COMMISSION STAFF WORKING DOCUMENT 2025 Country Report - Cyprus Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Cyprus
Date: 2025-06-04
Institutions: European Commission, Reform and Investment Task Force
Subjects: Cyprus, budget policy, economic policy, economic recovery, economic reform, employment policy, energy policy, labour market, social policy, stability pact

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 4.6.2025  SWD(2025) 213 final  COMMISSION STAFF WORKING DOCUMENT 2025 Country Report - Cyprus Accompanying the document Recommendation for a COUNCIL RECOMMENDATION  on the economic, social, employment, structural and budgetary policies of Cyprus {COM(2025) 213 final}  
 
 
 
 
 
ECONOMIC DEVELOPMENTS AND KEY POLICY 
CHALLENGES 

Robust economic growth is 
expected to continue 

fragile 

Economic growth  remains  strong,  despite 
a 
international  environment. 
Cyprus’s  economy  has  rebounded  since  the 
pandemic,  with  real  GDP  in  2024  standing 
almost  30%  above  its  level  of  2020  and 
annual  real  GDP  growth  averaging  4.3%  per 
year. Growth was driven by domestic demand, 
with  particularly  strong  growth  in  private 
consumption (around 28% between 2020 and 
2024).  Job  creation  has  continued  at  a 
sustained  pace:  unemployment  fell  to  4.9% 
while  the  employment  rate  reached  79.8%  in 
2024.  Net  exports 
fluctuated  between 
negative  and  positive  contributions (1),  but  in 
2024 turned strongly positive thanks to robust 
surpluses  in  ICT,  tourism  and  sea  transport. 
This  strong  growth  coincided  with  a  steady 
stream of foreign-owned companies relocating 
offices  and  workers  to  Cyprus,  temporarily 
fuelling domestic demand, but also the current 
account deficit (see below), although a gradual 
in  recent 
slow-down  has  been  observed 
quarters. 

to 

Growth  is  expected  to  remain  strong  in 
the 
the  coming  years.  According 
Commission’s Spring 2025 Economic Forecast, 
real GDP is expected to increase by 3.0% and 
2.5%  in  2025  and  2026  respectively.  Despite 
uncertainty  in  global  trade,  the  economy  is 
solid  export 
expected 
performance,  bolstered  by  a 
favourable 
outlook  for  tourism  and  continued  rapid 
growth  in  ICT.  At  the  same  time,  employment 
growth  is  expected  to  slow  to  1.3%  in  2025 
and  1.1%  in  2026.  Private  consumption  is 

to  maintain 

its 

(1)  Figures not corrected for the impact of ships and 

aircrafts. 

private 

expected  to  cool  off  as  purchasing  power 
grows.  Public  and 
investment, 
particularly  in  the  construction  sector,  will 
continue  to  support  growth,  thanks  in  part  to 
actions  financed  under  the  recovery  and 
resilience plan.  

The  fiscal  situation  and  outlook  remain 
robust. The general  government budget hit a 
surplus  of  4.3%  of  GDP  in  2024,  while  debt 
has  continued  to  fall,  reaching  65.0%  of  GDP 
by  the  end  of  2024.  Fiscal  performance  is 
mainly fuelled by solid revenue from corporate 
income 
tax  as  well  as  social  security 
contributions.  Fiscal  performance  is  expected 
to  remain  positive  with  general  government 
surpluses  reaching  3.5%  and  3.4%  of  GDP  in 
2025  and  2026  respectively.  The  debt  is 
projected  to  fall  quickly  and  is  forecast  to 
reach 51.9% of GDP by the end of 2026. 

by 

driven 

higher 

Net  expenditure  growth 
is  projected 
above  the  path  recommended  by  the 
Council. In 2024, net expenditure (2) in Cyprus 
grew  by  2.9%  (see  Annex  1).  This  increase  is 
intermediate 
mainly 
consumption 
In  2024, 
this 
discretionary  revenue  measures  of  0.1%  of 
GDP  were  added  to  net  expenditure  growth, 
whereas in 2023 they were deducted for 0.3% 
of GDP. In 2025, net expenditure is forecast by 
the  Commission  to  grow  by  7.3%,  which  is 
rate 
above 
The 
recommended 

the  maximum 
by 

growth 
Council (3). 

year. 

the 

in 

(2)  Net expenditure is defined in Article 2(2) of Regulation 
(EU) 2024/1263 as government expenditure net of (i) 
interest expenditure, (ii) discretionary revenue 
measures, (iii) expenditure on programmes of the Union 
fully matched by revenue from Union funds, (iv) 
national expenditure on co-financing of programmes 
funded by the Union, (v) cyclical elements of 
unemployment benefit expenditure, and (vi) one-off 
and other temporary measures. 

(3)  Council Recommendation of 21 January 2025 

endorsing the national medium-term fiscal-structural 

2 

 
 
 
 
 
cumulative  growth  rate  of  net  expenditure  in 
2024 and 2025 taken together is projected at 
10.4%,  which  is  above  the  maximum  rate 
recommended  by  the  Council.  Expenditure 
growth  above  the  Council  recommendation  in 
is  mainly  driven  by  strongly 
both  years 
growing 
employees, 
for 
intermediate  consumption  as  well  as  social 
in  kind.  This  development  has 
transfers 
however  to  be  contrasted  in  the  context  that 
at  the  same  time  Cyprus  is  achieving  high 
government  surpluses  and  a  fast-declining 
government debt-to-GDP ratio. 

compensation 

offers 

Cyprus’s tax system is characterised by a 
strong  reliance  on  corporate  taxation, 
which  plays  an  outsized  role  in  public 
revenue 
a 
collection.  Cyprus 
favourable  corporate  tax  rate  (12.5%)  and 
collects one of the highest shares of corporate 
tax  revenues  among  EU  Member  States.  This 
represents  more  than  18%  of  total  tax 
revenue  of  Cyprus 
(vs.  EU  8%)  and 
corresponds  to  more  than  6%  of  the  GDP  of 
Cyprus (twice as large the EU average, 3.2% of 
GDP)  in  2023.  The  tax  regime  and  targeted 
incentives for foreign investors have attracted 
companies  (see  also  below)  that  register  as 
taxpayers  in  Cyprus.  Accordingly,  while  these 
high  corporate  tax  revenues  support  the 
budget  surplus,  they  may  also  make  the 
budget  balance  more  vulnerable  to  external 
shocks.  Since  Cyprus  imposes  low  or  zero 
taxes  on  other  potentially  stable  revenue 
sources—such  as  immovable  property,  capital 
transfers,  and  pollution  (see  also  Annex  2  on 
Taxation)—its  current  tax  structure  remains 
relatively concentrated and less diversified. 

improvement  in  recent  years,  declining  by 
almost  50 pp  since  its  peak  in  2020.  It  is 
expected  to  fall  below  the  Treaty  value  of 
60% of GDP by  2026. Private debt has fallen 
from its record high of 350% almost a decade 
ago,  to  183%  of  GDP  as  of  September 2024. 
Although  originally 
triggered  by  active 
deleveraging  efforts,  the  main  driver  for  this 
has been the high nominal GDP growth seen in 
recent  years.  Given  their  significant  external 
component, 
in  public  and 
private debt have also contributed to reducing 
external  sector  debt.  As  a  result,  the  net 
international  investment  position  is  projected 
to  improve  to  80.2%  by  the  end  of  2024,  a 
notable improvement from its all-time low of -
164%  in  2014.  In  aggregate  terms,  this 
improvement  was  driven  by  strong  nominal 
GDP  growth  and  positive  valuation  effects, 
despite  a  persistent  current  account  deficit. 
The current account deficit has been primarily 
financed by foreign direct investment inflows. 

improvements 

Ongoing efforts to transform and 
diversify the economy are showing 
results 

in  the  EU.  By 

is  the  most  service-intensive 
Cyprus 
its 
economy 
strategic  location,  highly  skilled  workforce, 
favourable  tax  regime,  and  stable  political 
framework, Cyprus has gained a competitive  

leveraging 

Vulnerabilities  relating  to  external  and 
private  debt  remain  but  are  steadily 
receding,  while  government  debt 
is 
rapidly  falling.  Long-standing  challenges  in 
this  area  were  discussed  as  part  of  an  in-
depth review carried out earlier this year under 
the  macroeconomic  imbalance  procedure (4). 
considerable 
Public 

shown 

debt 

has 

plan of Cyprus (OJ C, C/2025/639, 10.2.2025, ELI: 
http://data.europa.eu/eli/C/2025/639/oj). 

(4)  See ‘In-depth review of Cyprus’ 2025 – Institutional 

Paper 311, May 2025, Brussels. 

3 

 
 
Box 1: 

UN Sustainable Development Goals (SDGs) 

Cyprus  is  improving  on  all  SDGs  (apart  from  SDGs  3,  4,  5,  11  and  17).  Cyprus  is 
catching up with the EU average on some SDGs related to fairness (SDGs 1, 3 and 10) 
and environmental sustainability (SDGs 6, 14 and 15) but is moving away from the EU 
average  on  all  other  SDGs,  including  those  related  to  productivity  (SDGs  4,  8  and  9) 
and macroeconomic stability (SDGs 8, 16, 17). 

of 

the 

advantage  in  services,  as  the  small  domestic 
market  does  not  support  an 
industrial 
economy.  Domestic 
deepening 
production  predominantly  focuses  on  trade, 
sea  freight  transport,  financial  services  and 
tourism,  which  employ  more  than  half  of  the 
workforce.  Cyprus  derives  over  83%  of  total 
gross  value  added  from  services,  the  largest 
share of any EU country. 

is  currently 
Cyprus’s  business  model 
undergoing transformation through policy 
initiatives  to  attract  foreign  investment 
in  new  economic  sectors.  To  diversify 
Cyprus’s service production, reduce its reliance 
on  a  limited  range  of  service  exports,  and  to 
lessen  its  vulnerability  to  external  shocks,  the 
Cypriot  authorities  have  introduced  incentives 
aimed  at  making  Cyprus  an  international 
business 
administrative 
incentives  have  been  introduced to encourage 
multinational  companies  to  relocate  their 
headquarters and workforce, in particular tech 
companies.  As  a  result,  Cyprus  has  now 
become more attractive to foreign investment. 

hub. 

and 

Tax 

resulted 

domestic 

low  capital 

intensity  and 

A  growing  ICT  sector  is  contributing  to 
output. 
productivity 
and 
Diversification  has 
in  economic 
activity  gradually  moving  away  from  sectors 
with 
limited 
innovation uptake, and towards the ICT sector, 
boosting  aggregate  productivity  growth  (see 
Graph  1.2  below).  As  a  result,  by  the  end  of 
2024,  ICT  accounted  for  10%  of  output  (see 
Graph 1.1 above) and a third of total exports – 
doubling 
in  a  decade.  However,  sizeable 
less 
investment  continues 
productive  sectors,  such  as  housing,  which, 
combined with persistent low R&D investment 
across the economy, is holding back aggregate 
productivity growth. 

flow 

into 

to 

Graph 1.1: Breakdown of GVA by sector. 

Notes: (1) horizontal bars in green (red) indicate an 
improvement (deterioration) between Q1-11 and Q4-24.  
NACE sectors: (A) agriculture, (C) manufacturing, (B_D_E) 
other industry, (F) construction, (G_I) trade & 
accommodation, (J) ICT, (K) finance & insurance, (L) real 
estate, (M_N) prof. & admin. services, (O_Q) public admin., 
education & health, (R_T) art & recreation. 
Source: Eurostat.  

Graph 1.2: Cyprus - real GVA per employee. 

Notes: (1) the shaded area represents the range of all 
NACE sectors except ICT. 
Source: Eurostat and Commission’s calculations.  

4 

0%5%10%15%20%25%30%G_I: TRADEO_Q: PUB. ADM.J: ICTM_N: PROF. SRV.K: FINANCIAL SRV.L: REAL EST.F: CONST.C: MANUF.R_T: ARTSB_D_E: INDU.A: AGRI.CY - 2011CY - 2024EU - 202450751001251501752002252502752011q12011q42012q32013q22014q12014q42015q32016q22017q12017q42018q32019q22020q12020q42021q32022q22023q12023q42024q3G_I: tradeJ: ictK: financial srv.L: real est.M_N: prof. srv.O_Q: pub adm.ALL: total economy 
  
 
   
 
 
Competitiveness and sustainable 
growth face further challenges 

Despite  recent  progress,  there  are  still 
challenges  to  address  in  critical  fields 
such  as  innovation,  access  to  finance, 
energy,  climate  adaptation,  labour  and 
skills  shortages.  In  particular,  despite  the 
growing  presence  of  tech firms  in  Cyprus,  the 
country’s innovation output remains weak (see 
Annex 2).  Access  to  finance  is  still  a  problem 
for companies, with bank loans remaining  

other 

inaccessible  or  expensive  for  new  companies, 
and  equity  finance  still  underdeveloped  (see 
Annex 2).  The  energy  sector  faces  challenges 
in  diversifying  its  energy  mix,  developing 
countries,  and 
connections  with 
increasing  the  capacity  of  the  electricity  grid. 
At  the  same  time,  climate-related  risks  such 
as  wildfires,  floods  and  water  scarcity  are 
worsening, threatening key economic activities 
such as tourism and agriculture (see Annex 3). 
Additionally,  the  domestic  labour  market  is 
struggling 
the 
necessary  qualifications  and  skills,  while  the 
ageing  population  is  only  expected  to  amplify 
these shortages (see Annexes 4 and 10). 

to  supply  workers  with 

Box 2: 

 Barriers to private and public investment 

Investment accounts for a large share of domestic demand but is primarily concentrated 
in less productive activities. The economy boasts a sizeable aggregate investment rate (see In-
depth Review of Cyprus, 2025), however this mostly comes from households and concerns property 
and  housing  (see  Graph  1.1).  By  contrast,  according  to  Eurostat  data,  the  share  of  business 
investment in GDP is the third lowest in the EU after Luxembourg and Greece (8.4% compared to an 
EU average of 13% in 2023). This potentially points to the following structural barriers that hinder 
corporate economic activity: 

• 

Persistent barriers  to finance for Cypriot businesses. Strict bank lending  requirements, an 
underdeveloped capital market, low equity financing, limited access to alternative financing 
instruments  (abroad)  and  limited  institutional  and  household  investment  are  stifling 
funding opportunities, notably for start-ups and scale-ups. 

