skills 
shortages  constitute  a  more  severe  problem  for 
Cypriot businesses, with 46% of them considering 
it  ‘very  difficult’  to  find  staff  with  the  right  skills 
(well  above  the  EU  average  of  38%).  The 
shortages 
candidates  with 
vocational  training  qualifications,  with  48%  of 
Cypriot  firms  reporting  difficulties  (which  is  10 
percentage  points  higher  than  the  EU  average), 
whereas for candidates with master’s degrees and 
PhDs  the  problem  is  less  acute  than  for  EU 
peers (86). 

affect  mostly 

of 

for 

areas 

regards 

different 

improvement 

the  business  environment, 
As 
remain, 
for 
margins 
particularly 
long-standing 
in  areas  with 
challenges  such  as  access  to  finance.  Cypriot 
firms  are  among  those in  the  EU that  cite  access 
to finance more frequently when asked to rate the 
importance 
their 
business (87).  This  perception  is  reflected  in  a 
higher-than-average  share  of  finance-constrained 
firms 
improved 
compared  to  the  peak  of  2021),  and  in  largely 
below-average scores in both the equity and loans 
sub-indexes  of  the  EIF  SME  Access  to  Finance 
Index.  Cyprus’s  performance 
is  particularly 
unsatisfactory  in  the  case  of  equity,  where  the 
country  has  one  of  the  lowest  scores  in  the  EU 
(0.05  in  2022,  compared  to  an  EU  average  of 
0.17).  Cypriot  firms  are  also  significantly  more 
dissatisfied than their EU peers with the collateral 

the  situation  has 

(although 

(84)  International Monetary Fund, IMF Country Report No. 21/126, 

2021. 

(85)  Cyprus Economy and Competitiveness Council, Cyprus 

Competitiveness Report, 2021. 

For  what  concerns  the  general  regulatory 
framework,  there  is  also  still  room  for 
improvement.  According  to  the  EIB  Investment 
Survey,  for  instance,  the  percentage  of  firms 
reporting  regulation  as  a  major  obstacle  to 
investment is well above the EU average, standing 
at  31%  in  2023  vs  an  EU  average  of  22.2%. 
Similarly,  the  level  of  regulation  of  professions  is 
overall  higher  than  the  EU  average,  in  particular 
for  lawyers,  patent/trademark  agents,  real  estate 
agents,  civil  engineers,  architects  and  tourist 
guides.  In  addition,  according  to  the  EU  Justice 
Scoreboard, the level of confidence in investments 
being  protected  by  law  and  courts  stands  at  only 
31%  (vs  EU  average  of  54%),  while  42%  of 
surveyed  investors  in  Cyprus  cite  the  difficulty  to 
enforce  rights  in  courts  due  to  concerns  about 
quality,  efficiency  or  independence  of  justice  as 
one of their main worries (89). 

to 

improve 

As  for  public  procurement,  despite  the 
efforts  made 
the  overall 
efficiency  and  effectiveness  of  the  system, 
challenges  persist,  particularly  in  the  areas 
of  competition  and  strategic  procurement. 
Although the use of negotiated procedures without 
a call for tenders decreased compared to last year 
(29%  in  2023  vs  39%  in  2022),  Cyprus  remains 
one  of  the  worst  performers  in  the  EU  on  this 
indicator,  with  no  stable  reduction  trend  seen  in 
recent  years.  Similarly,  Cyprus  still  underperforms 
in  the  use  of  quality-based  criteria  in  public 
procurement, having one of the highest shares of 
contracts  awarded  exclusively  on the  basis  of the 
lowest  price  (93%  in  2023).  A  wider  uptake  of 
strategic  procurement  –  encouraging  green, 
innovation-oriented  and 
responsible 
procurement  practices  –  could  improve  Cyprus’s 
procurement  system  and  allow  the  country  to 

socially 

(88)  European Investment Bank, EIB investment survey – Cyprus 

(86)  Flash Eurobarometer 537, SMEs and skills shortages, 2023. 

overview, 2023. 

(87)  European Central Bank, SAFE survey, 2023. 

(89)  EU Justice Scoreboard, 2024. 

56 

 
 
 
harness  the  potential  of  public  purchases  to 
support the green and digital transitions. 

rules, 

single  market 

While  Cyprus  is  well  integrated  into  the 
single  market,  particularly  for  services, 
barriers  remain.  Cyprus’  trade  integration  for 
services is  among  the  highest  in  the  EU,  whereas 
for  goods  it  is  below  average.  In  terms  of 
the 
transposition  of 
percentage of non-transposed directives is slightly 
higher  in  Cyprus  than  on  average  in  the  EU, 
whereas for what concerns the levels of incorrect 
transposition  Cyprus performs  slightly better  than 
EU  benchmarks.  The  SOLVIT  network,  which  aims 
to  provide  help  with  problems  linked  to  the 
application  of  single  market 
is  also 
functioning  comparatively  well  in  Cyprus,  solving 
95%  of  the  cases  handled  as  lead  centre  (above 
the EU average of 88.3%). 

rules, 

Finally,  Cyprus  is  in  the  initial  stage  of 
technical  implementation  of  the  Once-Only 
Technical  System  (OOTS) (90).  As  part  of  the 
Single  Digital  Gateway  Regulation (91),  the  system 
will  enable  the  automated  cross-border  exchange 
of  evidence  between  competent  authorities, 
improving 
information, 
access 
administrative  procedures  and  assistance  within 
the  EU.  The  onboarding  of  Cypriot  competent 
authorities  is  crucial  for  the  system  to  function 
smoothly and to reduce administrative burden. 

online 

to 

(90)  Implementing Regulation (EU) 2022/1463. 

(91)  Regulation (EU) 2018/1724. 

57 

 
 
Table A12.1:Industry and the Single Market 

Source: (1) AMECO, (2) Eurostat, (3) Single Market Scoreboard, (4) OECD, (5) ECFIN BCS, (6) COMEXT and Commission 
calculations, (7) EIB Investment Survey, (8) Intrum Payment Report, (9) SAFE survey, (10) EIF SME Access to Finance Index 
* Own Commission calculations for the EU27 average 

58 

POLICY AREAINDICATOR NAME20192020202120222023EU27 average*Net Private investment, level of private capital stock, net of depreciation, % GDP17,38,17,68,610,13,8Net Public investment, level of public capital stock, net of depreciation, % GDP10,40,50,80,71,31,2Real labour productivity per person in industry (% yoy)23,8-0,9-3,1-1,11,1-1,24Cost competitivenessNominal unit labour cost in industry (% yoy)2-0,1-1,47,61,44,19,83Single Market integrationEU Trade integration, % (Average intra-EU imports + average intra EU exports)/GDP231,532,237,439,636,942,9Transposition deficit, % of all directives not transposed311,91,80,90,90,7Conformity deficit, % of all directives transposed incorrectly30,61,110,70,91,1SOLVIT, % resolution rate per country395,393,397,098,095,088,3Number of pending infringement proceedings3181923232325,9RestrictionsEEA Services Trade Restrictiveness Index4-----0,05Single bids, % of total contractors3222523161628,6Direct Awards, %325262839298,1Material Shortage (industry), firms facing constraints, %51,42,82,33,71,317,2Labour Shortage using survey data (industry), firms facing constraints, %53,12,00,62,33,323,3Vacancy rate, % of vacant posts to all available ones (vacant + occupied)21,951,62,62,82,92,5Concentration in selected raw materials, Import concentration index based on a basket of critical raw materials60,140,130,140,150,190,22Installed renewables electricity capacity, % of total electricity produced29,18,98,621,3-50Investment obstaclesImpact of regulation on long-term investment, % of firms reporting business regulation as major obstacle727,525,433,439,031,022,2Bankruptcies, Index (2015=100)243,535,932,620,616,3105,6Business registrations, Index (2015=100)2-----120,2Payment gap - corporates B2B, difference in days between offered and actual payment8-----15Payment gap - public sector, difference in days between offered and actual payment8-----16Share of SMEs experiencing late payments in past 6 months, %951,152,363,663,641,648,7EIF Access to finance index - Loan, Composite: SME external financing over last 6 months, index values between 0 and 1100,330,290,190,34-0,49EIF Access to finance index - Equity, Composite: VC/GDP, IPO/GDP, SMEs using equity, index values between 0 and 110 0,070,200,060,05-0,17CyprusHEADLINE INDICATORSEconomic StructureSINGLE MARKETCompliancePublic procurement ECONOMIC STRUCTUREShortagesStrategic dependenciesBUSINESS ENVIRONMENT - SMEsBusiness demographyLate paymentsAccess to finance 
 
 
     
 
ANNEX 13: PUBLIC ADMINISTRATION 

on 

Overall, 

perceived 

environment. 

competitiveness  by, 

Cyprus’ public administration is essential for 
in 
the  economy’s 
particular,  shaping  the  conditions  for  the 
twin  transitions  and  creating  a  favourable 
Cyprus’ 
business 
performance 
government 
effectiveness is still below the EU average (Graph 
A13.1).  Despite  improving  in  2022,  the  level  of 
government  effectiveness  remains  lower  than  in 
the  pre-pandemic  period,  indicating  a  need  for 
continued focus on improving public administration 
and  governance.  In  this  context,  Cyprus  has  been 
implementing  reforms  under  its  recovery  and 
resilience plan (RRP) to modernise human resource 
management  in  the  civil  service  and  improve  the 
public  administration’s  digital  transformation.  A 
local  government reform, entering in force in July 
2024, aims to reduce the number of municipalities 
to  streamline  services  and  strengthen  financial 
autonomy and sustainability. 

Graph A13.1: Government effectiveness 

supported  by  a 
Instrument project. 

tailored  Technical  Support 

For 

unlike 

example, 

There  are  gaps 
in  the  quality  of  best 
practices  for  state-owned  enterprise  (SOE) 
listed 
governance. 
companies,  there  is  no  requirement  for  all  large 
SOEs  to  be  subject  to  audits  by  an  independent 
audit  firm.  There  is  no  comprehensive  financial 
and  non-financial  reporting  on  the  SOE  sector. 
fail 
Nomination  procedures 
to 
adequately 
political 
interference. In addition, board evaluations rely on 
self-evaluations,  with  no  external  evaluators.  The 
evaluation  results  have  no  specific  consequences 
for the company’s board and management. 

for  boards 
from 

protect 

them 

and 

administrative 

The  efficiency  and  quality  of  the  justice 
system  continues  to  be  of  serious  concern. 
Despite  some  improvements,  the  length  of  civil, 
judicial 
commercial 
proceedings is the highest in the EU. Digitalisation 
in  the  justice  system  also  faces  challenges  as  e-
justice  implementation  has  been  slow.  On  judicial 
independence, no systemic deficiencies have been 
reported.  However,  there  are  concerns  about  the 
independence 
the 
prosecution  service.  This  is  due  to  the  Attorney 
legal  adviser  to  the 
General’s  dual  role  as 
government  and  head  of  the  prosecution  service, 
which has broad discretionary powers that are not 
subject to any review (92). 

accountability 

and 

of 

Cyprus  has  accelerated  the  digitalisation  of 
its  public  administration.  Several  digital 
solutions have been put in place during the COVID-
19  pandemic,  making  it  easier  for  the  public  and 
small  and  medium-sized  enterprises  to  request 
services. Personal digital wallets are also available, 
giving  people  a  secure  way  to  request,  store  and 
share  certificates 
issued  by  public  services. 
However, there is still a gap with the EU average in 
the  share  of  e-government  users, 
the  e-
government  benchmark  score  and  the  level  of 
digital skills (Graph A13.2). Ongoing RRP measures 
aim  to  improve  the  provision  of  digital  public 
services, including in health and justice. 