•  Business  environment.  Cyprus  has  inefficient  regulatory  processes  which  are  hindering 

simplification efforts and slowing down private investments. 

• 

Labour and skills shortages.  The low number of  ICT and  science, technology, engineering, 
and mathematics graduates alongside limited enrolment in secondary vocational education 
and training in areas such as healthcare and energy are resulting in workforce shortages, 
creating barriers to private investment. 

Slow  progress  in  modernising  the  public  service  is  an  additional  obstacle  to  business 
development.  Public  sector  modernisation  could  make  transactions  between  business  and  the 
public sector more efficient, however progress has been slow. This is partly due to Cyprus’s public 
procurement system which is still moving towards a more strategic and professionalised approach. 
Public  investment  projects  are  often  subject  to  delays  or  reversals  creating  negative  spillover 
effects and uncertainty for private investment. Barriers to efficient public spending remain, such as: 

5 

 
 
 
 
 
•  Administrative and capacity constraints. Bureaucratic delays, limited expertise within 
public  administration,  weak  administrative  capacity  of  local  government  and  slow 
procurement processes are hindering the timely execution of projects and fund absorption. 

•  Coordination  and  governance  challenges.  Fragmented  stakeholder  collaboration, 
inadequate  monitoring  and  reporting  mechanisms,  and  delayed  legislative  amendments 
are undermining efficient fund management. 

•  Project  planning  and  implementation  risks.  Weak  initial  planning,  shifting  project 

priorities, and slow execution remain challenges. 

These challenges also act as a bottleneck to the implementation of EU funds. The implementation 
of Cyprus’s RRP is significantly delayed. At present, Cyprus has fulfilled 24% of the milestones and 
targets in its RRP. 

It remains important to accelerate the implementation of the cohesion policy programme. The mid-
term  review  offers  opportunities  to  speed  up  progress  and  better  address  EU  strategic  priorities 
related to competitiveness, defence, housing, water resilience and the energy transition. 

Cyprus has not yet taken advantage of the opportunities provided by the Strategic Technologies 
for Europe Platform under Cohesion Policy and the Recovery and Resilience Facility to reallocate 
resources  towards  this  priority.  However,  Cyprus  can  still  seize  these  opportunities  to  support 
the development or manufacturing of critical technologies in the areas of digital and deep tech, 
clean and resource efficient technologies, and biotechnologies. 

6 

 
 
 
 
 
 
 
 
INNOVATION, BUSINESS ENVIRONMENT AND 
PRODUCTIVITY 

innovation 

supportive 

ecosystem, 

competitiveness 

and 
Cyprus’s 
productivity  are  hindered  by  weaknesses 
in 
an 
the 
insufficiently 
business 
environment  and  difficulties  in  accessing 
funding  opportunities.  Cyprus  has  a 
fragmented  innovation  ecosystem,  lacks  a 
longer-term  R&I  strategy  and  is  characterised 
by  low  levels  of  R&D  intensity.  These  act  as 
barriers  to  the  commercialisation  of  scientific 
output and the creation of linkages to acquire 
and  deepen  know-how  from  foreign  tech 
companies.  Difficulties  remain 
in  securing 
funding 
for  business  development  and 
expansion, with bank loans essentially the only 
source  of  financing.  Furthermore,  delays  in 
aligning corporate governance of state-owned 
enterprises  with  international  standards  are 
slowing  down  efforts  to  modernise  critical 
sectors such as electricity, telecommunications 
and water supply, while regulatory barriers are 
preventing  Cyprus  from  achieving  optimal 
economic 
and 
efficiency across key sectors.  

competitiveness, 

growth, 

Innovation is being held back by 
low R&D spending while the 
fragmented R&I ecosystem lacks 
strong linkages 

Public  and  private  R&D  investment  in 
Cyprus  remains  very  low.  Public  R&D 
intensity  has  stagnated  over  the  past  decade, 
with Cyprus ranking among the bottom five in 
the EU in terms of R&D investment (0.29% of 
GDP  in  2023  compared  to  an  EU  average  of 
0.72%)  (see  Annex  3).  Cyprus  has  a  limited 
number  of  large  enterprises,  a  service-based 
economy  and  a 
relatively  small  budget 
available  for  tax-  and  other  incentives,  which 
are  all  structural  challenges  and  obstacles  to 
technological 
private-sector 

investment 

in 

(1.47%).  Additionally,  access 

innovation  and  knowledge  creation.  Business 
R&D  expenditure  fell  to  0.28%  of  GDP  in 
2023,  a  reduction  of  one-third  compared  to 
2020  and  five  times  lower  than  the  EU 
to 
average 
financing  other  than  bank  loans,  e.g.  equity 
financing  for  innovation  and  venture  capital, 
remains  difficult  for  small  to  medium-sized 
enterprises  and  well  below  the  EU  average 
(see  paragraph  on  access  to  finance  below). 
For these  reasons, Cyprus’s  small to medium-
sized  enterprises  and  public  R&I  institutions 
have  been  actively  seeking  support  under  the 
EU’s  Horizon  Europe  funding  programme, 
reflecting  significant  unmet  national  demand 
for 
the 
country’s  openness,  EU  membership,  and  the 
high  educational  attainment  (5).  Cyprus  has  a 
strong  foundation  in  place  for  advancing 
innovation  and  technology.  Numerous 
ICT 
companies  have  recently  relocated  to  Cyprus, 
presenting  new  opportunities  for  stronger 
synergies  with  local  research  institutions  and 
potentially  generating  significant  spillover 
effects for innovation and the wider economy.  

financing.  Moreover, 

innovation 

output, 

scientific 

Despite low R&D funding, Cyprus boasts a 
but 
strong 
commercialisation  of  research  results 
remains  weak.  More  than  11%  of  Cypriot 
research  publications  ranked  among  the  top 
10%  most  cited  publications  worldwide  in 
2021  (latest  available  data),  compared  to  an 
EU average of 9.6%. However, in 2022, Cyprus 
filed  only  0.7  patent  applications  per  billion 
GDP under the Patent Cooperation Treaty, well 
below the EU average of 2.8 This is partly due 
to  Cyprus’s  innovation  ecosystem  which  is 
fragmented and lacks strong linkages, thereby 
making  it  difficult  for  universities,  start-ups, 
large  companies,  the  government,  possible 

(5)  Educational attainment refers to the highest level of 
education an individual has completed, typically 
measured by degrees, diplomas, or certificates earned. 

7 

 
 
 
to 

innovation 

connect  and 

financing 
intermediators  and 
institutions 
collaborate 
effectively to develop new technologies. At the 
same time, the number of science, technology, 
engineering  and  mathematics  graduates  is 
falling  and  few  researchers  are  employed  in 
the public sector (1.8 researchers per thousand 
economically-active population in 2023 vs. 4.2 
EU  average)  and  private  sector  (1.1  vs.  5.7). 
These present barriers to acquiring knowledge 
and  expanding 
innovation  capability.  The 
Cypriot  R&I  short-term  strategy  currently  has 
indicators,  defined 
no  clear 
targets, impact assessments, and multi-annual 
institutional  funding.  The  legislation  does  not 
lay 
for 
unified 
commercialising research results which covers 
intellectual property rights, start-ups, and spin-
offs.  Moreover,  knowledge  could  be  better 
exploited  through  stronger  linkages  between 
local  Knowledge  Transfer  Offices  (KTOs)  and 
the central KTO.  

input-output 

framework 

down 

a 

Graph 2.1: Global innovation index: business 
sophistication ranking for selected countries 

Source: World Intellectual Property Organisation (WIPO). 

Persistent difficulties in accessing 
finance are hindering innovation, 
start-ups and scale-ups 

and 

potentially 

innovative 
New 
businesses  face  major  difficulties 
in 
securing  finance.  Bank  loans  remain  the 
main  source  of  financing  for  businesses, 
accounting  for  45%  of  the  total  financing 

to 

needs  of  non-financial  corporations,  well 
above  the  EU  average  of  27%(6).  Although 
lending 
non-financial 
established 
corporations  is  expected  to  stay  strong  given 
the  ample  liquidity  of Cyprus’s  banking  sector 
(the  highest  in  the  eurozone),  prospects  for 
new  businesses  to  secure  financing  are 
expected  to  remain  underwhelming.  Strict 
lending  requirements  naturally  imposed  by 
traditional  banks  without  specialised  facilities 
for riskier investments limit the ability of new 
businesses  without  an  established  credit 
history  to  access  loans.  In  addition,  financing 
through 
remains 
underdeveloped,  with Cyprus  recording  one  of 
the  lowest  rates  in  the  EU.  Capital  market 
financing  in  Cyprus  represents  only  9.5%  of 
GDP,  compared  to  an  EU  average  of  nearly 
50%.  Underutilisation  of  alternative  funding 
sources points to a structural weakness within 
Cyprus’s  business  and  financial  systems  to 
establish appropriate linkages to domestic and 
foreign 
all 
categories  of  start-ups,  whether  innovative  or 
not. 

instruments 

financing 

markets 

capital 

for 

Under  the  recovery  and  resilience  plan, 
initiatives are being funded to strengthen 
alternative  financing  opportunities  for 
small  to  medium-sized  enterprises  and 
start-ups,  however  Cyprus’s 
capital 
market  remains  underdeveloped  overall. 
In  December 2023,  the  Cyprus  Equity  Fund 
was launched with the support of the recovery 
and resilience plan and the private sector. It is 
expected to enhance the ecosystem for equity 
and  venture  capital  investments  by  providing 
initial  financing  to  emerging  businesses  and 
direct  investments  to  innovative  companies. 
With funding from the Recovery and Resilience 
Facility,  a  reform  is  underway  to  privatise  the 
Cyprus  Stock  Exchange  and  select  a  strategic 
investor to buy a controlling stake in it, which 
is  expected  to  enhance  capital  market  access 
and  attract  more 
investment.  As  of 
December 2024,  there  were  338  investment 
in  Cyprus.  However,  the 
funds  operating 
overall  private  equity  and  venture  capital 

(6)  Source: Non-financial corporations - statistics on 

financial assets and liabilities - Statistics Explained - 
Eurostat 

8 

32nd31st26th24th28th28th23rd01020304050607080901002016201720182019202020212022CyprusAustriaGreeceIrelandLuxembourgMalta 
   
 
and 

limited 

venture 

household 

value  of  annual 

market  remains  significantly  underdeveloped. 
The 
capital 
investment  stood  at  just  0.02%  of  GDP  in 
December 2023, four times lower than the EU 
average,  while  no  major  private  equity 
investments were recorded in 2022 and 2023. 
The lack of financing options is exacerbated by 
a 
institutional 
participation  in  private  investment.  In  the 
absence  of  an  established  investment  culture 
and 
alternatives, 
households  prefer  to  invest  in  real  estate  or 
hold  their  financial  assets  in  savings  rather 
than other types of investments, with only 3% 
investing  their  financial  assets  in  investment 
funds, as compared to an EU average of 10%. 
At  the  same  time,  Cyprus’s  pension  and 
insurance  funds  are  fragmented,  hindering 
efficient  asset  management  and,  as  a  result, 
limiting financing options for small businesses 
(see Annex 5).  

investment 

reliable 

Removing barriers to boost 
competitiveness and business 
dynamism 

of 

water, 

performance 

The 
state-owned 
enterprises  risks  holding  back  economic 
and business development in key sectors. 
While  state-owned  enterprises  make  up  only 
2%  of  total  employment,  they  are  natural 
monopolies  in  key  sectors  such  as  electricity, 
wastewater 
telecommunications, 
management  and  infrastructure.  A  recent  IMF 
report  requested  by  the  Cypriot  authorities 
highlighted  that  the  governance  of  state-
owned  enterprises  falls  short  in  several  key 
areas  covered  by  international  and  OECD 
standards.  These  include  merit-based  board 
nominations,  ownership  policy,  performance-
driven  management,  and  transparency  and 
accountability  in  financial  performance.  Such 
weaknesses  hold  back  the  modernisation  of 
these  companies  and  may  impact  Cyprus’s 
potential to achieve key policy targets in fields 
such as the green transition, digitalisation and 
increased  value-added  of  products  and 
IMF’s 
To 
services. 
recommendations,  Cyprus 
is  preparing  an 
action  plan;  however,  its  adoption  has  been 

address 

the 

significantly delayed. Cyprus has also recently 
established  an  Advisory  Council  for 
the 
nomination  of  SOE  board  members.    Further 
legal  steps  may  also  be  needed,  for  instance 
to  address  managerial  appointments  and 
transparency and performance criteria. 

for 

companies, 

Further regulatory reforms could improve 
the business environment. In 2024, 34% of 
Cypriot  firms  (EU  average  of  24.5%)  cited 
regulation  as  a  major  investment  barrier,  up 
from  31.5%  in  2023.  Obtaining  permits  from 
various  competent  authorities  is  a  common 
challenge 
particularly 
approvals  for  new  construction  projects,  such 
as town planning permits and building permits. 
Over the past five years, Cyprus’s performance 
has fallen further below the EU average in this 
area.  With  a  Product  Market  Regulation  score 
of  1.63  (OECD  average:  1.34),  Cyprus  lags 
behind  many  other  EU  countries.  Further 
efforts  to  reduce  administrative  burdens, 
simplify  processes  and  improve  licensing  and 
permit procedures could enhance the business 
environment (see Annex 4). 

are 

also 

Large 

Slow  progress  in  developing  Cyprus’s 
infrastructure  and  modernising  its  public 
hampering 
service 
competitiveness  and  weakening 
the 
business 
public 
environment. 
infrastructure  projects  are  often  subject  to 
major  delays  or  changes,  creating  negative 
spillover  effects  and  uncertainty  for  private 
investment.  Similarly,  slow  progress  is  being 
made  to  modernise  the  public  sector  to 
potentially  make 
between 
business  and  the  public  sector  more  efficient. 
The  technologies  chosen  to  assist  in  these 
before 
efforts 
modernisation  projects  or  systems  come  to 
fruition. This is partly related to Cyprus’s public 
procurement  system  which  is  still  evolving 
towards a more strategic and professionalised 
approach.  In  addition,  procurement  processes 
frequently  face  appeals  and  litigation,  further 
the  development  of  essential 
delaying 
infrastructure. 

transactions 

obsolete 

often 

are 

9 

 
DECARBONISATION, ENERGY AFFORDABILITY AND 
SUSTAINABILITY 

transition, 

Cyprus faces significant challenges in its 
energy 
environmental 
sustainability  and  climate  resilience.  The 
country  is  only  slowly  diversifying  its  energy 
mix away from fossil fuels. The energy sector 
still  faces  considerable  challenges  related  to 
the  slow  implementation  of  the  Great  Sea 
Interconnector, the diversification of its energy 
supply and the modernisation of its electricity 
grid,  all  of  which  will 
impact  energy 
affordability  for  consumers  and  businesses. 
Increased  energy  efficiency  will  be  key  to 
decarbonisation.  Moreover,  Cyprus  would 
benefit 
the 
transport  sector  to  help  its  transition  and 
become 
relevant 
measures  already  being  taken,  Cyprus  still 
faces  significant  challenges  and  resource 
constraints  in  the  areas  of  risk  preparedness 
and climate adaptation. Water and wastewater 
management  remain  major  environmental 
concerns,  with  sustainable  water  use  and 
wastewater treatment continuing to present a 
challenge. Additionally, the country’s transition 
to  a  circular  economy  is  progressing  only 
slowly, highlighting the need for further efforts 
to 
efficiency,  waste 
reduction, and sustainable practices. 

increasing  support 

sustainable. 

resource 

improve 

Despite 

from 

to 

Additional action to improve the 
energy mix and contain prices 

Cyprus  has  seen  an  upward  trend  in  the 
production  and  use  of  renewable  energy 
sources.  24%  of  Cyprus’s  electricity  mix  was 
supplied  by  renewables in  2024,  compared  to 
20% in 2023, however this remains below the 
EU  average.  The  majority  comes  from  solar 
energy  projects,  while  wind  and  biomass 
energy  projects  have  been  contributing  to  a 
lesser but growing extent. Cyprus’s target is to 
increase  the  share  of  renewable  energy 
sources in its energy mix to one-third by 2030. 

10 

The Great Sea Interconnector project will 
end  Cyprus’s  energy  isolation.  The  aim  of 
this  project  is  to  interconnect  the  Greek, 
Cypriot and Israeli power grids via a submarine 
power  cable,  however  the  project  has  been 
beset  by  delays.  To  connect  users  of 
renewable  energy  sources  to  the  grid  and  to 
support the green transition, further efforts to 
expand  and  upgrade  Cyprus’s  electricity 
system and grid would be required. Developing 
renewable energy storage systems will also be 
important  for  increasing  renewable  energy 
capacity  in  the  transmission  network  and 
reducing energy curtailment. 

Affordable  electricity  is  a  pressing  issue. 
In  2024,  Cyprus  was  again  one  of  the 
countries with the highest household electricity 
prices  in  the  EU,  placing  consumers  under 
(regarding 
considerable  financial  pressure 
energy poverty, see Annex 8). Electricity prices 
for  non-household  consumers  in  Cyprus  were 
the  highest  in  the  EU,  creating  substantial 
challenges  for  the  competitiveness  of  Cypriot 
businesses.  

Decarbonisation remains a 
challenge in many sectors 

infrastructure 

Cyprus is not on track to reach its effort 
sharing  target  of  a  32%  reduction  in 
greenhouse  gas  emissions 
in  effort 
sharing  sectors  by  2030  compared  to 
2005.  To  meet  the  target,  planned  measures 
alongside 
and 
additional  measures,  will  have 
to  be 
implemented  in  a  timely  manner.  Additional 
policies  and  measures  in  sectors  covered  by 
the  Effort  Sharing  Regulation—such  as 
transport, buildings, small industry, waste, and 
non-CO₂ agriculture—beyond those in the final 
NECP,  along  with  their  potential  emission 
financing  needs,  and 
reduction 

projects, 

impacts, 

 
 
funding sources, can be reflected in the 2027 
NECP progress report. 

Cyprus’s energy mix is still characterised 
by  high  emission  intensity,  for  example 
from  the  manufacturing  sector.  Further 
electrification  across  sectors  would  help  to 
progress 
cost-effective 
decarbonisation  of  the  economy  while  also 
bringing benefits for consumers. 

towards 

the 

in 

Energy 

Increased  energy  efficiency 
the 
building and transport sectors is also key 
to  decarbonisation. 
efficiency 
investments in Cyprus mainly consist of grants 
and  tax  rebates.  Between  2005  and  2023, 
greenhouse  gas  emissions  from  buildings 
decreased  by  14%,  far  less  than  the  EU 
average  of  33%.  Faster  implementation  of 
climate mitigation measures in this sector will 
help households and businesses. Furthermore, 
Cyprus  would  benefit  from  focusing  more  on 
helping  the  transport  sector  to  transition  and 
become sustainable, since it is still in the very 
early stages of electrification. The carbon price 
set  by  the  carbon  tax  and  later  the  EU’s 
Emissions  Trading  System 2  will  provide  a 
market  incentive  for  investing  in  building 
renovations  and  low-emission  mobility  while 
offering 
for 
vulnerable  energy  and  transport  users.  The 
creation  of  innovative  financing  tools  and  the 
promotion  of  the  European  Energy  Efficiency 
Financing  Coalition  to  the  national  financial 
institutions  could  also  contribute  to  the  same 
direction. 

additional 

support 

direct 

Sustainable  mobility  remains  a  priority. 
The transport sector, which is Cyprus’s biggest 
energy  consumer,  saw  an  increase  in  its  final 
energy  consumption  of  7.7%  in  2023  (see 
Annex 6).  Furthermore,  all  domestic  freight  is 
transported  by  road  as  Cyprus  has  no  rail 
network. There are also very few incentives for 
greening  and  electrifying  the  vehicle  fleet, 
while the necessary infrastructure for doing so 
is lacking (see Annex 5). 

11 

Cyprus is particularly exposed to 
climate change and environmental 
risks 

an 

average 

2006-2023, 

Cyprus  is  subject  to  a  range  of  climate 
risks  and  extreme  weather  events,  with 
wildfires posing the greatest risk. Over the 
period 
of 
1 728 hectares  was  impacted  each  year  by 
wildfires  in  Cyprus.  The  country  is  vulnerable 
to  extreme  weather  events  such  as  irregular 
but  intense  rainfall,  drought  and  storms,  with 
flash  flooding  occurring  in  urban  and  rural 
is  prone  to  high  summer 
areas.  Cyprus 
temperatures,  with  heatwaves  becoming 
increasingly  frequent  and  severe.  This  has 
serious  public  health  and 
resulted 
In 
impacts 
environmental 
response  to  climate-related  challenges,  the 
Ministry  of  Finance  has  started  to  integrate 
climate risks into its fiscal planning, aiming to 
assess  and  mitigate  their  impact  on  the 
country’s economy. 

(see  Annex 9). 

in 

implementation 

Although  Cyprus  has  put  in  place  a 
strategies  and 
certain  number  of 
measures,  it  is  lacking  the  substantial 
resources  needed  to  invest  in  disaster 
preparedness  and  climate  adaptation. 
Measures  are  already 
in  the  pipeline  to 
address  water  resources,  agriculture  and 
health.  Furthermore,  the  national  adaptation 
strategy  (2017)  is  currently  under  review.  A 
relevant  Technical  Support  Instrument  (TSI) 
project,  which  was  signed  in  November  2023 
and  initiated  in  January  2024,  is  currently  in 
key 
the 
assessments  and  stakeholder  engagements 
underway  to  revise  and  update  the  national 
adaptation  strategy  and  action  plan  with  the 
aim  of  increasing  the  capacity  to  implement 
climate adaptation actions. The revision of the 
National  Adaptation  Strategy  and  Action  Plan 
is  progressing 
the 
established  timeline.  The  new  (draft)  version 
contains  an  action  plan  that  will  cover  the 
period  2025-2050,  i.e.  a  long-term  vision  for 
boosting the country’s resilience to the impact 
of  climate  change.  With  support  from  the 
Recovery  and  Resilience  Facility,  actions  are 
improving 
also  under 

in  accordance  with 

phase,  with 

consideration 

for 

 
recycled and 70% of packaging waste recycled 
in 2022. Additionally, in the same year, Cyprus 
produced  the  highest  volume  of  food  waste 
per  person  in  the  EU,  at  294 kg.  In  2023,  the 
country  generated  674  kg  of municipal  waste 
per  capita,  which  is  significantly  above  the 
estimated EU27 average of 511 kg per capita.  
The  introduction  of  a  landfill  charge  under 
Cyprus’s  recovery  and  resilience  plan  has  the 
potential  to  promote  more  sustainable  waste 
management  practices 
is  properly 
operated and enforced. This reform, which has 
proven successful in other Member States, will 
be crucial for Cyprus (see Annex 7). 

if 

it 

and 

responsibilities 
governance 
between  ministries  and  local  authorities  (see 
Annex 9). 

sharing 

in  2022.  Cyprus 

Water  and  wastewater  management  are 
a  major  environmental  concern.  Cyprus  is 
affected  by  severe  water  scarcity,  particularly 
when  compared  to  the  EU  average.  Cyprus’s 
water  exploitation  index  plus  (WEI+),  which 
compares  water  use  against  renewable  water 
resources,  was  a  staggering  70.6  in  2022, 
indicating a critical situation. At the same time, 
Cyprus  has  demonstrated  poor  water  use 
efficiency.  The  agricultural  sector,  which  is 
Cyprus’s primary consumer of water resources, 
accounted  for  88%  of  all  water  resource 
faces  a 
consumption 
EUR 30 million  annual  water  investment  gap 
(0.11% of GDP), approximately half of which is 
needed 
in  drinking  water. 
Wastewater  treatment  is  also  a  cause  for 
concern,  with  28 
not 
complying  with  the  requirements  of  Directive 
(EU) 2024/3019 concerning urban wastewater 
treatment.  Some  of these  agglomerations  are 
set  to  receive  cohesion  policy  funding  to 
construct  sewage  collection  networks  and 
pumping  stations.  Additionally,  investment  in 
wastewater  measures  needs  to  increase  by 
EUR 10 million  per  year,  with  an  additional 
EUR 5 million  a  year  needed  to  meet  the 
the  Water  Framework 
requirements  of 
Directive  on  top  of  existing  financing  (see 
Annex 9). 

agglomerations 

investing 

for 

to 

sustainable 

The  circular  economy  is  only  progressing 
slowly.  Cyprus’s  2021-27  Circular  Economy 
Action  Plan,  reinforced  by  the  recovery  and 
resilience  plan,  is  advancing  the  country’s 
resource 
transition 
management,  with  a  focus  on  priority  sectors 
such  as  agriculture,  food,  manufacturing  and 
hospitality.  However,  the  plan  appears  to  be 
insufficient,  as  the  country’s  circular  material 
use  rate  and  resource  productivity  is  still 
below the EU average. The plan’s effectiveness 
in  addressing  every  dimension  of  the  circular 
economy is also uncertain, as Cyprus is at risk 
of  missing  municipal  waste  and  packaging 
waste 
requires  additional 
investment  to  unlock  its  circular  economy 
potential.  The  country’s  waste  management 
performance is still lagging, with only 15% of 
re-use  or 
municipal  waste  prepared  for 

targets  and 

12 

 
 