There is room to strengthen the Independent 
Fiscal  Institution  of  Cyprus.  Its  secretariat  is 

(92)  For a more detailed analysis, see the 2024 EU Justice 

Scoreboard and the 2024 Commission’s Rule of Law Report 
(forthcoming). 

Average value over 2018-2022 and change over 2018-2022. 
The GDP per head bar shows the mean value of the 
government effectiveness indicator for the group of EU 
countries belonging to the same GDP per head cluster as 
Cyprus (EU countries are ranked in terms of their GDP per 
head and grouped into three equally sized clusters). 
Source: Worldwide Governance Indicators 

Several  reforms  of  the  human  resource 
management  systems  are  planned 
for 
implementation  in  2024.  New  legislation  aims 
to ensure due consideration of performance in civil 
servants’ appraisal and promotion. In addition, the 
country will run recruitment competitions in a new 
examination  centre  with  selection  based  on 
meritocratic  and  objective  exams,  currently 

59 

-0.4-0.20.00.20.40.60.81.01.2CYEU-27GDP perhead clusterChange 2018-2022Average 2018-2022 
 
   
 
 
Table A13.1:Public administration indicators 

(1) High values denote a good performance, except for indicator # 6. (2) 2023 value. If unavailable, the latest value available is 
shown. (3) Measures the user centricity (including for cross-border services) and transparency of digital public services as well as 
the existence of key enablers for the provision of those services. (4) Defined as the absolute value of the difference between the 
percentage of men and women in senior civil service positions.  
Flags: (b) break in time series; (d) definition differs; (u) low reliability.  
Source: E-government activities of individuals via websites, Eurostat (# 1); E-government benchmark report (# 2); Open data 
maturity report (# 3); Labour Force Survey, Eurostat (# 4, 5, 7); European Institute for Gender Equality (# 6); Fiscal Governance 
Database (# 8, 9); OECD Indicators of Regulatory Policy and Governance (# 10). 

staffed by government officials and staff numbers 
are  limited  by  law,  which  has  an  impact  on  its 
independence and analytical capacity. 

The  quality of legislation  in Cyprus is facing 
challenges.  The  country’s  performance  on  the 
indicators  on  regulatory  governance  and  policy  is 

below  the  EU  average  (Table  A13.1).  Cyprus  has 
taken  some  steps  to  institutionalise  stakeholder 
consultations  via  an  online  consultation  platform, 
although further measures are needed to ensure a 
meaningful public participation.  

Graph A13.2: a) Use of public authorities’ websites or apps (left side); b) e-government maturity (centre); 
c) share of individuals with basic or above basic overall digital skills (right side) 

(1) 2023 data. Indicators a and c: % of people who used the internet in the last year. 
Source: Eurostat and e-government benchmark report 

60 

CY20192020202120222023EU-27(2)1n/an/an/a98.772.475.02n/a54.450.253.460.175.830.80.90.90.90.90.8455.660.061.4 (b)58.962.852.959.54.8 (u)12.9 (b)17.413.917.9629.227.220.08.40.09.272.12.01.9 (b)1.71.61.580.60.60.80.8n/a0.791.11.11.11.1n/a1.410n/an/a0.83n/an/a1.7Medium-term budgetary framework indexIndicator (1)E-government and open government dataShare of internet users within the last year that used a public authority website or appE-government benchmark overall score (3) Open data and portal maturity indexEducational attainment level, adult learning, gender parity and ageingShare of public administration employees with higher education (levels 5-8, %)Participation rate of public administration employees in adult learning (%)Gender parity in senior civil service positions (4)Ratio of 25-49 to 50-64 year olds in NACE sector OPublic financial management Strength of fiscal rules indexEvidence-based policy makingRegulatory governance20%40%60%80%100%Interacting withauthoritiesDownloading  /printing officialformsMaking anappointmentReceive officialcommunications / documentsSubmit onlinetax declarationRequestdocuments,benefitsa) E-government usersCYEU-2750%52%54%56%58%60%62%CYEU-27c) Digital skills202320210102030405060708090100CYEU-27b) E-government benchmark scoreUser centricityTransparencyKey enablersCross-border services2022 
 
 
       
 
   
FAIRNESS 
ANNEX 14: EMPLOYMENT, SKILLS AND SOCIAL POLICY CHALLENGES IN LIGHT OF 
THE EUROPEAN PILLAR OF SOCIAL RIGHTS 

The  European  Pillar  of  Social  Rights  is  the 
compass  for  upward  convergence  towards 
better  working  and  living  conditions  in  the 
EU.  This  Annex  provides  an  overview  of  Cyprus’ 
progress in implementing the Pillar’s 20 principles 
and the EU headline and national targets for 2030 
on employment, skills and poverty reduction. 

such as NEETs, whose rate (13.8%) is higher than 
the  EU  average  at  11.2%  in  2023,  even  with  a 
decrease  of  0.9 pps,  and  higher  for  women  than 
for  men 
(14.8%  vs  12.7%).  Persons  with 
disabilities also face a relatively wide employment 
gap (25.7 pps vs 21.4 pps in the EU in 2022), even 
after narrowing by 1.3 pps since 2021. 

Table A14.1:Social Scoreboard for Cyprus 

Update of 25 April 2024. Members States are categorised 
based on the Social Scoreboard according to a methodology 
agreed with the EMCO and SPC Committees. Please consult 
the Annex of the Joint Employment Report 2024 for details on 
the methodology. 
Source: Eurostat 

Fostering  the  employment  of  people  outside 
the  labour  force,  including  those  with  care 
responsibilities,  and  increasing  participation 
in  early  childhood  education  and  care  are 
related  priorities.  To  this  end,  a 
law  on 
regulating  telework  was  passed  by  the  Cypriot 
parliament  on  16  November  2023,  as  included  in 
the recovery and resilience plan (RRP).  This law is 
also  expected  to  further  reduce  the  gender 
employment gap in Cyprus (9.0 pps in 2023 vs EU 
10.2 pps),  as  well  as  the  gender  pension  gap, 
which  is  one  of  the  widest  in  the  EU  (34.3%  in 
2022).  The  participation  rate  in  formal  childcare 
for children under 3 years of age was only 24.4% 
in 2022 (vs EU 35.9%) after a substantial drop of 
3 pps.  Both  the  Recovery  and  Resilience  Facility 
(RRF)  and  the  European  Social  Fund  Plus  (ESF+) 
support  investments  in  early  childhood  education 
and  care,  which  are  expected  to  increase  their 
accessibility  for  children  in  Cyprus,  while  helping 
reconcile  family  and  working  life  for  those  with 
care 
the 
European Child Guarantee is ongoing as described 
in  the  Cypriot  progress  report.  Addressing  these 
challenges, along with additional measures, would 
support  progress  towards  the  2030  national 
employment target of 80%. 

Implementation  of 

responsibilities. 

The  Cypriot  labour  market  is  performing 
strongly but there are labour shortages, and 
challenges  remain  for  young  people  not  in 
employment,  education  or  training  (NEETs), 
women  and  persons  with  disabilities.  Despite 
the  expected  moderation  of  economic  activity  in 
2023,  the  employment  rate  reached  a  peak  of 
78.9% in 2023 and is well  above the EU average 
of  75.3%.  On  the  back  of  this  growth,  the 
unemployment rate fell in 2023 by 0.7 percentage 
points (pps) year-on-year to 6.1% and is at the EU 
average.  Labour  shortages,  as  measured  by  the 
job vacancy rate, were at 2.8% in -2023 (vs EU 2.7 
%)  and  are  substantial  in  construction  (16%). 
Employment challenges persist for specific groups 

Basic  skills  have  further  deteriorated  and 
there  is  a  low  level  of  digital  skills.  Skills 
mismatches  persist,  especially  in  the  areas 
of  science,  technology,  engineering  and 
mathematics  (STEM),  and  the  green  and 
digital transitions. The early school leaving rate 
further decreased in Cyprus but remains above the 
EU  average  for  people  born  outside  the  EU. 
However, 
for 
International  Student  Assessment  (PISA)  shows 
that  pupils’  basic  skills  are  below  average  and 
have worsened compared to 2018 (see Annex 15). 
A low level of basic skills hinders a person’s future 
development:  only  39.8%  of  the  working  age 
population is employed  in high-skilled jobs (vs EU 

the  2022  OECD  Programme 

61 

28.310.549.513.894.378.96.11.9104.116.718.130.8525.72.524.40.1Critical situationTo watchWeak but improvingGood but to monitorOn averageDynamic labour markets and fair working conditionsEmployment rate(% of the population aged 20-64, 2023)Unemployment rate(% of the active population aged 15-74, 2023)Long term unemployment(% of the active population aged 15-74, 2023)Gross disposable household income (GDHI) per capita growth(index, 2008=100, 2022)Social protection and inclusionAt risk of poverty or social exclusion (AROPE) rate (% of the total population, 2022)At risk of poverty or social exclusion (AROPE) rate for children(% of the population aged 0-17, 2022)Impact of social transfers (other than pensions) on poverty reduction(% reduction of AROP, 2022)Disability employment gap (percentage points, population aged 20-64, 2022)Housing cost overburden (% of the total population, 2022)Children aged less than 3 years in formal childcare (% of the under 3-years-old population, 2022)Self-reported unmet need for medical care (% of the population aged 16+, 2022)Better than averageBest performersPolicy areaHeadline indicatorEqual opportunities and access to the labour marketAdult participation in learning (during the last 12 months, excl. guided on the job training, % of the population aged 25-64, 2022)Early leavers from education and training(% of  the population aged 18-24, 2023)Share of individuals who have basic or above basic overall digital skills(% of the population aged 16-74, 2023)Young people not in employment, education or training(% of the population aged 15-29, 2023)Gender employment gap(percentage points, population aged 20-64, 2023)Income quintile ratio (S80/S20, 2022) 
 
 
 
   
 
 
the  EU  (23.1%  in  2022  vs  EU  19.9%).  From 
the  minimum  wage  will  be 
January  2024, 
readjusted every 2 years based on specific criteria, 
including  the  purchasing  power  of  the  minimum 
wage  in  view  of  variations  in  the  cost  of  living. 
Access  to  social  protection  benefits  is  uneven,  as 
self-employed  people  are  not  entitled 
to 
unemployment  benefits  or  benefits  for  accidents 
at  work  or  occupational  diseases.  This  will  be 
partly  addressed  in  the  revised  law  on  social 
insurance as promoted in the RRP.  

Table A14.2:Situation of Cyprus on 2030 
employment, skills and poverty reduction targets 

(1) Adult Education Survey, special extraction: adults in 
learning in the past 12 months, special extraction excl. guided 
on-the-job training 
(2) Change in the number of persons at risk of poverty or 
social exclusion (AROPE), reference year 2019. 
Source: Eurostat, DG EMPL 

The  development  of  the  social  economy  and 
social  inclusion  services  will  help  improve 
equal  opportunities  and  assist  people  in 
vulnerable  situations.  This  is  key  for  those  in 
need  of  home-care  support  and  for  persons  with 
disabilities.  Public  funding  for  long-term  care  is 
low at 0.33% of GDP in 2021, less than a fifth of 
the  EU  average  (1.74%),  while  the  share  of  the 
population  in  need  well  exceeds  the  EU  average, 
with  very  strong  disparities  between 
income 
quintiles.  This  imposes  caregiving  obligations  on 
people, which has an impact on activity rates. Staff 
shortages  pose  a  challenge  to  the  health  system 
(there  are  5.2  nurses  per  1 000  inhabitants,  well 
below  the  EU  average  of  8.3).  The  RRP  and  ESF+ 
support  investments  in  infrastructure  for  long-
term  care  and  services  for  older  people  and 
persons  with  disabilities.  By  2022,  Cyprus  had 
reached  its  national  2030  target  of  reducing  the 
number  of  persons  at  risk  of  poverty  or  social 
exclusion  by  at  least  10 000  people  compared  to 
2019, including its complementary target on child 
poverty (to reduce by 3 000). 

44.2%).  STEM  students  were  only  11.2%  of  all 
graduates  in  2021  (vs  EU  25.4%),  one  of  the 
lowest  rates  in  the  EU,  while  demand  for  STEM 
jobs by 2032 is forecast to be 50% more than the 
supply in 2021. Digital literacy is low overall: only 
49.5% of the population had at least basic digital 
skills in 2023, below the EU average of 55.6%. In 
addition, there is a strong skills mismatch: in 2022, 
31.8% of employed people were over-qualified for 
their  job,  9.6 pps  more  than  the  EU  average.  The 
share  of  upper  secondary  students  enrolled  in 
vocational  education  and  training  programmes  in 
2021 was very low at 17.6% (vs EU 52.1%), while 
share  of  tertiary  graduates  (25-34  year-olds)  in 
2023  was  the  highest  at  61.6%  (vs  EU  43.1%). 
Adult  learning  has  a  limited  potential  to  correct 
this situation as the proportion of those aged 25-
64  participating  in  learning  in  the  previous  12 
months  was  28.3%  in  2022  (vs  EU  39.5%),  a 
substantial  decrease  from  44.8%  in  2016.  Along 
with  deteriorating  levels  of  basic  skills  and  skills 
mismatches, the low rates of adult participation in 
learning  undermine  Cyprus’s  potential  to  improve 
its  economic 
the 
considerable  additional  efforts  needed,  training 
programmes  (including  for  young  NEETs)  and  the 
modernisation of vocational education and training 
systems  financed  by  the  RRP  and  the  ESF+  are 
reduce  skills  mismatches  and 
expected 
contribute  to  achieving  the  ambitious  national 
target  of  at  least  61%  of  adults  participating  in 
training every year by 2030.  

competitiveness.  Besides 

to 

The high share of people in specific groups at 
risk of poverty or social exclusion (AROPE) in 
low 
remains  a  challenge,  while 
2022 
purchasing power and limited access to long-
term  care  persist.  The  AROPE  rate  improved  to 
16.7%  in  2022  (17.3%  in  2021),  below  the  EU 
average of 21.6%. It was much higher for persons 
with  disabilities,  at  28%.  The  impact  of  social 
transfers on reducing poverty decreased by almost 
7 pps  from  2021  (37.6%)  to  2022  (30.8%) (93). 
This  is  an  area  to  watch,  because  the  growth  in 
real gross disposable household income (GDHI) per 
person in Cyprus was one of the lowest in the EU 
in  2022.  Cyprus  introduced  a  universal  statutory 
minimum  wage  on  1 January  2023,  which  is 
expected  to  safeguard  the  purchasing  power  of 
people  earning  low  wages.  It  should  also  help 
alleviate the  risk  of  in-work  poverty,  which  is  one 
of  the  highest  in  the  EU  for  people  born  outside 

(93)  A break in series is flagged for this indicator for 2022. 

62 

IndicatorsLatest dataTrend            (2016-2023)2030 targetEU target 78.9(2023)28.3(2022)-12(2022)Poverty reduction2 (thousands)-10-15,000Employment (%)8078Adult learning1 (%)6160 
 
 
  
 
ANNEX 15: EDUCATION AND TRAINING 

This  Annex  outlines  the  main  challenges  of 
Cyprus's  education  and  training  system  based  on 
the  2023  Education  and  Training  Monitor  and  the 
2022  OECD  Programme  for  International  Student 
Assessment (PISA) results. 

Cypriot  students’  underachievement  rate  in 
basic  skills  continues  to  increase  and  is  one 
of  the  highest  at  EU  level.  The  2022  OECD 
Programme  for  International  Student  Assessment 
(PISA) (94)  showed that 60.6% of Cypriot 15-year-
olds  could  not  identify  the  main  idea  in  a  text  of 
moderate length and reflect on its purpose. 53.2% 
had difficulties in interpreting and recognising how 
a 
represented 
mathematically.  51.8%  could  not  recognise  the 
scientific 
for 
correct 
phenomena and draw evidence-based conclusions, 
putting  Cyprus  among  the  worst  performers. 
Cyprus  recorded  the  highest  increase  since  2012 
(+27.9 pps  vs  EU  +8.2 pps)  in  the  share  of 
underachievement. 

explanation 

situation 

familiar 

simple 

can 

be 

Graph A15.1: Underachievement rates by field, 
PISA 2012, 2018 and 2022 

Source: OECD (2023). 

The  strong  decline  in  students’  performance 
in  basic  skills  might  affect  the  country’s 
competitiveness  and  social  cohesion.  Low 
performance in all three tested subjects has grown 
over  the  entire  socio-economic  distribution  since 
the  previous  PISA  cycle  (2018).  Cyprus  recorded 
the  largest  increases  among  all  Member  States 
since 2018 for both the top quartile rate (10.6 pps 
vs  EU  2.2 pps)  and  the  bottom  quartile  (17.6 pps 
vs  EU  9.9 pps).  As  a  result,  one  in  three  students 
underachieve even in the most advantaged group, 

(94)  OECD (2023), PISA 2022 Results (Volume I): The State of 

Learning and Equity in Education 

while  for  disadvantaged  learners,  this  reaches 
69.8%.  In  contrast,  the  underperformance  rate  of 
foreign-born  students  is  lower  compared  with 
native-born  students  (Table  A15.1),  although  the 
increase  in  the  percentage  of  students  with 
migrant  background  during  the  last  decade  was 
one  of  the  highest  in  the  EU  (11.1 pps).  All  this 
points  to  severe  challenges  for  the  Cypriot 
education  system  that  may  affect  even  adult 
participation  in  learning  (see  Annex  14).  These 
trends  point  to  structural  challenges;  reforms  are 
more  than  necessary  to  improve  educational 
outcomes  and  address  strong  socio-economic 
in  education,  equity,  quality,  and 
disparities 
inclusion.  For 
little 
instance,  schools  have 
autonomy  (a  factor  that  is  associated  with  better 
teaching 
outcomes),  and 
methods  are  yet  to  be  further  developed  and 
implemented together with a culture of evaluation. 
An early warning system and developing pathways 
to  school  success  could,  in  particular,  help  low-
achieving students. 

competence-based 

The  teaching  profession  is  attractive  in 
Cyprus  and  teachers  are  highly  qualified. 
Teachers’ salaries and working conditions compare 
favourably  with  those  of  their  European  peers. 
Teaching  was  the  first-choice  career  for  70%  of 
teachers  in  Cyprus  (vs  EU-22  average  67%).  Half 
of  lower  secondary  teachers  in  Cyprus  (49.7%) 
hold  a  master’s  degree,  a  much  higher  rate  than 
for other EU countries, and 8% of them hold a PhD 
(Eurydice,  2021).  In  addition,  the  country  has  a 
large  supply  of  candidate  teachers.  Promotion  is 
the  main  incentive  for  continuous  professional 
to 
development.  Although  a  new  approach 
teachers’ evaluation has been high on the political 
agenda  for  many  years,  and  also  part  of  the 
Cyprus  recovery  and  resilience  plan (95),  it  is  still 
not  legislated.  An  effective  teacher  and  school 
evaluation  process  could  help  improve  education 
outcomes. 

to  extend 
Consistent  efforts  continue 
compulsory  preschool  education  under  the 
national  recovery  and  resilience  plan  (RRP). 
Between 2020 and 2021, the participation rate in 
early childhood education and care above the age 
of 3 dropped by 5.3 pps to 85.8%, well below the 
EU-level  target  of  96%.  More  children  are  in 
preschool  from  age  4+ (87.7%)  as 4 years  and  8 
months is currently the starting age of compulsory 

. 

(95)  Education and Training Monitor 2023, Volume II. 

63 

0.010.020.030.040.050.060.070.0CYEUCYEUCYEUMathematicsReadingScience%2012201820222030 EU target 
 
  
 
 
 
 
Table A15.1:EU-level targets and other contextual indicators under the European Education Area 
strategic framework 

Notes: b = break in time series; d = definition differs; e = estimated; p = provisional; u = low reliability; : = data not available. 
Source: 1,3,4,5,7,8,9,10,12=Eurostat; 11= Eurostat, Adult Education Survey; 2,6=OECD, PISA. 

education.  Based  on  the  revised  Barcelona  target, 
Cyprus  should  increase  the  participation  rate  in 
formal  childcare for children under 3 by 12.6 pps, 
to  40.6%  in  2030  (from  an  average  of  28%  in 
2017-2021).  The  national  authorities  planned 
consistent  measures  to  increase  affordability  of 
early  childhood  education  and  care,  through  the 
ESF+, the Recovery and Resilience Facility and the 
EU 
Cyprus 
committed  to  extending  compulsory  pre-primary 
education  from  the  age  of  4  under  its  RRP.  The 
relevant  law  was  adopted  by  the  Parliament  in 
March 2024.  

Instrument. 

Technical 

Support 

faces  structural  difficulties 

in 
Cyprus 
integrating minors into the formal  education 
system. In 2022, the share of young people (18-
24-year-olds)  having  left  education  and  training 
the 
prematurely  decreased 
previous  year  by  2.1 pps  to  8.1%  (EU  9.6%).  This 
was  the  first  decrease  recorded  after  steady 
increases  since  2015  and  it  is  mainly  due  to  the 
2022 drop by 5.3 pps in the share among the non-
EU  born  population.  However,  the  gap  between 
native  and  non-EU  born  youngsters  is  still  the 
widest in the EU, at 22.7 pps. 

compared  with 

Cyprus  is  a  leading  EU  country  in  tertiary 
educational  attainment.  At  61.6%  in  2023  (EU 
43.1%),  Cyprus  is  above  the  EU  target  for  2030 
(45%)  and  increasing  steadily.  The  employment 
rate of recent tertiary graduates is close to the EU 
average  (82.7%  vs  87.7% 
in  2023),  having 
increased significantly by 17.8 pps during the last 
decade.  Skills  and 
labour  shortages  persist, 
especially  related  to  the  science,  technology, 
engineering  and  mathematics  (STEM)  fields  and 
the green and digital transitions (see Annex 14). 

Education  for  environmental  sustainability 
(EES) is a key aspect of Cypriot education. By 
giving  emphasis  to  EES  in  the  new  primary  and 
secondary  curricula,  Cyprus  aims  at  creating  a 
long-lasting  awareness  in  schools  of  the  need  to 
address  global  warming,  climate  change,  energy, 
is  part  of 
and  urban  development.  EES 
professional development courses for teachers.  