 
 
 
 
SKILLS, QUALITY JOBS AND SOCIAL FAIRNESS 

targeted 

outpacing  that  of  young  women  (33.8%)  by 
3.9  percentage  points,  while  the  employment 
rate  among  men  aged  55-64 
(78.9%) 
surpassed  that  of  women  (62.4%)  by  16.5 
percentage points. There is a growing influx of 
non-EU  citizens,  providing  additional  potential 
for  further  employment  growth.  Efforts  to 
promote  integration  are  underway,  supported 
by  active 
labour  market  policies  and 
incentives,  however  they  would  benefit  from 
more 
those  whose 
focus  on 
participation  is  a  priority  (see  Annex 10).  The 
public  employment  service  could 
improve 
support  for  employers  in  hiring  persons  with 
disabilities  and  offering  targeted  employment 
schemes for older women. In addition to these 
measures,  easing  institutional  restrictions  on 
employment  as  well  as  up-  and  reskilling  of 
foreign workers, promoting legal migration and 
attracting talent from non-EU  countries, could 
help  sustain  the labour  supply in  vital  sectors 
and enhance Cyprus’s competitiveness. 

and 

skills 

thereby 

shortages 

Labour 
are 
restricting economic development. Despite 
strong overall labour market outcomes, labour 
and  skills  shortages  are  limiting  businesses’ 
capacity  to  expand,  innovate  and  improve 
restricting  economic 
productivity, 
development  overall.  Labour  shortages  have 
worsened  in  sectors  such  as  construction  and 
energy (see Annex 10). Working conditions are 
contributing to labour shortages, including the 
nursing  profession  and  long-term  care  There 
are  also  persistent  skills  shortages  and 
mismatches 
in  agriculture,  accommodation 
and  food  services  due  to  an  over-qualified 
workforce (see Annex 12). A reform is included 
in  the  recovery  and  resilience  plan  to  address 
skills  mismatches  between  education  and  the 
in 
labour  market,  alongside 
training 
in  digital,  green  and  blue  skills. 
Moreover,  with  the  support  of  the  European 
learning 
Social  Fund  Plus,  the 
accounts  pilot  project  is  being  rolled  out, 

investments 

individual 

and 

Challenges  in  developing  a  competitive 
labour  market  and  effective  social 
policies are standing in the way of robust 
economic growth in Cyprus. Cyprus’s labour 
market 
labour 
is  faced  with  skills  and 
low 
and  mismatches, 
shortages 
integration of underrepresented groups. At the 
same time, low attainment levels in basic skills 
and  limited  enrolment  in  adult  learning  is  a 
barrier to growing the workforce. The ongoing 
transformation  and  diversification  of  Cyprus’s 
economy  is  creating  opportunities  for  tackling 
some of these challenges, with the emergence 
of new economic sectors and inflows of skilled 
workers  from  abroad  helping  to  increase 
productivity  and  value  added.  At  the  same 
time, Cyprus’s ageing population is resulting in 
new  demands  such  as  access  to  long-term 
care, while the country is still faced with social 
challenges, such as energy poverty. 

Labour and skills shortages are 
holding back economic potential 

Overcoming  the  weak 
integration  of 
underrepresented  groups,  especially  that 
of  young  people,  is  a  challenge  for 
Cyprus. The labour market is expanding in line 
with  Cyprus’s  rapid  economic  growth.  2024 
saw  a  further  rise  in  the  employment  rate, 
from  79.5%  in  2023  to  79.8%  in  2024  (see 
the  Social  Scoreboard  in  Annex  13).  However, 
for  certain  categories  of  the  population  such 
as  young  people,  older  women  and  persons 
with  disabilities,  obstacles  to  entering  the 
labour  market  persist  (see  Annex 10).  The 
share  of  young  people  neither  in employment 
nor 
(12.9%) 
remainshigher  than  the  EU  average  (  11%), 
especially  for  young  women  (14.1%  vs  EU: 
the  gender 
12.1%).  At 
employment  gap  has  widened,  with  the 
employment  rate  of  young  men  (36.9%) 

in  education  and 

the  same 

training 

time, 

13 

 
 
together with training for young persons not in 
employment or education (7). 

Underperformance in basic skills 
and low participation in training 
are a barrier to growing the 
workforce 

of 

to 

the 

the 

one 

and 

seen 

biggest 

increase 

Cyprus  is  witnessing  a  concerning  trend 
of  falling  levels  in  basic  skills  among 
young  people  which  is  hindering  their 
access 
skilled 
training 
employment.  According  to  the  results  of  the 
2022  OECD’s  Programme  for  International 
Student  Assessment  tests,  since  2018  Cyprus 
has 
in 
underachievement  in  basic  skills  in  the  EU  – 
numeracy,  literacy  and  science  –  among  15-
year-olds  (see  Annex 12).  Factors  behind  this 
downward  trend  may  include  low  levels  of 
participation  in  early  childhood  education  and 
care,  incomplete  policy  implementation  and  a 
lack  of  school  autonomy  which  is  generally 
associated  with  better  outcomes.  Cyprus  also 
of 
has 
underachievement  in  basic  digital  skills  in  the 
EU.  The  decline  in  attainment  of  basic  skills 
was  pronounced  among  students  irrespective 
of their socio-economic background. Low basic 
skills  are  generally  a  barrier  to  effective 
reskilling  and  upskilling  of  the  workforce. 
have 
Furthermore, 
advanced  skills  in  all  three  fields  covered  by 
the  Programme  for 
International  Student 
Assessment which, combined with a low share 
of students who are top performers in creative 
thinking,  is  restricting  Cyprus’s  potential  for 
innovation  and 
competitiveness.  Several 
measures  are  underway  as  part  of  the 
improve 
recovery  and  resilience  plan 
participation  in  early  childhood  education  and 
care,  including  an  action  plan  for  better 
education  outcomes,  revision  of  curricula, 
learning 
competency-based 

teaching  and 

students 

highest 

rates 

very 

few 

to 

(7)  Individual learning accounts are digital wallets designed 
for all adults of working age to address three common 
training  barriers:  motivation,  time,  and  funding.  More 
information is here. 

14 

methods,  and  monitoring  and  evaluation 
mechanisms  with  an  emphasis  on  teacher 
evaluation.  However,  the  effectiveness  of 
these measures is yet to be determined. 

Challenges  in  the  attainment  of  basic 
compounded  by 
skills  are 
limited 
participation 
in  secondary  vocational 
education  and  training,  and  inadequate 
in  secondary 
digital  skills.  Participation 
training  and 
vocational  education  and 
opportunities  for  work-based 
learning  are 
limited (see Annex 12). Key components of the 
adult  learning  system,  such  as  the  national 
qualifications  framework,  could  be  rolled  out 
faster,  with  particular  focus  on  vulnerable 
groups and those in need of reskilling, in order 
to address skills shortages. Efforts to increase 
the attractiveness of vocational education and 
training  could  focus  on  digital  skills,  with 
support 
for  persons  with 
disabilities, in order to meet rising demand for 
such skills. Cyprus could upgrade its vocational 
education  and  training  infrastructure  more 
quickly  and  involve  employers  in  designing 
vocational education and training programmes 
in  order 
to  better  align  post-secondary 
vocational and training institutes (MIEEK) with 
labour market needs. 

in  particular 

Digital  skills  remain  low  among  Cyprus’ 
skills, 
working-age  population.  Digital 
especially  among  vulnerable  groups,  are 
exacerbating skills shortages, with only 49.5% 
of adults having basic digital skills in 2023. To 
enhance  digital  skills  and  ensure  continuous 
skills  development  across  all  demographic 
groups, Cyprus is implementing its national e-
skills  action  plan  2021-2025.  Training 
improving 
programmes  are 
employees’ digital  and  green  skills,  funded  by 
the Recovery and Resilience Facility. Gradually 
expanding  these  programmes  to  cover  the 
entire  population  could  significantly  improve 
overall  digital  skills  levels.  Moreover,  there  is 
scope  for  more  effective  communication 
regarding  the  available  training  programmes 
and  initiatives,  and  incentives  for  acquiring 
qualifications. 

launched  for 

in 

technology, 
Graduates 
engineering  and  mathematics  fields  are 
in  short  supply,  exacerbating  skills 

science, 

 
 
in  science, 

In  Cyprus,  the  proportion  of 
shortages. 
students  enrolled 
technology, 
engineering  and  mathematics  (STEM)  fields 
relative  to  total  tertiary  enrolments  is  13.7%, 
the  lowest  in  the  EU,  despite  policy  efforts. 
Skills  and  labour  shortages  remain  acute 
especially  in  STEM  fields  as  well  as  in  the 
broader  context  of  the  green  and  digital 
transitions (see Annex 12). Policy efforts have 
been intensified in recent years, including with 
support  from  the  Recovery  and  Resilience 
Facility  and  the  European  Social  Fund  Plus. 
to  enhance 
However, 
enrolment  in  STEM  fields  at  tertiary  level 
(levels  5-8  under  the  International  Standard 
Classification of Education) by increasing their 
attractiveness and highlighting the importance 
of  STEM  education  for  society  could  help 
further alleviate skills shortages. 

targeted  measures 

Low  participation  of  adult  in  learning  is 
hampering  reskilling  from  a  life  cycle 
perspective. Cyprus saw a significant decline 
in  adult  learning  participation  between  2016 
and 2022 (from 44.3% to 28.3%). In addition, 
women and unemployed people are less likely 
to  engage  with  learning.  In  a  fast-changing 
labour  market,  this  lack  of  lifelong  learning 
creates vulnerabilities for both individuals and 
the  economy.  Cyprus  is  piloting  individual 
innovative  way  to 
learning  accounts,  an 
learning. 
support  adult  participation 
ensuring 
Mainstreaming 
universal 
encouraging 
training uptake among the entire working-age 
achieve  much 
could 
population 
needed-improvements in this area. 

in 
approach, 
and 

accessibility 

help 

this 

Long-term care services are 
insufficient, while energy poverty 
remains high 

a 

of 

Against 
growing 
backdrop 
demographic  challenges,  access  to  long-
term  care  services  is  limited.  Recent  data 
(2019) shows that in Cyprus, the proportion of 
people  aged  65  and  over  who  require  long-
term  care  due  to  severe  difficulties  with 
personal care or household activities, is one of 
(see 
the  highest 

the  EU,  at  34.3% 

in 

Annex 11) (8).  Demand  for  long-term  care  is 
expected  to  rise  further in  the  years to  come, 
with the share of the population aged 65 and 
over  expected  to  increase  from  16.5%  in 
2022,  to  19%  by  2030  to  23.9%  by  2050. 
However, the proportion of spending dedicated 
to  residential  care  and  the  number  of  long-
term care workers – key factors in social care 
provision for older people – are well below the 
EU average. To improve the availability, access 
and  quality  of  services,  Cyprus’s  existing 
funded integrated long-term care model could 
be rolled out faster. This model includes strong 
quality assurance mechanisms for all types of 
long-term care. 

Energy  poverty  remains  high.  In  Cyprus, 
despite recent improvements, the share of the 
population  who  struggle  to  heat  their  homes 
(14.6%),  and  especially  the  share  of  those  at 
risk of energy poverty (42.5%), remains one of 
the highest in the EU. Cooling is an additional 
challenge.  The  recovery  and  resilience  plan 
includes measures aimed at improving energy 
vulnerable 
efficiency 
consumers  through  reduced  electricity  tariffs 
and  protection  against  grid  disconnections. 
However,  there  is  scope  to  make  further 
improvements to the housing stock to mitigate 
the effects of high energy costs. 

supporting 

and 

(8)  European Health Interview Survey, [hlth_ehis_tadle]. 

The value sums the share of those having difficulty with 
personal care, household activities or both. 