64 

96%69.4%201391.8%201388.4%92.2%85.8%202192.5%2021,dReading< 15%32.8% 18.0%43.7% 22.5%60.6%202226.2%2022Mathematics< 15%42.0% 22.1%36.9%22.9%53.2%202229.5%2022Science< 15%38.0% 16.8%39.0%22.3%51.8%202224.2%2022< 9 %11.4%12.6%7.8%10.5%10.5%9.5%Men16.5%14.5%9.9%12.1%11.2%11.3%Women7.0%10.6%6.0%8.7%10.0%7.7%Cities9.8%b11.2%7.9%9.4%8.2%8.6%Rural areas12.2%b14.0%4.8%u11.0%13.2%9.9%5By country of birthNative8.0%11.3%6.2%9.2%5.2%8.2%EU-born22.7%26.2%14.7%u22.4%27.1%21.0%Non EU-born18.8%30.1%13.4%u23.0%24.2%21.6%6Socio-economic gap (percentage points)39.1:30.129.537.1202237.220227Exposure of VET graduates to work-based learning≥ 60% (2025) ::: :39.2% 64.5%45%53.6%34.1%58.5%38.7%61.6%43.1%Men46.9%29.1%49.9%33.3%53.4%37.6%Women59.8%39.2%66.5%44.2%69.2%48.8%Cities58.6%b43.5%64.5%49.0%66.8%53.3%Rural areas42.0%b24.8%45.0%27.7%49.9%31.7%Native61.3%35.4%65.6%39.7%71.3%44.2%EU-born39.6%29.3%40.2%36.7%39.1%40.2%Non EU-born39.6%24.2%43.1%31.0%44.9%37.1%11Participation in adult learning (age 25-64)≥ 47% (2025) ::44.8%201637.4%201628.3%202239.5%20227.5%201322.7%201315.8%23.8%16.6%202124.5%2021Tertiary educational attainment (age 25-34)8Total8By gender9By degree of urbanisation10By country of birth12Share of school teachers (ISCED 1-3) who are 55 years or over1Participation in early childhood education (age 3+)2Low-achieving 15-year-olds in:Early leavers from education and training(age 18-24)3Total3By gender4By degree of urbanisation201220182023IndicatorTargetCyprusEU-27CyprusEU-27CyprusEU-27 
 
  
 
ANNEX 16: HEALTH AND HEALTH SYSTEMS 

A  healthy  population  and  an  effective, 
accessible  and  resilient  health  system  are 
prerequisites  for  a sustainable  economy and 
society.  This  Annex  provides  a  snapshot  of 
population health and the health system in Cyprus. 

in  2021, 

Despite  a  sharp  decline 
life 
expectancy  in  Cyprus  rebounded  slightly  in 
2022  and  remains  well  above  the  EU 
average. Before 2020, and against an overall EU 
trend of increasing life expectancy, life expectancy 
appeared  to  be  plateauing  in  Cyprus.  In  2020, 
mortality from COVID-19 was low in Cyprus, but in 
2021 it almost quadrupled and was a key factor in 
the  reduction  in  life  expectancy  that  year.  Life 
expectancy increased slightly in 2022 even though 
mortality  from  COVID-19  remained  at  the  same 
level  as  in  2021 (96).  Cyprus  fares  comparatively 
well  with  respect  to  avoidable  mortality,  which  is 
also reflected in its relatively low cancer mortality 
rate.  In  2021,  the  leading  causes  of  death  were 
diseases of the circulatory system (‘cardiovascular 
diseases’), with mortality rates decreasing over the 
last  decade,  followed  by  cancer,  for  which 
mortality  rates  have  remained  unchanged.  The 
third  leading  cause  of  death  was  endocrine, 
nutritional and metabolic diseases (e.g. diabetes). 

Graph A16.1: Life expectancy at birth, years 

Source: Eurostat 

Health spending in Cyprus increased to 9.1% 
of  GDP  in  2021  but  remained  below  the  EU 
average.  The  2019-2020  health  system  reform 
introduced universal health coverage and unified a 
previously fragmented system. This pushed up the 
public share of health spending to 85.3% in 2021 
(above  the  EU  average  of  81.1%)  and  reduced 
what  was  the  highest  level  of  out-of-pocket 

spending for healthcare in the EU. Concretely, out-
in  Cyprus 
of-pocket  spending  for  healthcare 
accounted  for  10.0%  of  total  health  spending  in 
2021,  well  below  the  EU  average  of  14.5%.  The 
reform  made  healthcare  more  affordable  and 
reduced  self-reported  levels  of  unmet  needs  for 
medical  care,  placing  Cyprus  among  the  top 
performing countries in the EU according to 2022 
data (also see Annex 14). Cyprus spends more per 
capita  on  inpatient  care  than  the  EU  overall,  a 
reflection  of  increased  spending  for  COVID-19 
care.  On  the  other  hand,  spending  per  capita  is 
below  the  EU  averages  for  outpatient  care, 
pharmaceuticals  and  medical  devices,  disease 
prevention  and  long-term  care.  The  relatively  low 
expenditure on long-term care can be attributed to 
the  absence  of  a  dedicated  framework  for  long-
term care provision in Cyprus, including home care 
services.  To 
the  quality  of  health 
spending,  under  its  recovery  and  resilience  plan 
(RRP),  Cyprus  has  already  begun  a  gradual  move 
towards  value-based  models 
for  healthcare 
provision and its reimbursement system. Based on 
the  age  profile  of  the  Cypriot  population,  public 
expenditure  on  health  is  projected  to  increase  by 
0.8  percentage  points  (pps)  of  GDP  by  2070, 
compared  to  0.6 pps  for  the  EU  overall  (see 
Graph A16.2 and Annex 21). 

improve 

Spending  on  prevention  remains  among  the 
lowest  in  the  EU.  Between  2019  and  2021, 
spending  on  prevention  in  Cyprus  as  a  proportion 
of total health expenditure increased from 1.2% to 
2.2%. Despite this increase, Cyprus was among the 
few EU countries that spent less than 3% of total 
in  2021, 
healthcare  spending  on  prevention 
compared  with  an  EU  average  of  6.0%. 
Proportionally, budget shares for prevention across 
the EU increased most (between 2019 and 2021) 
for  emergency  response,  disease  detection  and 
immunisation  programmes.  Between  2019  and 
2021,  Cyprus  saw  a  remarkable  proportional 
increase  in  reported  spending  on  early  disease 
detection  programmes.  Also  in  the  field  of  public 
health,  there  is  concern  about  the  high  level  of 
consumption  of  antibacterials  in  Cyprus,  which 
could accelerate antimicrobial resistance. Cyprus is 
among  the  five  EU  countries  with  the  highest 
morbidity  and  mortality  attributable  to  infections 
with  resistant  bacteria (97).  Total  consumption  of 

(96)  Based on data provided directly by Member States to the 

European Centre for Disease Prevention and Control, under 
the European Surveillance System. 

(97)  See: ECDC/EFSA/EMA third joint report on the integrated 
analysis of the consumption of antimicrobial agents and 
occurrence of antimicrobial resistance in bacteria from 
humans and food-producing animals (JIACRA III) (europa.eu). 

65 

82.282.982.382.481.381.680.981.081.380.480.180.6201720182019202020212022CyprusEU 
 
   
 
 
 
Table A16.1:Key health indicators 

Note: The EU average is weighted for all indicators except for doctors and nurses per 1 000 population, for which the EU simple 
average is used. Doctors’ density data refer to practising doctors in all countries except Greece, Portugal (licensed to practise) and 
Slovakia (professionally active). Nurses’ density data refer to practising nurses in all countries except Ireland, France, Portugal, 
Slovakia (professionally active) and Greece (hospital only). 
Source: Eurostat Database; except: * OECD, ** Joint Questionnaire on non-monetary healthcare statistics, *** ECDC, **** Council 
Recommendation on stepping up EU actions to combat antimicrobial resistance in a One Health approach. 

antibacterials  in  2022  (33.5 daily  defined  doses 
per 1 000 population) increased by 11% compared 
to  2019  and  was  well  above  the  EU  average. 
Under the Council Recommendation on stepping up 
EU actions to combat antimicrobial resistance in a 
One  Health  approach,  the  national  recommended 
target for Cyprus is to reduce total consumption of 
antibiotics by 27% by 2030 compared to the 2019 
level.  To  address  this,  Cyprus’  RRP  contains  a 
measure  to  set  up  an  electronic  platform  for 
monitoring antibiotic consumption. 

Graph A16.2: Projected increase in public 
expenditure on healthcare over 2024-2070 

Baseline scenario 
Source: European Commission / EPC (2024) 

Staff  and  bed  shortages 
jeopardise  the 
health  system’s  long-term  performance.  The 
number  of  doctors  per  1 000  population  is  above 
the  EU  average,  while  the  number  of  nurses  is 
below  it,  and  the  number  of  graduates  in  both 
professions  considerably 
the  EU 
average.  The  age  profile  of  active  physicians 
(40.6% aged 55 or above) raises concerns for the 
long-term  accessibility  of  health  services.  The 
limited  availability  of  some  specialists  translates 
into  longer  waiting  times  for  consultations  and 

lower  than 

66 

elective  surgery.  Both  healthcare  and  long-term 
care  are  affected  by  nurse  shortages.  The 
increasing  need  for long-term  care  calls  for more 
comprehensive  measures,  aimed  at  optimal 
service  provision  across  all  aspects  of  care  (see 
also Annex 14).  Cyprus had 312 hospital beds per 
100 000  population  in  2021,  still  below  the  EU 
average  of  525 beds,  mirroring  pre-pandemic 
trends.  Private  hospital  beds  and  staff  were 
requisitioned as part of the pandemic response. As 
more  private  providers  are  now  contracting  with 
to 
the  General  Healthcare  System,  access 
emergency departments is improving. 

Through  its  RRP,  Cyprus  plans  a  wide  range 
of investments and reforms in the healthcare 
sector.  Around  EUR 69.6 million  (5.7%  of  the 
RRP’s total value) will be spent on health. Historical 
levels  of  investment  in  healthcare  in  Cyprus, 
measured in terms of gross fixed capital formation 
as share of GDP, are among the lowest in the EU. 
An impetus for higher investment may come from 
is  focusing  on 
Cyprus’  RRP. 
modernising  state  hospitals,  procuring  equipment 
and  rolling  out  digital  and  interoperable  e-health 
services.  Complementary 
investments  worth 
in  digital  health  services  and 
EUR 8.3 million 
applications are also envisaged under the cohesion 
policy funds in the period 2021-2027 (98). 

In  this,  Cyprus 

(98)  The EU cohesion policy data reflect the status as of 13 May 

2024. 

6.67.50.60.802468EUCyprus% of GDP20242070increase20182019202020212022EU average (latest year) Treatable mortality per 100 000 population (mortality avoidable through optimal quality healthcare)78.977.170.578.4NA93.3 (2021)Cancer mortality per 100 000 population204.6195.4205.6213.2NA235.4 (2021)Current expenditure on health, % GDP 6.87.18.39.1NA10.9 (2021)Public share of health expenditure, % of current health expenditure42.054.274.985.3NA81.1 (2021)Spending on prevention, % of current health expenditure 1.31.21.62.2NA6.0 (2021)Available hospital beds per 100 000 population318311317312NA525 (2021)Doctors per 1 000 population4.14.34.74.9NA4.1 (2021)*Nurses per 1 000 population5.35.35.25.0NA7.9 (2021)Total consumption of antibacterials for systemic use, daily defined dose per       1 000 inhabitants per day ***28.030.128.925.033.519.4 (2022) 
   
 
 
 
  
 
ANNEX 17: ECONOMIC AND SOCIAL PERFORMANCE AT REGIONAL LEVEL 

Annex 17 showcases the economic and social 
regional  dynamics  in  Cyprus.  It  provides  an 
analysis  of  economic,  social  and 
territorial 
cohesion  in  the  Cypriot  regions  and  assesses 
investment  and  subnational  reform 
emerging 
social 
needs 
development and competitiveness in the country.  

foster  economic  growth, 

to 

of 
Overview 
performance at regional level 

economic 

and 

social 

in 

Cyprus  has  been  progressively  recovering 
its  economic  crisis  since  2015, 
from 
demonstrating  resilience 
its  economic 
growth.  While  its  GDP  per  capita  remains  below 
the  EU  average,  it  has  been  gradually  converging 
towards  it.  The  real  GDP  per  capita  grew  at  an 
annual  rate  of  1.1%  between  2012  and  2021, 
marginally  higher  than  the  EU  average  (1%),  to 
reach  94% 
in  2021-2022.  Cyprus  was  not 
classified  to  be  in  a  development  trap  between 
2003 and 2021 (99).  