15 

 
 
KEY FINDINGS 

To  boost  competitiveness,  sustainability  and 
social fairness, Cyprus would benefit from: 

•  accelerating the implementation of the 
recovery  and  resilience  plan,  including 
the  REPowerEU  chapter.  Making  optimal 
use  of  EU  instruments,  including  InvestEU 
improve  competitiveness  and 
STEP,  to 
implementing  cohesion  policy, 
swiftly 
taking  advantage  of  the  opportunities 
under the mid-term review; 

•  strengthening  the  commercialisation 
of  R&D  outcomes  by  increasing  public 
and  private  R&D  investment,  enhancing 
research-business  linkages  and  synergies, 
and  incorporating  input-output  indicators 
and  multiannual  funding  into  the  long-
term R&I strategy; 

• 

improving  the  business  environment 
by  reducing  regulatory  and  administrative 
barriers,  enhancing  the  transparency  and 
state-owned  enterprise 
efficiency  of 
the 
governance,  and  further 
regulatory 
on 
simplification; 

refining 
focusing 

framework 

services 

•  expanding  public  infrastructure  and 
public 
by 
modernising 
accelerating 
investments, 
relevant 
including  in  digital  networks  and  systems, 
and  by 
improving  public  procurement, 
including  through  the  professionalisation 
of procedures; 

•  enhancing  access  to  finance 
by 

for 
businesses 
alternative 
financing  opportunities,  including  venture 
investment 
capital,  private  equity  and 
funds;  

enabling 

• 

increasing 
investor 
individual 
participation in capital markets, including 
through  incentives  to  invest  in  mutual 
funds and alternative financial products; 

•  accelerating 

decarbonisation 

and 
enhancing  energy  affordability  by 
accelerating the development of electricity 
interconnections,  promoting  sustainable 
mobility, increasing the share of renewable 
energy,  modernising  and  expanding  the 
grid, 
improving  energy  efficiency  and 
adopting the green taxation reform; 

•  boosting  resilience  to  climate  change 
and  speeding  up  the  transition  to  a 
circular  economy  by  improving  water 
in 
practices 
management 
agriculture,  improving  and  investing  in 
wastewater 
increasing 
treatment,  and 
recycling rates; 

especially 

•  enhancing  long-term  stability  of  tax 
revenues by diversifying the tax mix; 

•  strengthening  educational  outcomes 
and  addressing 
labour  and  skills 
shortages  by  improving  basic  and  digital 
skills,  increasing  participation  in  science, 
technology,  engineering  and  mathematics 
fields  and  in  vocational  education  and 
training,  adapting  adult 
to 
employment  needs,  and  better integrating 
young people in the labour market; 

learning 

social 

protection 

for 
improving 
reducing 
vulnerable  groups  and 
energy  poverty  by  strengthening  access 
to  quality  long-term  care,  improving  the 
energy efficiency of homes, and providing 
targeted support to vulnerable households. 

• 

16 

 
 
 
 
ANNEXES 

 
 
 
 
LIST OF ANNEXES 

Fiscal 

A1.  Fiscal surveillance and debt sustainability 

A2.  Taxation 

Productivity 

A3. 

Innovation to business 

A4.  Making business easier 

A5.  Capital markets, financial stability and access to finance 

A6.  Effective institutional framework 

Sustainability 

A7.  Clean industry and climate mitigation 

A8.  Affordable energy transition 

A9.  Climate adaptation, preparedness and environment 

Fairness 

A10.  Labour market 

A11.  Social policies 

A12.  Education and skills 

A13.  Social Scoreboard 

A14.  Health and health systems 

Horizontal 

A15.  Sustainable development goals 

A16.  CSR progress and EU funds implementation 

A17.  Competitive regions 

LIST OF TABLES 

General government balance and debt 
Net expenditure growth 
Net expenditure (outturn and forecasts), annual and cumulated deviations vis-à-vis the recommendation 
Defence expenditure 

A1.1. 
A1.2. 
A1.3. 
A1.4. 
A1.5.  Macroeconomic developments and forecasts 
A1.6. 
A1.7. 
A1.8. 
A1.9. 

General government budgetary position 
Debt developments 
RRF – Grants 
RRF - Loans 

19 

21 

21 

28 

32 

32 

36 

41 

49 

54 

54 

60 

65 

70 

70 

73 

76 

80 

81 

84 

84 

87 

94 

22 
22 
23 
23 
24 
24 
25 
25 
26 

 
 
 
A1.10.  Projected change in age-related expenditure in 2024-2040 and 2024-2070 
A1.11.  Fiscal Governance Database Indicators 
A2.1. 
Taxation indicators 
A3.1. 
Key innovation indicators 
A4.1.  Making Business Easier: indicators. 
A5.1. 
Financial sector indicators 
A6.1. 
Selected indicators on administrative burden reduction and simplification 
A6.2. 
Key Digital Decade targets monitored through the Digital Economy and Society Index 
A7.1. 
Key clean industry and climate mitigation indicators: Cyprus 
A8.1. 
Key Energy Indicators 
A9.1. 
Key indicators tracking progress on climate adaptation, resilience and environment 
A13.1.  Social Scoreboard for Cyprus 
A14.1.  Key health indicators 
A16.1.  Selected EU funds with adopted allocations - summary data (million EUR) 
A16.2.  Summary table on 2019-2024 CSRs 
A17.1.  Socio-economic indicators by degree of urbanisation, 2024 

LIST OF GRAPHS 

Tax revenue shares in 2023 
Tax wedge for single and second earners, % of total labour costs, 2024 
Public expenditure on R&D as % of GDP, 2013-2023 
Business R&D investment as % of GDP in strong innovator countries, 2013-2023 

A2.1. 
A2.2. 
A3.1. 
A3.2. 
A4.1.  Making Business Easier: selected indicators.* 
A5.1. 
Net savings-investments balance 
A5.2. 
Net international investment position 
A5.3. 
Capital markets and financial intermediaries 
A5.4. 
Composition of NFC funding as % of GDP 
A5.5. 
Composition of HH financial assets per capita and as % of GDP 
A6.1. 
Trust in justice, regional / local authorities and in government 
A6.2. 
Indicators of Regulatory Policy and Governance (iREG) 
A7.1. 
GHG emission intensity of manu-facturing and energy-intensive sectors, 2022 
A7.2. 
Greenhouse gas emissions in the effort sharing sectors in Mt CO2eq, 2005-2023 
A7.3.  Municipal waste treatment 
A8.1. 
A8.2. 
A9.1. 
A9.2. 
A10.1.  Share of young people neither in employment nor in education and training (15-29; NEET rate) and disability employment 

Retail energy price components for household and non-household consumers, 2024 
Cyprus' installed renewable capacity (left) and electricity generation mix (right) 
Direct dependency(1) on ecosystem services(2) of the gross value added generated by economic sector in 2022 
Investment needs and gaps in EUR million, in 2022 constant prices 

gap (20-64) 

A10.2.  Labour shortages (%) and the job vacancy rate (%) 
A10.3.  Foreign workers in Cyprus (thousands, 20-64) 
A11.1.  At-risk-of-poverty or social exclusion rate, selected population groups 
A12.1.  Underachievement rates by field, PISA 2012, 2018 and 2022 (%) 
A12.2.  Participation in education and training (during the past 12 months), by educational attainment level for 2016 and 2022 
A14.1.  Life expectancy at birth, years 
A14.2.  Treatable mortality 
A15.1.  Progress towards the SDGs in Cyprus 
A16.1.  Distribution of RRF funding in Cyprus by policy field 
A16.2.  Distribution of cohesion policy funding across policy objectives in Cyprus 
A17.1.  The evolution of labour productivity per hour in Cyprus 

20 

27 
27 
29 
35 
40 
48 
50 
51 
59 
64 
69 
80 
82 
90 
91 
96 

28 
30 
32 
33 
37 
41 
42 
43 
45 
46 
49 
50 
56 
56 
57 
60 
62 
67 
67 

70 
71 
72 
73 
76 
79 
81 
81 
84 
88 
88 
94 

 
 
 
 
 
 
FISCAL 
ANNEX 1: FISCAL SURVEILLANCE AND DEBT SUSTAINABILITY 

This  Annex  contains  a  series  of  tables  relevant  for  the  assessment  of  the  fiscal  situation  in  Cyprus, 
including  how  Cyprus  is  responding  to  Council  recommendations  issued  under  the  reformed  Economic 
Governance Framework. 

The  reformed  framework,  which  entered  into  force  on  30  April  2024 (9),  aims  to  strengthen  debt 
sustainability  and  promote  sustainable  and  inclusive  growth  through  growth-enhancing  reforms  and 
priority investments. The medium-term fiscal-structural plans (hereinafter, MTPs or plans) constitute the 
cornerstone  of  the  framework,  setting  the  budgetary  commitment  of  Member  States  over  the  medium 
term. The latter is defined in terms of net expenditure growth, which is the single operational indicator for 
fiscal surveillance.  

Cyprus submitted its plan on 15 October 2024. The plan covers the period until 2028, presenting a fiscal 
adjustment  over  four  years.  On  21  January  2025,  the  Council  adopted  the  Recommendation  endorsing 
Cyprus’s plan (10). 

The assessment of the implementation of the Council Recommendation endorsing Cyprus’s plan is carried 
out  on  the  basis  of  outturn  data  from  Eurostat,  the  Commission  Spring  2025  Forecast  and  taking  into 
account  the  Annual  Progress  Report  (APR)  that  Cyprus  submitted  on  30  April  2025.  Furthermore,  in  the 
context  of  the  Commission  Communication  of  19  March  2025 (11),  on  accommodating  defence 
expenditure  within  the  Stability  and  Growth  Pact,  the  Annex  reports  the  projected  increase  in  defence 
expenditure based on the Commission Spring 2025 Forecast.  

The Annex is organised as follows. First, developments in government deficit and debt are presented 
based  on  the  figures  reported  in  Table  A1.1.  Then,  the  assessment  of  the  implementation  of  the 
Council  Recommendation  endorsing  the  plan  follows,  based  on  the  relevant  figures  presented  in 
Tables A1.2 to A1.9, including data on defence expenditure. 

The Annex also provides information on the cost of ageing and the national fiscal framework. Fiscal 
sustainability risks are discussed in the Debt Sustainability Monitor 2024 (12). 

Developments in government deficit and debt  

Cyprus’s government surplus amounted to 4.3% of GDP in 2024. Based on the Commission Spring 2025 
Forecast, it is projected to decrease to 3.5% of GDP in 2025. The government debt-to-GDP ratio amounted 
to 65.0% at the end of 2024 and, according to the Commission, it is projected to decrease to 58.0% end-
2025.  

(9)  Regulation (EU) 2024/1263 of the European Parliament and of the Council (EU) on the effective coordination of economic policies 
and on multilateral budgetary surveillance, together with the amended Regulation (EC) No 1467/97 on the implementation of the 
excessive deficit procedure, and the amended Council Directive 2011/85/EU on the budgetary frameworks of Member States are the 
core elements of the reformed EU economic governance framework. 

(10)  OJ C, C/2025/639, 10.02.2025, ELI: http://data.europa.eu/eli/C/2025/639/oj. 

(11)  Communication  from  the  Commission  accommodating  increased  defence  expenditure  within  the  Stability  and  Growth  Pact of  19 

March 2025, C(2025) 2000 final. 

(12)  Commission (2025) ‘Debt Sustainability Monitor 2024,’ European Economy-Institutional Papers 306. 

21 

 
 
 
 
 
 
Table A1.1:  General government balance and debt 

Source: Commission Spring 2025 Forecast (COM), Annual Progress Report (APR) 

Developments in net expenditure  

The  net  expenditure (13)  growth  of  Cyprus  in  2025  is  forecast  by  the  Commission (14)  to  be  above  the 
recommended  maximum,  corresponding  to  a  deviation  of  0.5%  of  GDP.  Considering  2024  and  2025 
together,  the  cumulative  growth  rate  of  net  expenditure  is  also  projected  above  the  recommended 
maximum cumulative growth rate, corresponding to a deviation of 0.5% of GDP. Differences between the 
Commission’s  calculations  compared  to  the  estimates  of  the  Annual  Progress  Report  by  the  national 
authorities are due to lower total expenditure and higher deductions for the national co-financing of EU 
programmes,  reflecting more  recent  available  data. The  annual  deviation in  2025  is  above  the  0.3%  of 
GDP threshold.  

Table A1.2:  Net expenditure growth 

* The cumulative growth rates are calculated by reference to the base year of 2023. 
Source: Council Recommendation endorsing the national medium-term fiscal-structural plan of Cyprus (REC), Annual Progress 
Report (APR) and Commission's calculation based on Commission Spring 2025 Forecast (COM). 

General  government defence expenditure in Cyprus amounted to 1.7% of GDP in 2021, 1,5% of GDP in 
2022 and 1.9% of GDP in 2023 (15). According to the Commission 2025 Spring Forecast, expenditure on 
defence is projected at 1.4% of GDP in 2024 and 2025. 

(13)  Net expenditure is defined in Article 2(2) of Regulation (EU) 2024/1263 as government expenditure net of (i) interest expenditure, 
(ii) discretionary revenue measures, (iii) expenditure on programmes of the Union fully matched by revenue from Union funds,  (iv) 
national  expenditure  on  co-financing  of  programmes  funded  by  the  Union,  (v)  cyclical  elements  of  unemployment  benefit 
expenditure, and (vi) one-off and other temporary measures.  

(14)  Commission Spring 2025 Forecast, European Economy-Institutional paper 318, May 2025. 