In  terms  of  labour  productivity,  Cyprus  has 
shown  progress,  albeit  with  some  room  for 
improvement  when  compared  to  the  EU 
average. It reached 86% in 2021-2022, despite a 
stronger annual growth (0.7%) compared to the EU 
(0.4%) between 2012 and 2021.  

in 

in 

lags 

terms  of 

competitiveness 

Cyprus 
and 
investments.  In  2022,  it  ranked  below  the  EU 
competitiveness (100). 
average 
Moreover, the investment rate in 2022 (gross fixed 
capital  formation  as  a  share  of  GDP)  was  20.4%, 
lower than the EU rate (22.5%), with expenditures 
in  R&D  notably  low (0.8%,  compared  to  2.23%  in 
the  EU).  Employment  in  high-technology  and 
knowledge-intensive  sectors  was  around  the  EU 
average (4% and 42%, respectively).  

The  Cypriot  economy  relies  strongly  on 
services.  Services  accounted  for  84.7%  of  total 
Gross  Value  Added  in  2022  (72%  for  the  EU). 
Labour  productivity  per  person  employed  varied 
from  137%  of  the  EU  average  in  the information 

(99)  Region is classified to be in a development trap if it has 
experienced an extended period (>16 years) of below-
average growth in GDP, productivity and employment during 
2003-2021. 

(100) 2022 Regional Competitiveness Index, EU-27 = 100. 

67 

and  communication  sector  to  a  low  of  58%  in 
industry (excluding construction). 

in 

A  socio-economic  urban-rural  divide  persists 
in  Cyprus.  The  rural-urban  divide  was  more 
terms  of  high  educational 
pronounced 
attainment  in  2022.  In  cities,  54.3%  of  the 
population aged 25-64 held a tertiary degree, but 
this share dropped to 40.3% in towns and suburbs 
and  further to  36.7%  in  rural  areas.  The  share  of 
early leavers from education and training (age 18-
24),  as  well  as  the  NEET  (not  in  education, 
employment or training) share, tended to be higher 
in cities and towns and suburbs compared to rural 
areas (Table A17.1).  

labour  market  was  most 
In  2022,  the 
dynamic in towns and suburbs, also featuring 
the  lowest  gender  employment  gap.  The 
employment  rate  for  ages  20-64 
in  Cyprus 
(77.9%) slightly exceeded the EU average (74.6%). 
Towns  and  suburbs  were  in  the  lead  (79.8%), 
followed  by  cities  (78.0%)  and  rural  areas  at  the 
bottom  (76.0%).  The  gender  employment  gap  in 
rural  areas  (17.3  percentage  points)  was  double 
that of towns and suburbs (9.1 percentage points) 
while  cities  had  a  gap  of  11.4  percentage  points. 
However,  reflecting  lower activity  and  low  female 
lowest 
rural  areas  had 
employment, 
unemployment  rate  (5.9%),  followed  by  cities 
(6.9%)  and  towns  and  suburbs  at  the  highest 
(7.3%).  

the 

Cyprus  achieved  positive  social  outcomes. 
The risk of poverty or social exclusion (AROPE (101) 
standing at 16.7% in 2022, was lower than the EU 
average  (21.6%)  across  different  urbanisation 
levels.  However,  the  risk  of  poverty  and  social 
exclusion  was  notably  higher 
in  rural  areas 
(20.9%) compared to 16.0% in towns and suburbs 
and  15.6%  in  cities.  The  material  and  social 
deprivation  (MSD (102)  rate,  recorded  at  11.0%  in 
2022,  was  below  the  EU  average  (12.7%)  only  in 

(101) Risk of poverty or social exclusion (AROPE) relates to people 
who are in at least one of the situations: risk of monetary 
poverty (AROP in the previous year), severe material and 
social deprivation (SMSD in the concurrent year) and very low 
work intensity of household (VLWI in the previous year). 

(102) Material and social deprivation (MSD) rate is a proportion of 
population experiencing an enforced lack of at least 5 out of 
13 deprivation items (6 individual and 7 household items). 
Severe MSD means an enforced lack of at least 7 out of 13 
items. The SMSD rate for Cyprus is 2.7%, compared to the EU 
average of 6.7%.  

 
 
 
 
 
Table A17.1:Main socio-economic indicators by degree of urbanisation, Cyprus, 2022 (%) 

Source: Eurostat, EDGAR database 

cities  (8.9%).  In  contrast,  it  was  elevated  in  rural 
areas (15.3%) and towns and suburbs (13.1%).  

network,  which  requires  sufficient  resources  for 
effective management. 

of 

local  authorities. 

Ahead  of  Cyprus’  legislative  reform  in  local 
government,  set  for  June  2024,  which 
includes  an  increase  in  local  government 
competences and the creation of five District 
organisations  for  local  administration,  there 
is a pressing need to boost the capacity and 
These 
efficiency 
organisations  will  be  responsible  for  strategic 
services  like  water  supply,  sewage,  solid  waste 
management,  and  issuing  urban  planning  and 
building permits at district level. Given this context, 
it  is  important  that  local  authorities  prioritise  the 
digitisation  and  professionalisation  of 
their 
administrative  processes.  Additionally,  ensuring 
interoperability  between  the  different  levels  of 
government  is  essential  for  maintaining  effective 
service  delivery  across  different  administrative 
layers. Moreover, it is vital for these authorities to 
Territorial 
Integrated 
actively 
Investments,  as  part  of  broader 
integrated 
territorial  and  local  development  strategies.  This 
approach,  along  with  the  adoption  of  other 
territorial  tools,  will  be  instrumental  in  fostering 
sustainable and cohesive regional development. 

engage 

in 

The  population  is  expanding,  yet  ageing 
might  soon  become  a  challenge  having 
inevitable consequences for the economy. The 
population has expanded by an average rate of 4.9 
per 1 000 residents between 2012 and 2021. This 
growth  is  attributed  to  natural  increases  (4.1  per 
1000  per  year),  with  a  modest  contribution  from 
net  migration  (+0.8  per  1  000  per  year).  The 
population  aged  65  and  over  increased  at  an 
annual  rate  of  30  per  1  000  residents  between 
2012  and  2021,  raising  their  share  to  17%. 
However,  it  remains  one  of  the  lowest  in  the  EU. 
Meanwhile,  the  working-age  population  increased 
by  2.8  per  1  000  residents  per  year  while  the 
increase in the number of young people (under 20 
years  old)  was  modest  (5.9  per  1  000  residents 
per year).  

Investment  and  subnational  reform  needs 
ahead 

in 

the 

transition, 

investment 

investment 

Cyprus faces major challenges in sustainable 
in  public 
transport,  requiring 
transport,  electric  vehicles,  pedestrian,  and 
bicycle infrastructure. In order to accomplish its 
energy 
country  also  needs 
renewable  energy, 
additional 
storage  solutions  and  energy  efficiency.  Cyprus 
could  also  benefit  from  the  opportunities  of  the 
STEP  initiative  to  support  its  energy  transition 
through 
efficiency 
technologies,  including  net-zero  technologies.  In 
addition,  Progress  towards  a  circular  economy  in 
requires 
waste  management 
investment  in  recycling  capacity,  waste  reduction 
and  waste-to-energy  projects.  Improving  water 
management,  especially  wastewater  treatment,  is 
essential  to  comply  with  the  Urban  Wastewater 
Treatment Directive. Furthermore, the protection of 
the  environment  and  biodiversity 
is  of  vital 
importance,  especially  for  the  EU  Natura  2000 

is  critical  and 

resource 

clean 

and 

68 

Emplyment rate 20-64Male employment rateFemale employment rateEmployment rate gender gap (pp dif. female - male)Unemployment rate 15+ (% of labour force)NEET 15-34Early leavers 18-24Population 25-64 with tertiary educationAt risk of poverty or social exclusion rateAt risk of poverty rateSocial and material deprivation rateTotal77.984.272.1-12.16.814.48.148.216.713.911.0Cities78.083.972.5-11.46.915.08.654.315.612.68.9Towns and suburbs79.884.475.3-9.17.313.910.040.316.013.413.1Rural areas76.085.067.7-17.35.912.64.836.720.918.515.3 
 
 
  
 
MACROECONOMIC STABILITY 
ANNEX 18: KEY FINANCIAL SECTOR DEVELOPMENTS 

The  Cypriot  banking  sector  remains  a 
fundamental pillar of the country’s economy, 
despite  experiencing  significant  downsizing 
since  the  2012-2013  financial  crisis.  Total 
banking-sector assets stood at EUR 68.3 billion, or 
228% of GDP in September 2023, which is below 
the EU average of 257%. The sector consists of six 
local banks, four subsidiaries and several branches 
of  foreign  banks.  The  top  five  lenders  hold 
approximately 92% of total banking-sector assets. 
The sector is dominated by domestic banks, which 
accounted  for  about  78%  of  total  assets  in 
September 2023 (see Table A18.1).  

rates). 

interest 

liquidity 

total-own-funds 

Overall,  in  2023,  the  Cypriot  banking  sector 
retained  a  solid  capital  position,  operated 
levels,  and  recorded 
with  high 
strong  profits.  The 
ratio 
reached  a  record  high  of  23.9%  in  September 
2023,  up  from  21.2%  in  December  2022,  driven 
by  improved  profitability.  The  bulk  of  the  profits 
came from banks’ excess liquidity placed with the 
European  Central  Bank  (ECB)  and  from  higher 
interest rates on variable-rate loans (by mid-2023, 
almost 70% of household loans in Cyprus were on 
Interest  cost  was 
variable 
contained  due  to  the  low  pass-through  of  the 
interest-rate  hikes  to  deposits.  Cypriot  banks 
operate with abundant liquidity. The sector’s loan-
to-deposit  ratio  of  44.3%  is  one  of  the  lowest  in 
the  euro  area,  and  therefore  banks  have  little 
incentive  to  increase  interest  rates  on  savings 
accounts  to  attract  additional  deposits.  Deposits 
remain  the  primary  funding  source  for  Cypriot 
banks. 
liquidity 
coverage ratio was 330%, which is well above the 
minimum requirement of 100%, and nearly double 
the  euro  area  average.  Furthermore,  banks  have 
reduced  staff  costs  and  other  administrative 
expenses,  mainly  through  the  digitalisation  of 
operations.  This  has  resulted  in  a  significant 
improvement  in  the  cost-to-income  ratio,  which 
dropped to 33.3% in September 2023 from 68.7% 
in December 2022, and to an annualised return on 
equity of 22.1%. 