(15)  Eurostat, government expenditure by classification of functions of government (COFOG) 

22 

2024OutturnAPRCOMAPRCOM1General government balance% GDP4.33.53.53.73.42General government gross debt% GDP65.057.458.052.651.9Variables20252026RECAPRCOMRECAPRCOM2024n.a.3.2%2.9%n.a.n.a.n.a.20256.0%6.8%7.3%8.9%10.2%10.4%20265.0%4.6%5.4%14.3%15.3%16.4%AnnualCumulative*Growth rates 
 
          
 
 
          
  
 
 
 
 
Table A1.3:  Net expenditure (outturn and forecasts), annual and cumulated deviations vis-à-vis the 
recommendation 

* The growth rate for 2024 is not a recommendation but serves to anchor the base, as the latest year with outturn data when 
setting the net expenditure path is year 2023.  
Source: Commission Spring 2025 Forecast and Commission's calculation 

Table A1.4:  Defence expenditure 

Source:  Eurostat (COFOG), Commission Spring 2025 Forecast. and Commission's calculation 

Table A1.5:  Macroeconomic developments and forecasts 

Source: Commission Spring 2025 Forecast (COM), Annual Progress Report (APR) 

23 

2023202420252026OutturnOutturnCOMCOM1Total expenditurebn NAC13.113.414.615.32Interest expenditurebn NAC0.40.40.40.53Cyclical unemployment expenditurebn NAC0.00.00.00.04Expenditure funded by transfers from the EUbn NAC0.30.20.50.45National co-financing of EU programmesbn NAC0.10.10.10.16One-off expenditure (levels, excl. EU funded)bn NAC0.00.00.00.07=1-2-3-4-5-6Net nationally financed primary expenditure (before discretionary revenue measures, DRM)bn NAC12.512.713.714.48Change in net nationally financed primary expenditure (before DRM)bn NAC0.30.90.79DRM (excl. one-off revenue, incremental impact)bn NAC-0.10.00.010=8-9Change in net nationally financed primary expenditure (after DRM) bn NAC0.40.90.711Outturn / forecast net expenditure growth% change2.9%7.3%5.4%12Recommended net expenditure growth*% change2.7%6.0%5.0%13=(11-12) x 7Annual deviationbn NAC0.00.20.014 (cumulated from 13)Cumulated deviationbn NAC0.00.20.215=13/17Annual balance% GDP0.10.50.116=14/17Cumulated balance% GDP0.10.50.717p.m. Nominal GDP  bn NAC31.333.635.537.2Variables2021202220232024202520261Total defence expenditure% GDP1.71.51.91.41.41.42of which: gross fixed capital formation% GDP0.30.20.60.30.30.22024OutturnAPRCOMAPRCOM1=7+8+9Real GDP% change3.43.13.03.12.52Private consumption% change3.82.52.52.32.23Government consumption expenditure% change1.54.53.72.72.54Gross fixed capital formation% change0.11.03.54.53.05Exports of goods and services% change5.31.73.71.83.56Imports of goods and services% change2.40.83.61.53.5Contributions to real GDP growth 7- Final domestic demandpps2.62.52.82.82.38- Change in inventoriespps-2.00.00.00.00.09- Net exportspps2.80.80.20.30.210Output gap% pot GDP2.81.62.21.41.711Employment % change2.01.81.31.71.112Unemployment rate%4.94.74.74.74.613Labour productivity% change1.41.31.71.41.414HICP % change2.31.92.02.12.015GDP deflator% change3.52.02.62.12.316Compensation of employees per head% change4.53.83.63.43.317Net lending/borrowing vis-à-vis the rest of the world% GDP-6.7n.a.-6.2n.a.-5.620252026Variables 
 
          
 
 
 
          
 
 
 
          
 
 
Table A1.6:  General government budgetary position 

Source: Commission Spring 2025 Forecast (COM), Annual Progress Report (APR) 

Table A1.7:  Debt developments 

* End of period.  
** The 'snow-ball' effect captures the impact of interest expenditure on accumulated general government debt, as well as the 
impact of real GDP growth and inflation on the general government debt-to-GDP ratio (through the denominator). The stock-flow 
adjustment includes differences in cash and accrual accounting (including leads and lags in Recovery and Resilience Facility grant 
disbursements), accumulation of financial assets, and valuation and other residual effects. 
Source: Commission Spring 2025 Forecast and Commission's calculation (COM), Annual Progress Report (APR) 

24 

2024OutturnAPRCOMAPRCOM1=2+3+4+5Revenue44.345.344.744.844.4of which:2- Taxes on production and imports14.014.314.114.314.33- Current taxes on income, wealth, etc.11.311.311.211.211.14- Social contributions13.513.613.513.613.55- Other (residual)5.56.16.05.75.58=9+16Expenditure 40.041.741.241.041.0of which:9- Primary expenditure38.740.440.039.739.8of which:10- Compensation of employees 11.612.011.811.911.911- Intermediate consumption4.64.64.54.54.512- Social payments15.816.216.216.216.213- Subsidies0.50.40.50.30.414- Gross fixed capital formation3.03.43.23.33.215- Other3.23.83.83.53.616- Interest expenditure1.21.31.21.31.218=1-8General government balance4.33.53.53.73.419=1-9Primary balance5.54.84.75.04.620Cyclically adjusted balance2.9n.a.2.4n.a.2.621One-offs0.00.00.00.00.022=20-21Structural balance2.92.12.42.42.623=22+16Structural primary balance4.13.43.63.73.8Variables (% GDP)202520262024OutturnAPRCOMAPRCOM1Gross debt ratio* (% of GDP)65.057.458.052.651.92=3+4+8Change in the ratio (pps. of GDP)-8.6-8.0-7.0-4.7-6.1Contributions**3Primary balance-5.5-4.8-4.7-5.0-4.64≈5+6+7'Snow-ball' effect-3.63.7-2.33.9-1.5of which:5- Interest expenditure1.21.31.21.31.26- Real growth effect-2.43.1-1.93.1-1.47- Inflation effect-2.51.9-1.72.1-1.38'Stock-flow' adjustment0.5-4.40.0-1.00.020252026Variables 
 
          
 
 
 
          
 
 
Table A1.8:  RRF – Grants 

Source: Annual Progress Report 

Table A1.9:  RRF - Loans 

Source: Annual Progress Report 

Cost of ageing  

Total age-related spending in  Cyprus is projected to rise from  21% of GDP in 2024 to  about 
23.5% in 2040 and 25% in 2070 (see Table A1.10). This increase predominantly stems from pension 
spending.  In  2070,  age-related  spending  would  be  close  to  the  projected  EU  average.  Public  pension 
spending is projected to rise by 3.5 pps of GDP by 2070, of which 2.1 pps by 2040. The increase expected 
by  2040  represents  one  of  the  largest  of  all  Member  States  for  this  period.  In  2024,  Cyprus’  pension 
spending of 8.4% of GDP was well below the EU average of 11.6%, though. 

25 

Revenue from RRF grants (% of GDP)20202021202220232024202520261RRF grants as included in the revenue projectionsn.a.0.20.20.30.41.00.72Cash disbursements of RRF grants from EUn.a.0.50.30.00.30.70.720202021202220232024202520263Total current expenditure0.00.00.10.10.10.30.24Gross fixed capital formation0.10.10.10.10.10.40.35Capital transfers0.00.00.00.10.20.30.26=4+5Total capital expenditure0.10.10.10.20.30.70.520202021202220232024202520267Reduction in tax revenue0.00.00.00.00.00.00.08Other costs with impact on revenue0.00.00.00.00.00.00.09Financial transactions0.00.00.00.00.00.00.0Expenditure financed by RRF grants (% of GDP)Other costs financed by RRF grants (% of GDP)Cash flow from RRF loans projected in the Plan (% of GDP)20202021202220232024202520261Disbursements of RRF loans from EUn.a.0.10.00.00.20.20.02Repayments of RRF loans to EUn.a.0.00.00.00.00.00.020202021202220232024202520263Total current expenditure0.00.00.00.00.00.00.34Gross fixed capital formation0.00.00.00.00.10.10.15Capital transfers0.00.00.00.00.00.00.06=4+5Total capital expenditure0.00.00.00.00.10.10.120202021202220232024202520267Reduction in tax revenue0.00.00.00.00.00.00.08Other costs with impact on revenue0.00.00.00.00.00.00.09Financial transactions0.00.00.00.00.00.00.0Expenditure financed by RRF loans (% of GDP)Other costs financed by RRF loans (% of GDP) 
 
          
 
 
 
          
 
 
Public healthcare expenditure is projected at 7.5% of GDP in 2024 (above the EU average of 
6.6%)  and is  expected to  increase by 0.4 pps by  2040  and  by a further  0.4 pps  by  2070 (16). 
Public expenditure on long-term care is projected at 0.2% of GDP in 2024 (well below the EU average of 
1.7%) and is expected to increase by 0.1 pp of GDP by 2040 and by a further 0.1 pp of GDP by 2070. The 
projected increase is due to an ageing population but is relatively low due to underdeveloped long-term 
care services (17).  

Table A1.10:Projected change in age-related expenditure in 2024-2040 and 2024-2070 

Source: 2024 Ageing Report (EC/EPC). 

National fiscal framework 

The Fiscal Council of Cyprus (FCC), which has a relatively narrow mandate, could benefit from 
staffing  and  access-to-information  measures  to  improve  its  independence.  The  Secretariat  is 
exclusively  staffed  by  government  officials  on  secondment  to  the  FCC  and  staff  numbers  are  by  law 
limited  to  six  (currently  almost  half  of  which  is  administrative  staff).  Moreover,  the  FCC  has  reported 
access-to-information issues. Despite reporting a fairly high visibility in traditional  media, the FCC could 
achieve higher visibility still by activating social media accounts and improving the website (e.g. currently 
no names or pictures of the Chair and the other Members on the FCC website), but insufficient staffing 
continues to be a problem in this regard. 

The  Cypriot  Ministry  of  Finance  has  started  integrating  climate  risks into  its  fiscal  planning. 
Both  the  2025  draft  budgetary  plan  and  the  2025-2028  medium-term  fiscal-structural  plan  present 
findings from an assessment of the macroeconomic impacts of energy transition policies. These findings 
stem from a three-year project  on Climate Change and its Effects on the Cypriot Economy,  launched in 
2023 by the Ministry of Finance in collaboration with the Research Centre of the University of Cyprus. The 
project aims to assess the economic and fiscal impacts of climate change on key sectors and to examine 
implications for public debt and Cyprus’ development model.  

(16)  Key performance characteristics, recent reforms and investments of the Cypriot healthcare system are discussed in Annex 14 

‘Health and health systems’. 

(17)  The adequacy and quality of the Cypriot long-term care system are covered in Annex 11 ‘Social policies’. 

26 

CY21.02.10.40.1-0.12.423.4CYEU24.30.50.30.4-0.30.925.2EUCY21.03.50.80.1-0.44.025.0CYEU24.30.20.60.8-0.41.325.6EUage-related expenditure 2024 (% GDP)change in 2024-2040 (pps GDP) due to:age-related expenditure 2040 (%GDP)pensionshealthcarelong-term careeducationtotalage-related expenditure 2024 (% GDP)change in 2024-2070 (pps GDP) due to:age-related expenditure 2070 (%GDP)pensionshealthcarelong-term careeducationtotal 
 
  
 
 
 
Table A1.11:Fiscal Governance Database Indicators 

The Country Fiscal Rule Strength Index (C-FRSI) shows the strength of national fiscal rules aggregated at the country level based 
on i) the legal base, ii) how binding the rule is, iii) monitoring bodies, iv) correction mechanisms, and v) resilience to shocks. The 
Medium-Term Budgetary Framework Index (MTBFI) shows the strength of the national MTBF based on i) coverage of the 
targets/ceilings included in the national medium-term fiscal plans; ii) connectedness between these targets/ceilings and the 
annual budgets; iii) involvement of the national parliament in the preparation of the plans; iv) involvement of independent fiscal 
institutions in their preparation; and v) their level of detail. A higher score is associated with higher rule and MTBF strength. 
Source: Fiscal Governance Indicators 

27 

2023CyprusEU AverageCountry Fiscal Rule Strength Index (C-FRSI)12.3814.52Medium-Term Budgetary Framework Index (MTBFI)0.820.73 
 
   
 
 
 
ANNEX 2: TAXATION 

This  annex  provides  an 
indicator-based 
overview  of  Cyprus’s  tax  system.  It  includes 
information on: (i) the tax mix; (ii) competitiveness 
and  fairness  aspects  of  the  tax  system;  and  (iii) 
tax  collection  and  compliance.  It  also  provides 
information on the risks of aggressive tax planning 
(ATP) activity.  

Cyprus’s  tax  revenues  expressed  as  a 
percentage  of  GDP  are  slightly  lower  than 
the  EU  average,  and  property taxes  are  low. 
Table A2.1 shows that Cyprus’s tax revenues as a 
share  of  GDP  were  still  below  the  EU  average  in 
2023, although they were also almost 3 pps higher 
than in 2022. The difference with the EU average 
decreased from 5.2 pps of GDP in 2022 to 1.6 pps 
in  2023.  Labour  taxes,  expressed  as  a  share  of 
both  GDP  and  total  tax  revenues,  were  below  the 
EU  average  in  2023.  Revenues  from  consumption 
taxes  were  above 
the  EU  average  and 
environmental  taxes  were  at  the  EU  average.  
Cyprus is still lagging behind the rest of the EU in 
the  implementation  of  pollution  and  resources 
taxes following the ‘polluter pays’ principle. In this 
respect, Cyprus could consider introducing taxes on 
fertilisers,  pesticides  and  plastic  products. 
Revenues  from  property  taxes  in  Cyprus  were 
relatively  low  as  a  percentage  of  both  GDP  and 
total  tax revenue in 2023. Recurrent property tax, 
which  is  one  of  the  taxes  least  detrimental  to 
growth,  was  abolished  in Cyprus in  2017  (18).  Tax 
revenues  could  therefore  be  increased  by  making 
greater use of currently underused taxes, such as 
recurrent property tax.  