In  June  2023, 

the  sector’s 

The Cypriot banking system has significantly 
improved  its  asset  quality  in  recent  years. 
After  considerable  progress  in  the  work-out  of 
non-performing  loans  (NPLs),  there  have  been  no 
further  outright  NPL  sales  since  January  2022. 
Banks resorted to organic actions to manage their 
legacy  NPLs,  resulting  in  a  slow  pace  of  NPL 

69 

reduction,  although  progress  varies  across 
different  banks.  The  overall  NPL  ratio  declined  to 
4% (103) in September 2023, yet it remains one of 
the three highest in the EU, above the EU average 
of 1.8%. Inflation and prevailing high interest rates 
are  challenges  that  pose  a  risk  to  banks’  asset 
quality in the near future. Inflation, for as long as 
it remains above its long-term average, puts extra 
pressure  on  the  finances  of  households  and 
corporations.  Moreover,  interest  rates  have  been 
increasing,  and  thus  borrowers  could  come  under 
pressure  as  they  face  a  higher  debt-servicing 
burden.  Adverse  macro-financial  dynamics  or 
heightened geopolitical risks could also negatively 
impact banks’ asset quality. 

Graph A18.1: Lending for house purchases and 
changes in house prices 

Source: ECB 

new 

loans, 

in  new 

excluding 

Housing  prices  have  continued  to  increase, 
lending  has  been 
while  growth 
hindered  by  higher 
interest  rates  and 
weakening  debt-servicing  capacity.  In  2023, 
total 
restructurings, 
amounted  to  EUR 3.27  billion,  around  the  same 
levels as in 2022. Lending for house purchases fell 
level  as  households  were 
below 
deterred  by  higher  borrowing  and  construction 
costs.  Nevertheless,  residential  property  prices 
continued 
in  2023,  supported  by 
demand  from  foreign  buyers  (see  Graph  A18.1). 
Conversely,  business  loan  volumes  increased  in 

last  year’s 

increasing 

(103) Source: ECB. This NPL ratio differs from the NPL ratio in the 

2024 Cyprus Post Programme Surveillance Report. The latter 
uses data from the Central Bank of Cyprus (CBC), which 
excludes from loans and advances to central banks and 
credit institutions and stood at 8.3% in September 2023. 

-4-20246810020406080100120140200820112014201720202023House price index (lhs)Adjusted loans, lending for house purchase (rhs)yoy% change2015=100 
 
 
   
 
 
Table A18.1:Financial Soundness Indicators 

(1) Last data: Q3 2023. 
(2) Data is annualized. 
(3) Data available for EA countries only, EU average refers to EA area. 
Source: ECB, Eurostat. 

to 

2023  compared  with  the  previous  year  as 
required  additional 
corporates 
lines, 
primarily 
capital  needs. 
cover  working 
Regardless of the level of prevailing interest rates, 
the high level of private indebtedness, at 214% of 
GDP,  limits  investing  opportunities  for  banks  and 
constrains credit expansion.  

credit 

lengthy  discussions, 

On  the  policy  side,  there  has  been  progress 
with both the mortgage-to-rent scheme, and 
reforms  to  facilitate  the  work-out  of  NPLs. 
The  long-awaited  mortgage-to-rent  scheme  was 
announced  in  July  2023,  aiming  at  safeguarding 
vulnerable  non-performing  borrowers  from  being 
evicted  from  their  homes.  In  December  2023, 
the  Cypriot 
following 
Parliament agreed on a package of amending laws 
that  promote  out-of-court  resolution  and  improve 
transparency  during 
the  work-out  of  NPLs. 
Unresolved  disputes  will  be  examined  by 
specialised 
These 
developments  offer  an  additional  safety  net  to 
eligible  borrowers  in  default  and  are  expected  to 
end  the  repetitive  suspensions  of  the  foreclosure 
framework.  

district 

courts. 

NPL 

local 

capital  market 

The 
remains 
underdeveloped,  with  banks  serving  as  the 
primary source of funding for individuals and 
corporates.  Cyprus  ranks  low  in  the  EU  as 
regards  non-bank  financing.  Households  and  non-
financial  corporations  predominately  hold  their 
financial  assets  in  cash  and  bank  deposits.  The 
market 
is  22%, 
significantly  below  the  EU  average  of  51%.  The 

in  Cyprus 

funding 

ratio 

local  stock  and  bond  markets  are  small,  and 
access  to  alternative  sources  of  finance 
is 
particularly difficult for startups,  and for research 
and  innovation  projects.  In  the  fund-management 
industry, alternative investment funds are growing 
strongly.  There 
interest  among 
investors in authorised companies under the scope 
of  the  Alternative  Investment  Fund  Managers 
Directive. The financial industry in Cyprus has also 
seen improvements in its digital performance, and 
while the fintech industry is still in its early stages, 
it  is  expanding,  with  domestic  banks  increasingly 
investing in digital and mobile channels. 

increasing 

is 

In  the  area  of  sustainable  finance,  the 
Cypriot  government  issued  its  inaugural  10-
year sustainable bond in April 2023. The bond 
featured  an  annual  yield  of  4.219%  and  raised 
EUR 1 billion.  The  proceeds  were  earmarked  to 
finance  projects  and  activities  that:  (i)  promote 
sustainability;  (ii)  combat  climate  change;  or  (ii) 
have other environmental and social purposes. 

The insurance sector remains resilient with a 
solvency  ratio  that  surpasses  the  EU 
average.  Despite  its  small  size,  the  sector  is 
highly  competitive,  with  many  insurance  suppliers 
relative  to  the  population.  The  total  assets  of  all 
insurers is equivalent to 16.3% of GDP, compared 
to  56.1%  in  EU.  The  sector  maintains  strong 
solvency, with the corresponding ratio standing at 
a robust 306% in December 2022, surpassing the 
EU average of 259%, although this varies between 
life and non-life insurers and across companies. 

70 

2017201820192020202120222023EUMedianTotal assets of the banking sector (% of GDP)395.9322.8282.7293.8288.5244.1228.2257.0184.6Share (total assets) of the five largest banks (%)84.286.985.786.587.391.9--69.6Share (total assets) of domestic credit institutions (%)180.978.378.378.678.677.277.7-62.9NFC credit growth (year-on-year % change)0.33.52.21.91.70.8-2.3-2.4HH credit growth (year-on-year % change)0.0-0.2-0.23.02.57.31.3-1.4Financial soundness indicators:1        - non-performing loans (% of total loans)30.720.218.111.05.64.54.01.81.8- capital adequacy ratio (%)16.317.119.920.320.621.223.919.620.1- return on equity (%)2-11.97.13.5-3.30.65.122.19.913.2Cost-to-income ratio (%)153.662.372.363.271.968.733.352.844.9Loan-to-deposit ratio (%)171.960.360.056.746.844.144.393.380.2Central bank liquidity as % of liabilities1.61.50.03.810.58.77.6-0.7Private sector debt (% of GDP)303.6281.8265.5267.2242.1213.4-133.0118.4Long-term interest rate spread versus Bund (basis points)230.6177.8132.3138.774.2181.7147.9107.7104.2Market funding ratio (%)13.015.019.920.521.322.2-50.839.8Green bonds outstanding to all bonds (%)3-----1.21.44.02.71-34-1011-1718-2424-27Colours indicate performance ranking among 27 EU Member States. 
 
  
 
ANNEX 19: TAXATION 

This  annex  provides  an 
indicator-based 
overview  of  Cyprus’s  tax  system.  It  includes 
information  on  the  types  of  tax  that  Cyprus 
derives  most  of  its  revenue  from,  the  tax  burden 
on  workers, 
and 
the 
redistributive  effect  of  the  tax  system.  It  also 
provides 
tax  collection  and 
compliance,  and  on  the  risks  of  aggressive  tax 
planning activity (ATP).  

information  on 

progressivity 

and 

from 

taxes 

consumption 

Cyprus’s  tax  revenues  as  a  percentage  of 
GDP are slightly lower than the EU aggregate 
and property taxes are low. Table A19.1 shows 
that Cyprus’s tax revenues as a share of GDP were 
below the EU aggregate in 2022, although almost 
2 pps  higher  than  in  2021.  The  share  of  labour 
taxes,  as  a  share  of  both  GDP  and  total  tax 
revenues,  was  well  below  the  EU  average,  and 
revenues 
and 
environmental  taxes  were  slightly  above  the  EU 
average.  However,  pollution  and  resources  taxes 
account  for  only  1.3%  of  environmental  taxes,  so 
the ‘polluter pays’ principle could be strengthened. 
Cyprus  is  not  advanced  in  the  implementation  of 
such taxes and does not have any of the six main 
types  of  pollution  and  resources  taxes.  There  is 
therefore  scope  to  implement  taxes  on  NOx 
into  water, 
emissions,  discharge  of  waste 
incineration  and  landfilling,  fertilisers,  pesticides 
and  plastic  products.  Revenues  from  property 
taxes were relatively low as a percentage of both 
GDP  and  total  tax  revenue.  Revenues  from 

recurrent  property  taxes,  which  are  among  the 
taxes least detrimental to growth, were among the 
lowest in the EU (as a percentage of GDP). In fact, 
Cyprus  currently  has  no  immovable  property  tax. 
Tax  revenues  could  therefore  be  increased  by 
making  greater  use  of  currently  underused  tax 
types, such as property taxes. 

Cyprus’s  Recovery  and  Resilience  Plan  (RRP) 
includes  measures  to  make  Cyprus’s  tax 
system greener. The green taxation reform aims 
to  address  environmental  challenges  related  to 
climate  change,  air  pollution,  waste  management, 
water  pollution  and  water  management.  The 
reform consists of the introduction of a carbon tax 
(initially on fuels), a levy on water and a charge on 
household/landfill waste. The reform is expected to 
be  accompanied  with  compensatory  measures  to 
alleviate  the  impact  on  affected  sectors.  The 
government aims to ensure that the tax reform is 
budget-neutral,  with  revenue  generated  from 
green  taxes  being  returned  to  households  and 
businesses  through  reimbursement  or  incentives, 
such  as  subsidies  for  electric  vehicles  or  support 
for the adoption of renewable energy sources like 
photovoltaic systems.  

Cyprus’s  labour  tax  burden  is  relatively  low 
across  the  various  income  levels  and  the 
redistributive  power  of  the  tax  and  benefit 
system is also limited. Graph A19.1 shows that 
the  labour  tax  wedge  for  Cyprus  in  2023  was 

Table A19.1:Taxation indicators (to be updated once new data are available) 

(1) Forward-looking effective tax rate (OECD). 
(2) A higher value indicates a stronger redistributive impact of taxation. 
(*) EU-27 simple average. 
(**) Forecast value for 2022, if available. For more details on the VAT gap, see European Commission, Directorate-General for 
Taxation and Customs Union, 2023, VAT gap in the EU, https://data.europa.eu/doi/10.2778/911698. 
For more data on tax revenues as well as the methodology applied, see the Data on Taxation webpage, 
https://ec.europa.eu/taxation_customs/taxation-1/economic-analysis-taxation/data-taxation_en. 
Source: European Commission and OECD 

71 

CY2010202020212022202320102020202120222023Total taxes (including compulsory actual social contributions) (% of GDP)31.733.734.836.537.940.040.440.2Labour taxes (as % of GDP)11.314.214.214.520.021.320.720.3Consumption taxes (as % of GDP)12.211.411.912.610.810.711.211.0Capital taxes (as % of GDP)8.28.18.79.57.18.08.68.9Of which, on income of corporations (as % of GDP)5.55.76.26.62.42.53.03.4Total property taxes (as % of GDP)1.20.70.70.71.92.32.22.1Recurrent taxes on immovable property (as % of GDP)1.00.20.20.21.11.21.11.0Environmental taxes as % of GDP2.72.42.32.22.42.22.32.0Tax wedge at 50% of average wage (Single person) (*)20.922.522.522.533.931.732.131.831.7Tax wedge at 100% of average wage (Single person) (*)21.523.424.625.341.040.139.940.040.2Corporate income tax - effective average tax rates (1) (*)11.311.311.419.519.019.0Difference in Gini coefficient before and after taxes and cash social transfers (pensions excluded from social transfers) (2) (*)5.16.36.55.58.68.18.27.9Outstanding tax arrears: total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)41.534.240.935.5VAT Gap (% of VAT total tax liability, VTTL)(**)17.58.39.75.4CyprusEU-27Tax structureProgressivity & fairnessTax administration & compliance 
 
 
 
        
 
much lower than the EU average for single people 
at various income levels. Overall, labour taxation is 
less  progressive  in  Cyprus  than  the  EU  average. 
The  limited  progressivity  of  the  tax  and  benefit 
system  is  also  reflected  in  the  fact  that  the  tax 
and benefit system reduced income inequality (as 
measured  by  the  Gini  coefficient)  below  the  EU 
average in 2022 (Table A19.1). The tax and benefit 
system  reduced  the  Gini  coefficient  by  5.5 pps, 
while it was 7.9 pps for the EU as a whole in 2022. 