Cyprus’s  recovery  and  resilience  plan  (RRP) 
includes  measures  to  make  Cyprus’s  tax 
system  greener.  Cyprus  has  made  progress 
towards  adopting  a  green  taxation  reform  to 
to 
address  environmental  challenges 
climate  change,  air  pollution,  waste  management, 
water  pollution  and  water  management.  The 
reform consists of the introduction of a carbon tax, 
a  levy  on  water  consumption,  and  a  charge  on 
landfill  waste  as  of  2025.  The  reform  is  also 
expected  to  introduce  compensatory  measures  to 
alleviate the impact of the new taxes on affected 
sectors.  The  government  aims  to  ensure  that  this 

related 

(18) 

Revenues  from  recurrent  property  taxes  since  2017 
have  related  to  past  tax  obligations  that  had  not  been  paid 
before.  Although  Cyprus  still  had  positive  revenues  from 
recurrent property taxes in 2023, these were among the lowest 
in the EU as a percentage of GDP.  

28 

and 

reform 

businesses 

is  budget-neutral,  with 

tax 
revenue 
generated  from  green  taxes  being  returned  to 
households 
through 
reimbursements  or  incentives,  such  as  subsidies 
for electric vehicles or support for the adoption of 
like  photovoltaic 
renewable  energy  sources 
systems.  In  2027,  the  new  emissions  trading 
system (ETS2) will be fully implemented in Cyprus, 
replacing  the  carbon  tax  on  road  transport  while 
extending  the  scope  of  the  emissions  trading 
system to heating fuels in the building sector.  

Graph A2.1: Tax revenue shares in 2023 

Source: Taxation Trends Data, DG TAXUD 

the  corporate-income-tax 

Corporate taxation plays an important role in 
promoting competitiveness in Cyprus.  Cyprus 
collects  one  of  the  highest  corporate-income-tax 
revenues  as  a  share  of  GDP  in  the  EU  (6.6%) 
thanks  to  the  significant  presence  of  foreign 
companies  in  the  country.  At  the  same  time, 
corporate-tax  rates  are  among  the  lowest  in  the 
EU.  There  is  a  proposal  under  consultation  to 
rate  from 
increase 
12.5%  to  15%.  In  addition  to  a  low  rate  of 
corporate-income tax, Cyprus has also several tax 
incentives,  including:  (i)  for  R&D  and  the  green 
transition;  (ii)  a  corporate  equity  allowance  to 
deduct a notional interest from the taxable profits 
in  proportion  to  equity  held  in  the  company;  and 
(iii)  beneficial  tax  rules  for  film  production, 
shipping  activities,  and  intellectual  property.  As 
part of Cyprus’ RRP, the special venture-capital tax 
incentive  to  support  risk-finance  investments  in 
innovative SMEs has been expanded to include not 
only individuals but also legal entities. 

Cyprus’s  labour  tax  burden  is  relatively  low 
across  the  various  income  levels,  although 
the  redistributive  power  of  the  tax  and 
benefit  system  is  also  limited.  Graph    shows 
that the labour tax wedge for Cyprus in 2024 was 
much lower than the EU average for single people 

51,226,921,942,732,724,5Tax revenue shares in 2023, Cyprus (outer ring) and EU (inner ring)Taxes on labourTaxes on consumptionTaxes on capital 
 
 
       
 
Table A2.1:  Taxation indicators 

(1) Forward-looking effective tax rate (KPMG).       
(2) A higher value indicates a stronger redistributive impact of taxation. 
(*) EU-27 simple average. 
(**) For more details on the VAT gap, see European Commission, Directorate-General for Taxation and Customs Union, VAT gap in 
the EU - 2024 report,  https://data.europa.eu/doi/10.2778/2476549 
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, OECD 

at  various  income  levels(19).  Moreover,  the  2025 
tax  reform  is  expected  to  further  reduce  the  tax 
wedge by increasing the tax-free income threshold 
(from EUR 19 500 to EUR 20 500) and increasing 
the threshold at which the highest tax rate applies 
(from  EUR  60 000  to  EUR  80 000).  Although  the 
first  measure  is  targeted  at  low-and  middle-
income  earners,  the  latter  benefits  high-income 
earners,  reflecting  a  commitment  to  attract  high-
skilled workers to Cyprus. 

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)  by  less  than  the  EU 
average in 2023 (Table A2.1). The tax-and-benefit 
system  reduced  the  Gini  coefficient  by  only  4.5 
points,  while  the  reduction  was  7.7  points  for  the 
EU on average in 2023. 

(19)  The  tax  wedge  is  defined  as  the  sum  of  personal  income 
social-security 
taxes  and  employee  and  employer 
contributions  net  of  family  allowances,  expressed  as  a 
percentage of total labour costs (the sum of the gross wage 
and social-security contributions paid by the employer).  

29 

201020212022202320242010202120222023202431,934,034,537,437,840,239,739,011,313,813,716,019,820,520,120,08,010,710,612,612,913,012,712,712,211,611,912,310,911,210,910,58,28,59,29,56,87,37,47,18,58,78,99,27,18,58,78,53,43,23,33,78,69,69,49,35,56,16,26,32,22,93,23,21,20,70,70,71,92,22,11,91,00,20,20,21,11,11,00,93,02,52,12,12,52,42,12,0NA80,2NA76,5NA86,0NA84,8na22,522,522,523,333,931,831,531,531,8na23,424,625,626,840,939,939,940,240,312,912,011,810,421,319,319,118,95,16,55,54,58,68,27,97,734,246,135,532,66,2-0,76,67,0CyprusEU-27 
 
 
 
  
 
Graph A2.2: Tax wedge for single and second 
earners, % of total labour costs, 2024 

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

Cyprus  has  a  number  of  preferential  tax 
rules  for  personal  income.  Salaries  of  persons 
who  were  not  resident  in  Cyprus  during  the  15 
previous years and who were employed abroad for 
at least three consecutive years before they came 
to  live  in  Cyprus  are  partially  exempted  from  tax. 
By  providing  these  benefits,  Cyprus  is  aiming  to 
attract  workers  from  other  countries.  In  addition, 
foreign-sourced pensions are only taxed up to 5% 
or  they  are  tax-free  upon  paying  a  lump  sum 
amount  of  taxes.  Moreover,  the    ‘non-domiciled’ 
residents  are  exempted  from  tax  on  all  their 
capital  gains,  dividend,  and 
income, 
regardless  of  their  source,  as  well  as  on  salaries 
for  work  done  for  more  than  90  days  outside  of 
Cyprus. 

interest 

Property  and  wealth-based  taxes  in  Cyprus 
are  low  compared  with  other  EU  countries. 
Cyprus  has  no  wealth,  inheritance  or  gift  tax. 
Capital gains on shares, bonds and other securities 
are in principle  untaxed. The only exception is the 
20%  tax  on  capital  gains  from 
immovable 
property  located  in  Cyprus,  which  also  applies  to 
shares  in  companies  owning  such  properties. 
Cyprus  still  applies  a  transfer  tax  on  immovable 
property,  but  abolished  its  recurrent  immovable 
property tax in 2017. 

Negative VAT compliance gaps are not feasible in 
practical  terms,  but  can  occur  in  some  cases  due 
to  statistical  and  measurement  inaccuracies.  The 
negative VAT compliance gap may also be due to 
collection  campaigns  of  VAT  arrears,  which  took 
place in Cyprus in the recent years. Consequently, 
the  VAT  compliance  gap  estimates  for  2022  in 
Cyprus  should  be  viewed  with  caution.  The 
actionable VAT policy gap, which is an estimate of 
the foregone VAT revenues that can be attributed 
to  reduced  rates  and  exemptions  that  could 
potentially be discontinued or eliminated, is 21.9% 
in  2022,  well  above  the  EU  average  of  16.6%.  A 
recent  study  that  compares  the  actual  situation 
with a counterfactual  hypothetical  scenario where 
all  commodities  and  services  are  subject  to  the 
standard  VAT  rate,  finds  that  reduced  rates  are 
estimated  to  reduce  VAT  revenues  from  the 
household  sector  by  27%,  which  is  equivalent  to 
2.3%  of  GDP (20).  Moreover,  Cyprus had  a  high  e-
filling  rate  for  VAT,  personal-income  tax  and 
corporate-income  tax,  above  the  EU  average. 
Nevertheless,  the  country  was  among  the  worst 
performers  in  the  EU  for  on-time  filing  of  both 
corporate  and  personal  income  tax  returns  in 
2022 (21).  

Data  suggest  that  Cyprus’s  tax  system  may 
be  used  for  ATP.  Outgoing  dividends  as  a  share 
of GDP, as well as foreign-direct-investment stock 
through  special  purpose  entities,  are 
held 
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. 

remains 

although 

is  taking  steps  to  tackle  ATP 
Cyprus 
this 
a 
strategies, 
challenge.  Large 
foreign  direct 
flows  of 
investment and the high level of dividend, interest 
and  royalty  payments  as  a  percentage  of  GDP 
both  suggest  that  Cyprus  could  be  being  used  by 
companies  engaged  in  ATP.  In  2023,  Cyprus 
started  to  partially  address  ATP  risks  by:  (a) 
imposing withholding tax on interest, dividend and 

is  mixed.  Outstanding 

Cyprus’s performance on tax compliance and 
administration 
tax 
arrears increased from 34.2% of total net revenue 
in 2021 to 46.1% in 2022. This  is well above the 
EU-27 average of 32.6%. However, the estimated 
VAT  gap  (the  gap  between  revenues  actually 
collected  and 
liability) 
decreased  from  6.2%  in  2021  to  -0.7%  in  2022. 

theoretical 

the 

tax 

(20)  Turrini,  A.,  Guigue,  J.,  Kiss,  A.,  Leodolter,  A.,  Van  Herck,  K., 
Neher,  F.,  Leventi,  C.,  Papini,  A.,  Picos,  F.,  Ricci,  M.  and  F. 
Lanterna  (2024).  Tax  Expenditures  in  the  EU:  Recent  Trends 
&  New  Policy  Challenges. Discussion  Paper  212,  European 
Commission. 

(21)  Source: CIAT, IOTA, IMF, OECD, International Survey on 

Revenue Administration, https://data.rafit.org. 

30 

23,323,326,833,423,32025303540455050100150Tax wedge, % of total labour costsEarnings as % of the average wageSingle earner - CYSingle earner - EU averageSecond earner -  CYSecond earner -  EU average 
   
 
 
test 

based 

residency 

royalty payments to jurisdictions included in Annex 
I of the EU list of non-cooperative jurisdictions for 
introducing  an  extra 
tax  purposes;  and 
(b) 
corporate-tax 
on 
incorporation.  Cyprus’  RRP  also  aims  to  prevent 
the 
double  non-taxation  by  providing 
introduction  of  new  legislation  to  make  outbound 
payments  of  dividends,  interest  and  royalties  to 
low-tax  jurisdictions  subject  to  withholding  taxes 
or non-deductibility. This new legislation is planned 
to  enter into  force in  2025.  Cyprus  also  assessed 
the  effectiveness  of  its  overall  set  of  measures 
related to ATP via an independent evaluation This 
evaluation  will  be  the  basis  of  further  policy 
action. 

for 

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

31 

 
PRODUCTIVITY 
ANNEX 3: INNOVATION TO BUSINESS  

innovation 

Cyprus’s  research  and 
(R&I) 
performance  presents  a  mixed  picture. 
Despite  a  good  uptake  of 
scientific 
production  and  digital  technology,  limited 
R&D  investment  continues  to  hold  back  the 
country’s  full  innovation  potential.  According 
to  the  2024  European  Innovation  Scoreboard 
(EIS) (22),  Cyprus  is  a  strong  innovator,  but  the 
country’s  R&D  intensity (23)  increased  from  0.48% 
of  GDP  in  2013  to  0.68%  of  GDP  in  2023,  far 
below the EU average of 2.24%. Cyprus’s business 
is  dominated  by  small 
innovation  ecosystem 
It 
enterprises  and  traditional  service  sectors. 
therefore  struggles  to  attract 
in 
investment, 
particular  to  new  sectors,  and  to  develop  a 
stronger  and  deeper 
talent  pool.  Cyprus’s 
innovation  potential  is  also  held  back  by  the  lack 
of  a  long-term  R&D  strategy  –  including  a 
multiannual  R&D  investment  programme  –  and 
performance-based  funding  of  public  research 
institutions.  There  is  also  a  need  for  further 
reform,  such  as  targeted  financial  measures 
aimed at improving knowledge transfer and public 
research  infrastructure,  which  could  help  improve 
the  commercialisation  of  research  results (24).  In 
contrast,  Cyprus  performs  above  the  EU  average 
for  most  business  digitalisation  indicators  and 
meets the EU’s Digital Decade targets (25). 

Science and innovative ecosystems 

investment 

in  research  and 
Low  public 
development  (R&D)  holds  Cyprus  back  from 
reaching  its  full  scientific  potential.  The 

(22)  2024  European  Innovation  Scoreboard  (EIS),  country  profile: 
Cyprus.  The  EIS  provides  a  comparative  analysis  of 
innovation performance in EU countries, including the relative 
strengths  and  weaknesses  of  their  national  innovation 
systems. 