Graph A19.1: Tax wedge for single and second 
earners as a % of total labour costs, 2023 

Data suggests that Cyprus’s tax system may 
be used for ATP. For instance, graphs A19.2 and 
A19.3 show that outgoing dividends as a share of 
GDP,  as  well  as  FDI  stock  held  through  SPEs,  are 
significantly  higher 
the  EU  average. 
than 
Historically,  Cyprus  has  also  attracted  Russian 
financial  flows,  but  this  has  changed  following 
Russia’s war of aggression against Ukraine. 

Graph A19.2: Total outgoing dividends by Member 
State as % of GDP, 2022 

The second earner tax wedge assumes a first earner at 100% 
of the average wage and no children. For the methodology of 
the tax wedge for second earners, see OECD, 2016, Taxing 
Wages 2014-2015. 
Source: European Commission 

fairly  well  on 

Cyprus  performs 
tax 
compliance  and  administration.  Outstanding 
tax  arrears  decreased  from  41.5%  of  total  net 
revenue  in  2020  to  34.2%  in  2021.  This  is  just 
below  the  EU-27  average  of  35.5%.  The  VAT  gap 
(the gap  between  revenues  actually  collected  and 
the theoretical tax liability) decreased from 17.5% 
to  8.3%  but  is  above  the  EU-wide  gap  of  5.4%. 
However, Cyprus was among the worst performers 
in the EU for on-time filing of both corporate and 
personal income tax returns in 2020.  

Cyprus  has  made  progress  with 
the 
digitalisation  of  its  tax  administration  as 
part  of  its  RRP.  In  2023,  Cyprus  put  into 
operation an integrated tax administration system 
(the  ‘Tax  For  All’  portal),  which  has  modernised 
taxpayers’  interaction  with  the  tax  administration. 
The  new portal  is  a  comprehensive  system  of  tax 
administration which aims to replace the previous 
non-linked  systems  and  to  provide  the  tax 
authorities  with  a  single  unified  picture  of 
taxpayers. It will facilitate consolidated monitoring, 
assessment and inspection of taxpayers. 

Source: European Commission 

royalty  payments 

The  Cypriot  RRP  also  contains  measures  to 
address  ATP.  Cyprus  adopted  a  law  in  2021  to 
tackle  ATP  (a) by  imposing  withholding  tax  on 
interest,  dividend  and 
to 
jurisdictions  included  in  Annex  I  to  the  Council 
list  of  non-
conclusions  on  the  revised  EU 
cooperative jurisdictions for tax purposes; (104) and 
(b) by establishing that companies are taxable not 
only  when  they  are  managed  and  controlled  in 
Cyprus,  but  also  when  only  registered  in  the 
country.  By  the  end  of  2024,  the  withholding  tax 
should  be  extended  to  include  such  payments  to 
low-tax jurisdictions, and Cyprus should assess the 
effectiveness  of  the  overall  set  of  measures 
related to ATP via an independent evaluation. This 
evaluation shall lead to further policy action.  

Despite  this  recent  progress,  tackling  ATP 
remains  a  priority.  Data  indicating  ATP  and 
several  features  of  the Cyprus  tax  system  should 
be  closely  monitored.  For  instance,  Cyprus  has  a 
residence-by-investment scheme and exempts the 
income  of  so-called  'non-domiciled'  residents  (tax 
residency in Cyprus for less than 17 of the 20 past 
years).  Cyprus  also  has  preferential  tax  rules  for 
foreign-sourced  pension  income,  as  well  as  for 
workers coming from abroad. 

(104) EU list of non-cooperative jurisdictions for tax purposes - 

Consilium (europa.eu) 

72 

22.522.525.331.922.5152025303540455050100150Tax wedge, % of total labour costsEarnings as % of the average wageSingle earner - CYSingle earner - EU averageSecond earner -  CYSecond earner -  EU average0%100%200%300%400%500%MTLUCYIENLHUCZBELTEEFIBGSELVPTSISKRODKHRPLFRELESDEITAT 
       
  
 
ANNEX 20: TABLE WITH ECONOMIC AND FINANCIAL INDICATORS 

Table A20.1:Key economic and financial indicators 

(1) domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU foreign-
controlled branches. 
(2) NIIP excluding direct investment and portfolio equity shares. 
Source: Eurostat and ECB as of 2024-5-17, where available; European Commission for forecast figures (Spring forecast 2024). 

73 

2004-072008-122013-2020212022202320242025Real GDP (y-o-y)4.90.13.09.95.12.52.82.9Potential growth (y-o-y).2.12.13.63.44.13.73.5Private consumption (y-o-y)6.20.42.25.68.64.22.21.9Public consumption (y-o-y)2.72.43.17.52.71.62.51.4Gross fixed capital formation (y-o-y)10.0-8.18.50.08.319.53.65.1Exports of goods and services (y-o-y)3.51.47.321.613.6-1.53.23.3Imports of goods and services (y-o-y) 5.9-0.18.115.418.35.13.22.9Contribution to GDP growth:Domestic demand (y-o-y)6.5-1.13.44.97.16.82.62.5Inventories (y-o-y)-0.20.40.20.21.41.90.20.0Net exports (y-o-y)-1.40.6-0.54.9-3.4-6.30.00.3Contribution to potential GDP growth:Total Labour (hours) (y-o-y).0.90.81.31.21.61.41.2Capital accumulation (y-o-y).1.40.71.21.31.81.71.7Total factor productivity (y-o-y).-0.30.61.10.90.70.60.6Output gap3.80.3-2.02.54.22.61.60.9Unemployment rate4.67.011.27.56.86.15.65.4GDP deflator (y-o-y)3.02.0-0.12.76.14.73.72.4Harmonised index of consumer prices (HICP, y-o-y)2.12.7-0.32.38.13.92.42.1HICP excluding energy and unprocessed food (y-o-y)1.01.7-0.11.05.34.42.62.3Nominal compensation per employee (y-o-y)3.72.80.14.31.15.63.91.5Labour productivity (real, hours worked, y-o-y)2.10.21.21.90.90.70.70.5Unit labour costs (ULC, whole economy, y-o-y)2.32.8-0.4-2.1-0.94.62.50.1Real unit labour costs (y-o-y)-0.70.7-0.3-4.6-6.6-0.1-1.2-2.2Real effective exchange rate (ULC, y-o-y)0.70.5-1.9-2.0-4.2-1.8-1.9-2.2Real effective exchange rate (HICP, y-o-y)0.20.2-1.10.2-1.80.7..Net savings rate of households (net saving as percentage of net disposable income)1.5-0.5-3.47.90.4...Private credit flow, consolidated (% of GDP)27.918.74.76.5-3.9...Private sector debt, consolidated (% of GDP)244.4308.0305.9242.1213.4...of which household debt, consolidated (% of GDP)88.5116.9106.979.971.7...of which non-financial corporate debt, consolidated (% of GDP)155.9191.1198.9162.2141.6...Gross non-performing debt (% of total debt instruments and total loans and advances) (1).8.925.04.73.8...Corporations, net lending (+) or net borrowing (-) (% of GDP)-9.92.32.0-3.0-4.8-6.9-6.7-6.6Corporations, gross operating surplus (% of GDP)23.720.021.221.422.521.621.821.9Households, net lending (+) or net borrowing (-) (% of GDP)-7.6-5.5-4.2-0.5-5.4-8.0-7.2-6.8Deflated house price index (y-o-y)6.8-4.91.2-4.2-3.6-0.2..Residential investment (% of GDP)10.98.25.68.38.68.6..Current account balance (% of GDP), balance of payments-6.2-7.7-4.7-6.1-7.9-12.1-11.2-10.8Trade balance (% of GDP), balance of payments-2.2-6.40.84.00.3-0.9..Terms of trade of goods and services (y-o-y)-0.5-0.40.20.9-0.25.30.30.4Capital account balance (% of GDP)0.10.30.20.30.20.0..Net international investment position (% of GDP)-68.2-123.4-137.1-104.0-96.2-96.4..NENDI - NIIP excluding non-defaultable instruments (% of GDP) (2).-69.0-192.3-2.239.942.1..IIP liabilities excluding non-defaultable instruments (% of GDP) (2).621.7585.0361.2277.9255.8..Export performance vs. advanced countries (% change over 5 years)..12.438.024.823.2..Export market share, goods and services (y-o-y)-5.8-4.25.53.5-5.5-2.6-0.3-0.4Net FDI flows (% of GDP).9.09.1-31.1-30.4-12.6..General government balance (% of GDP)-0.9-4.1-2.3-1.82.73.12.92.9Structural budget balance (% of GDP)..1.4-3.20.61.82.12.4General government gross debt (% of GDP)60.460.4102.799.385.677.370.665.4forecast 
 
 
 
  
 
 
ANNEX 21: DEBT SUSTAINABILITY ANALYSIS 

This  annex  assesses  fiscal  sustainability 
risks for  Cyprus  over  the  short, medium and 
long  term. 
It  follows  the  multi-dimensional 
approach  of  the  European  Commission’s  2023 
Debt Sustainability Monitor, updated based on the 
Commission 2024 spring forecast. 

1  –  Short-term  risks  to  fiscal  sustainability 
low.  The  Commission’s  early-detection 
are 
indicator  (S0)  does  not  point  to  major  short-term 
fiscal  risks  (Table A21.2) (105).  Government  gross 
financing  needs  are  expected  to  decrease  to 
around  6%  of  GDP  on  average  over  2024-2025 
(Table  A21.1, Table 1) (106).  Financial  markets’ 
perceptions  of  Cyprus  are  favourable  as  its  debt 
rating continued to be upgraded in 2023. The main 
four  credit-rating  agencies  now  rate  Cyprus’ 
sovereign  debt  at  investment  grade  (two  notches 
within  the  investment-grade  area  with  a  positive 
or stable outlook).  

2  –  Medium-term  fiscal  sustainability  risks 
are medium.   

is 

ratio 

expected 

The DSA baseline shows that the government 
debt 
decline 
substantially to reach around 38% of GDP in 
2034 (Graph 1, Table 1) (107). The debt reduction is 
supported  by  the  assumed  sizeable  structural 
primary  surplus  (excluding  changes  in  cost  of 
ageing) of 3.5% of GDP as of 2024. This appears 

to 

ambitious  compared  with  past  performance, 
suggesting  limited  fiscal  room  of  manoeuvre (108). 
The  debt  decline  also  benefits  from  a  still 
favourable but declining snowball effect of around 
1  pp.  of  GDP  annually  on  average  over  2025-
2034,  which  is  also  supported  by  the  expected 
impact on potential growth of Next Generation EU 
(NGEU).  

four 

The  baseline  projections  are  stress-tested 
against 
deterministic 
alternative 
scenarios to assess the impact of changes in 
key  assumptions  relative  to  the  baseline 
(Graph 1).  Under  the  historical  structural  primary 
balance  (SPB)  scenario  (i.e.  the  SPB  returns  to  its 
historical  15-year  average  of  1.5%  of  GDP)  the 
debt  ratio  would  be  about  15  pps.  of  GDP  higher 
than  under  the  baseline  in  2034.  Under  the 
adverse  interest-growth  rate  differential  scenario 
(i.e.  the  interest-growth  rate  deteriorates by  1  pp. 
compared with the baseline), the debt ratio would 
be higher than under the baseline by 4 pps. of GDP 
in  2034.  Under  the  financial  stress  scenario  (i.e. 
interest  rates  temporarily 
increase  by  1  pp. 
compared  with  the  baseline)  government  debt 
ratio  would  be  almost  unchanged  compared  with 
the  baseline.  Finally,  under  the  lower  structural 
the  projected 
primary  balance  scenario 
cumulative  improvement  in  the  SPB  over  2023-
2024  is  halved)  the  debt  ratio  would  be  higher 
than under the baseline by about 1 pp. in 2034. 

(i.e. 

(105) The S0 is a composite indicator of short-term risk of fiscal 
stress. It is based on a wide range of fiscal and financial-
competitiveness indicators that have proven to be a good 
predictor of emerging fiscal stress in the past.  

(106) Gross financing needs are determined in line with the 

methodology described in the European Commission’s 2023 
Debt Sustainability Monitor, updated based on the 
Commission 2024 spring forecast 

(107) The assumptions underlying the Commission’s ‘no-fiscal 

policy change’ baseline include in particular: (i) a structural 
primary surplus, before ageing costs, of 3.5% of GDP from 
2024 onwards; (ii) inflation converging linearly towards the 
10-year forward inflation-linked swap rate 10 years ahead 
(which refers to the 10-year inflation expectations 10 years 
ahead); (iii) the nominal short- and long-term interest rates 
on new and rolled over debt converging linearly from current 
values to market-based forward nominal rates by T+10; (iv) 
real GDP growth rates from the Commission 2024 spring 
forecast, followed by the EPC/OGWG ‘T+10 methodology 
projections between T+3 and T+10 (average of 1.9%); (v) 
ageing costs in line with the 2024 Ageing Report (European 
Commission, Institutional Paper 279, April 2024). For 
information on the methodology, see the 2023 Debt 
Sustainability Monitor (European Commission, Institutional 
Paper 271, March 2024). 

These 

The  stochastic  projections  indicate  medium 
risk,  pointing  to  the  moderate  sensitivity  of 
these  projections  to  plausible  unforeseen 
events  (109). 
simulations 
indicate a 9% probability that the debt ratio will be 
higher  in  2028  than  in  2023,  implying  limited 
risks.  At 
the  uncertainty 
surrounding  the  baseline  debt  projections  is  high: 
the  difference  between  the  10th  and  90th  debt 
distribution percentiles points) is high, as there is a 

the  same 

stochastic 

time, 

(108) This assessment is based on the consolidation space 

indicator, which measures the frequency with which a tighter 
fiscal position than assumed in a given scenario has been 
observed in the past. Technically, this consists of looking at 
the percentile rank of the projected SPB within the 
distribution of SPBs observed in the past in the country, 
taking into account all available data from 1980 to 2022. 

(109) The stochastic projections show the joint impact on debt of 

10000 different shocks affecting the government’s 
budgetary position, economic growth, interest rates and 
exchange rates. This covers 80% of all the simulated debt 
paths and therefore excludes tail events. 

74 

 
 
 
 
 
 
interest 

costs  and 

4  –  Finally,  several  additional  risk  factors 
need to be considered in the assessment.  On 
the one hand, risk-increasing factors are related to 
heightened  borrowing 
increased 
exposure  to  interest  rate  fluctuations  in  light  of 
rate  environment,  Cyprus’ 
the  high 
negative net international investment position and 
risks  to  the  budget  balance  due  to  higher  public 
wage and social spending as well as a number of 
government-sponsored housing schemes, including 
the  mortgage-to-rent  scheme  offered  through 
KEDIPES. On the other hand, risk-mitigating factors 
include  the  lengthening  of  debt  maturities  in 
recent  years,  substantial  cash  reserves,  credit 
rating upgrades, relatively stable financing sources 
(with  a  diversified  investor  base),  the  currency 
denomination of debt, the low share of short-term 
public debt and the phasing out of energy-related 
support measures.  

80%  probability  that  the  debt  ratio  will  lie  in  a 
large  range  of  45  pps.  of  GDP  in  five  years’  time 
(Graph 2).  

3  –  Long-term  fiscal  sustainability  risks 
appear overall low. This assessment is based on 
the  combination  of  two  fiscal  gap  indicators, 
capturing  the  required  fiscal  effort  to  stabilise 
debt  (S2  indicator)  and  bring  to  60%  of  GDP  (S1 
indicator) over the long-term (110). This assessment 
is  driven  by  the  very  favourable  initial  budgetary 
position,  which  is,  however,  (partly)  offset  by  the 
projected  increase  in  ageing  costs.  These  results 
are  conditional  on  the  country  maintaining  a  high 
structural primary surplus over the long term. 

indicator  points  to 

low  fiscal 
The  S2 
sustainability  risks.  The  indicator  shows  that, 
relative  to  the  baseline,  the  SPB  would  only  need 
to  improve  by  0.7  pp.  of  GDP  in  2025  to  ensure 
debt  sustainability  over  the  long  term.  This  result 
is  underpinned  by  significant  ageing  costs 
(contribution of 3.7 pps. of GDP), which are partly 
offset  by  a  very  favourable  initial  budgetary 
position  (-3  pps.  of  GDP).  Ageing  costs  are 
primarily driven by the projected increase of public 
pension 
of  GDP) 
expenditure 
(Table A21.1, Table 2).  

pps. 

(3.3 

The  S1  indicator  also  points  to  low  fiscal 
sustainability risks. The S1 indicator signals that 
no  consolidation  effort  is needed  to  bring  debt  to 
60% of GDP by 2070. This result is driven by the 
very 
position 
(contribution  of  -3.5  pps.  of  GDP),  which  is  only 
partly offset by ageing costs (2.8 pps. of GDP) and 
the  debt 
(0.2  pp.  of  GDP) 
(Table A21.1, Table 2).  

requirement 

favourable 

budgetary 

initial 

(110)The S2 fiscal sustainability indicator measures the 

permanent SPB adjustment in 2024 that would be required 
to stabilise public debt over an infinite horizon. It is 
complemented by the S1 indicator, which measures the 
permanent SPB adjustment in 2024 to bring the debt ratio to 
60% by 2070. The impact of the drivers of S1 and S2 may 
differ due to the infinite horizon component considered in the 
S2 indicator. For both the S1 and S2 indicators, the risk 
assessment depends on the amount of fiscal consolidation 
needed: ‘high risk’ if the required effort exceeds 6 % of GDP, 
‘medium risk’ if it is between 2% and 6% of GDP, and ‘low 
risk’ if the effort is negative or below 2% of GDP. The overall 
long-term risk classification combines the risk categories 
derived from S1 and S2. S1 may notch up the risk category 
derived from S2 if it signals a higher risk than S2. See the 
2023 Debt Sustainability Monitor for further details. 

75 

 
 
Table A21.1:Debt sustainability analysis - Cyprus 

Source: Commission services 

Table A21.2:Heat map of fiscal sustainability risks - Cyprus 

Source: Commission services. 

76 

BaselineHistorical SPBLower SPBAdverse 'r-g'Financial stressOverallLOWLOWLOWLOWLOWMEDIUMDebt level (2034), % GDP37.652.638.741.537.7Debt peak year20242024202420242024Fiscal consolidation space20%31%20%20%20%Probability of debt ratio exceeding in 2028 its 2023 level9%Difference between 90th and 10th percentiles (pps. GDP)44.7Source: European Commission (for further details on the Commission's multidimensional approach, see the 2023 Debt Sustainability Monitor)(1)Debtlevelin2034.Green:below60%ofGDP.Yellow:between60%and90%.Red:above90%.(2)Thedebtpeakyearindicateswhetherdebtisprojectedtoincreaseoveralloverthenextdecade.Green:debtpeaksearly.Yellow:peaktowardsthemiddleoftheprojectionperiod.Red:latepeak.(3)Fiscalconsolidationspacemeasurestheshareofpastfiscalpositionsinthecountrythatweremorestringentthantheoneassumedinthebaseline.Green:highvalue,i.e.theassumedfiscalpositionisplausiblebyhistoricalstandardsandleavesroomforcorrectivemeasuresifneeded.Yellow:intermediate.Red:low.(4)Probabilityofdebtratioexceedingin2028its2023level.Green:lowprobability.Yellow:intermediate.Red:high(alsoreflectingtheinitialdebtlevel).(5)thedifferencebetweenthe90thand10thpercentilesmeasuresuncertainty,basedonthedebtdistributionunder10000differentshocks.Green,yellowandredcellsindicateincreasinguncertainty.(Forfurtherdetailson the Commission's multidimensional approach, see the 2023 Debt Sustainability Monitor)LOWMEDIUMLOWLOWLOWShort termMedium term - Debt sustainability analysis (DSA)Long termOverall                               (S0)Overall Deterministic scenariosStochastic projectionsS2S1Overall(S1 + S2)Table 1. Baseline debt projections20212022202320242025202620272028202920302031203220332034Gross debt ratio (% of GDP)99.385.677.370.665.860.957.153.650.147.044.241.739.637.6Changes in the ratio-15.7-13.7-8.3-6.7-4.8-4.9-3.9-3.5-3.5-3.1-2.8-2.5-2.2-2.0of whichPrimary deficit0.1-4.2-4.5-4.3-3.7-3.2-2.8-2.5-2.7-2.4-2.2-2.0-1.7-1.6Snowball effect-11.4-8.7-4.4-3.4-2.4-1.6-1.0-0.9-0.9-0.7-0.6-0.5-0.5-0.4Stock-flow adjustments-4.4-0.70.61.01.30.00.00.00.00.00.00.00.00.0Gross financing needs (% of GDP)6.04.52.75.26.86.86.56.65.84.94.92.32.22.1S1S2Overall index  (pps. of GDP)-0.50.7of which Initial budgetary position-3.5-3.0Debt requirement0.2Ageing costs2.83.7of which    Pensions2.63.3     Health care0.50.7     Long-term care0.10.1Education-0.3-0.4Table 2. Breakdown of the S1 and S2 sustainability gap indicators02040608010012020212022202320242025202620272028202920302031203220332034Graph 1. Deterministic debt projections Historical SPB scenarioLower SPB scenarioFinancial stress scenarioAdverse 'r-g' scenarioBaseline% of GDPp10p20p40p60p80p903040506070809010011020212022202320242025202620272028% of GDPGraph 2. Stochastic debt projections 2024-2028MedianBaseline