(23)  R&D  intensity  is  defined  as  gross  domestic  expenditure 
(GERD) on research and development (R&D) as a percentage 
of gross domestic product (GDP). 

(24)  PSF Specific Support to Cyprus Optimal Utilisation of Publicly 
Funded  Research  Laboratories  by  the  Business  Community 
(2020). 

country’s  share  of  research  publications,  as  a 
percentage of its total publications, among the top 
10%  most  cited  ones  worldwide,  an  indicator  of 
scientific  excellence,  stands  at  11.1%,  well  above 
the EU average of 9.6% (see the indicators table). 
However,  public  R&D  intensity  has  stagnated  in 
the last decade; in 2023 it stood at 0.29% of GDP 
(see  Graph  A3.1),  far  below  the  EU  average  of 
0.72%.  This  underinvestment  hampers 
the 
country’s  ability  to  further  expand  its  scientific 
potential. 

Graph A3.1: Public expenditure on R&D as % of 
GDP, 2013-2023 

Source: Eurostat 

The  R&I  ecosystem  is  currently  composed of 
12  universities  (three  public,  nine  private), 
nine  research  institutions  and  seven  centres 
of  excellence.  The  seven  centres  of  excellence 
have  received  funding  through  the  Teaming 
Programme  in  Horizon  2020  and  Horizon  Europe 
and have created the necessary infrastructure for 
research.  However,  the  lack  of  a  coherent  long-
term  strategy,  with  predictable  multiannual 
institutional  R&D,  threatens  the 
funding  for 
sustainability  of  these  centres  and  of  the  science 
ecosystem  in  general.  Currently,  the  recovery  and 
resilience  plan  (RRP)  for  Cyprus  and  cohesion 
investment, 
funding  account  for  most  public 
amounting  to  nearly  200  million  euro  in  2021-
-2027. Going forward, it will be crucial to mobilise 
national  funding  for  R&I,  especially  as  the  RRP 
investments end in mid-2026. 

EU’s 

(25)  The Digital Decade policy programme sets out a pathway for 
specific 
transformation, 
the 
commitments  by  Member  States  to  jointly  achieve  certain 
objectives  (e.g.  competitiveness,  resilience,  sovereignty)  and 
digital targets by 2030. 

including 

digital 

32 

00.10.20.30.40.50.60.70.80.920132014201520162017201820192020202120222023CYPRUSEU 
 
 
 
     
 
Business innovation 

retail 

(7%), 

technology 

innovation 

performance 

Cyprus’s 
is 
hampered by low and decreasing private R&D 
investment,  mostly  by  a  small  number  of 
companies  in  traditional  sectors.  Technology 
production  remains  weak.  There  are  some 
400 start-ups  and  scale-ups  in  Cyprus.  Over  a 
hundred of them have been certified as innovators 
by the Deputy Ministry of Research, Innovation and 
Digital  Policy,  as  have  140  medium-sized  and 
large  technology  companies.  Most 
innovative 
companies  in  Cyprus  carry  out  their  activities  in 
the  areas  of  financial  technology  (15%),  life 
(7%), 
sciences 
entertainment/media (7%), human resources (7%), 
clean  technology  (5%),  data  analytics  (4%)  and 
manufacturing  (4%) (26).  According  to  a  recent 
report from McKinsey (27), market capitalisation of 
start-ups and scale-ups in Cyprus reached 15% of 
national  GDP  in  2022,  second  only  to  Estonia  in 
the ranking of strong innovators. However, despite 
this strong performance, these companies employ 
only  2.6%  of  the  national  workforce.  Business 
expenditure  on  R&D  as  a  percentage  of  GDP  has 
tripled  since  2013,  reaching  its  peak  in  2020  at 
0.37%  of  GDP,  albeit  from  a  very  low  starting 
point. However, in 2023 business R&D expenditure 
fell  to  0.28%  of  GDP  (vs  1.49%  for  the  EU 
average),  only  75%  of 
its  2020  peak.  This 
contrasts  with  the  investment  levels  observed  in 
other  strong  innovator  countries  in  the  EU  (see 
Graph A3.2). This low private-sector investment in 
is  partly  due  to  the  Cypriot  economy 
R&D 
specialising  in  products  and  services  with  low 
added  value  and  to  Cypriot  companies’  limited 
participation  in  R&D  activities,  with  the  notable 
exception of pharmaceutical  companies. Low R&D 
investment 
innovation 
outputs,  with Cyprus  filing  0.7  patent  applications 
per  billion  GDP  under  the  Patent  Cooperation 
Treaty in 2022, compared to an EU average of 2.8. 
Moreover, Cyprus would benefit from participating 
in  the  unitary  patent  system,  which  offers  key 

into  weak 

translates 

(26)  Cyprus Research and Innovation Strategy (2024-2026). 

(27)  McKinsey – Reinventing our economy from within. How 

Europe’s start-up ecosystems can learn from each other to 
ignite and scale up entrepreneurship  (Nov 2023). 

33 

advantages  in  terms  of  promoting innovation  and 
enhancing competitiveness (28). 

Graph A3.2: Business R&D investment as % of GDP 
in strong innovator countries, 2013-2023 

Source: Eurostat 

Policy attention on business-science linkages 
has increased in recent years, but low levels 
of  R&D  investment,  in  both  the  public  and 
the  private  sector,  affect  the  potential  for 
stronger  linkages.  While  public-private  scientific 
collaboration, measured  by  the  number  of  public-
private  co-publications  as  a  proportion  of  total 
publications,  has  increased  over  the  last  decade 
(from 5.8% in 2013 to 8.5% in 2023) and is now 
(7.7%),  technological 
above  the  EU  average 
collaboration  has  not  followed  suit.  Business 
sector  involvement  in  financing  public  R&D  is 
almost  10  times  lower  than  the  EU  average 
(0.006%  vs  0.05%  in  2021),  hampering  the 
knowledge  valorisation  efforts  of  a  rather  good 
science  system.  A  number  of measures  under  the 
RRP are specifically designed to support and boost 
stronger  collaboration  between  businesses  and 
academia (29). In particular, the Cyprus Government 
set  up  the  Central  Knowledge  Transfer  Office  as 
part  of  a  network  of  such  offices. 
If  this 
investment is  coupled  with  more  funding, it  could 
become  pivotal 
research 
results.  Cyprus  has  also  introduced  measures 

in  commercialising 

(28)  The country is expected to join by ratifying the Unified Patent 

Court Agreement. 

(29)  For  example:  i)  launching  a  digital  tool  available  to  all 
stakeholders  of  the  R&I  ecosystem,  providing  services  to 
facilitate  collaborative  partnership  arrangements  between 
different  R&I  organisations  and  teams  (public  and  private) 
for  publicly  funded  research  facilities  and  laboratories; 
ii) introducing  measures  and  incentives  (such  as  including  a 
clause on opening up funded infrastructure in Research and 
Innovation  Foundation  grant  agreements)  to  strengthen 
cooperation between research organisations and businesses 
and spin-offs. 

00.511.522.5320132023 
 
     
 
designed  to  promote  entrepreneurship  under  the 
new  programmes (30).  As  the  impact  of  these 
measures will take time to materialise, it remains 
to  be  seen  how  effective  they  are  in  addressing 
current shortcomings. 

of 

adoption 

advanced 

The 
digital 
technologies  by  enterprises  in  Cyprus  is 
gaining traction. Cyprus contributes positively to 
the EU-level Digital  Decade target (31), i.e. 90% of 
SMEs  to  be  digitalised  by  2030,  with  74.3%  of 
SMEs  having  at  least  a  basic  level  of  digital 
intensity in 2024, above the EU average of 72.9%. 
The  business  take-up  of  cloud  services  in  Cyprus 
increased to 45.5% in 2023, above the EU average 
of  38.9%.  Also,  33.5%  of  enterprises  in  Cyprus 
reported  using  data  analytics  in  2023,  which  is 
close  to  the  EU  average  of  33.2%.  In  2024  the 
take up of AI by enterprises in Cyprus increased to 
7.9%,  still  well  below  the  average  13.48%.  The 
RRP and cohesion funds include measures to boost 
the digital transition of Cyprus and further develop 
the  ecosystem  for  start-ups  and  scale-ups.  While 
these  efforts  will  help  advance  the  country’s 
digital  capabilities,  sustained  financial  support  for 
these  and  other  measures  will  be  necessary  to 
achieve the digital transformation targets. 

Financing innovation 

The  start-up  ecosystem  relies  heavily  on 
support  from  public  institutions  due  to  an 
underdeveloped  private  equity  and  venture 
capital  market.  Venture  capital  provision  in 
Cyprus is decreasing and remains far below the EU 
average.  This  hampers  Cyprus’  capacity 
to 
generate  further  innovation.  Between  2019  and 
2023, venture capital provision decreased sharply, 
from 0.05% of GDP in 2019 to 0.017% of GDP in 
2023, and remained very low compared to the EU 
average of 0.078%. At the same time, investments 
from  private  equity  funds  in  Cyprus  are  close  to 

(30)  Examples: the PRE-SEED programme to support the creation 
and  initial  development  of  start-ups  with  an  international 
orientation,  the  ‘PhD  in  industry’  programme  and  proof  of 
concept for technology/knowhow applications. 

(31)  The Digital Decade policy programme sets out a pathway for 
concrete 
transformation, 
the  EU’s  digital 
commitments of Member States to jointly achieve objectives 
(e.g.  competitiveness,  resilience,  sovereignty)  and  digital 
targets by 2030. 

including 

zero, again hampering Cyprus’s ability to generate 
further  innovation.  Initiatives  such  as  the  State-
funded  Equity  Fund  under  the  RRP  aim  to  foster 
synergies  between  public  and  private  investment, 
by  offering  equity  financing,  mentorship  and 
market access (32). The establishment of a National 
Promotion  Agency  and  a  Regulatory  Sandbox  for 
FinTech  are  also  expected  to  improve  access  to 
finance  and  attract  global  start-ups,  while 
enabling  Cypriot  firms  to  scale  up  innovative 
solutions.  The  start-up  &  scientific  visa  schemes, 
provided by the Cyprus government, as well as the 
pre-seed  and  seed  grants  offered  through  the 
Research and Innovation Foundation, are examples 
of well-designed good practices. While the limited 
allocated  budget  paves  the  way  for  progress, 
further  steps  could  be  taken  to  help  strengthen 
business innovation through public funds. 

Innovation talent 

the  private 

in  science  and 

Fewer  STEM  graduates,  coupled  with  the  limited 
number of researchers employed in both the public 
inhibits  Cyprus’s 
and 
sector, 
performance 
innovation.  The 
number of new science and engineering graduates 
per  thousand  population  aged  25-34,  a  measure 
of scientific capacity, decreased substantially from 
2016  to  2022  (from  8.5  to  7.4).  The  EU  average 
stands at 17.6. For the same period, there was an 
increase  in  the  number  of  researchers  employed 
both in the public sector (from 1.5 in 2016 to 1.8 
in  2023)  and  in  the  private  sector  (from  0.6  in 
2016  to  1.1  in  2022), but  Cyprus  still  has  one  of 
the  lowest  rates  in  the  EU.  In  addition  to  a  low 
share of top performers in basic skills, Cypriot 15-
year-olds  also  proved  to  be  the  weakest  in 
creative  thinking,  with  a  top  performance  rate  of 
only  10.4%  vs  the  EU-23  average  of  25.1%.  This 
lack  of  excellence  constitutes  a  major  barrier  to 
participation 
in  STEM  studies  and  hurts  the 
country’s innovation capacity economy (see Annex 
12 on education and skills). Also, entrepreneurship 
the  Cypriot 
education 

is  a  weakness  of 

(32)  This fund, which was entered in the business register of the 
Dutch  Chamber  of  Commerce  in  2023,  is  the  first  sizeable 
venture  capital  fund in  Cyprus.  Its  investment  strategy is  to 
invest  primarily  in  SMEs  in  the  seed,  pre-seed  and  start-up 
stages  and  to  provide  direct  investments  to  innovative 
companies. 

. 

34 

 
 
 
Table A3.1:  Key innovation indicators 

(1) EU average for the last available year with the highest number of country data. 
Source:  Eurostat, DG JRC, OECD, Science-Metrix (Scopus database), Invest Europe, European Innovation Scoreboard 

is 

There 

entrepreneurship 
no 
ecosystem. 
integrated  training  approach  between  educational 
levels, limited funding, no national strategy and a 
lack of clear objectives, monitoring and evaluation 
that pose barriers to the growth of entrepreneurial 
activity.  Cypriot  entrepreneurship  education 
is 
therefore highly  fragmented and relies heavily  on 
external partners. To strengthen research capacity, 
persistent  shortcomings  need  to  be  addressed,  in 
terms  of  improving  researchers’  careers,  talent 
circulation  and  intersectoral  mobility.  There  are 

some  factors  affecting  career  progression  and 
working conditions of researchers in Cyprus. Apart 
from RRP measures to incentivise the attraction of 
scientific  talent  from  abroad,  continued  financial 
support  for  these  and  additional  measures  could 
be helpful for a lasting impact. 

35 

 R&D intensity (gross domestic expenditure on R&D as % of GDP) 0.440.540.830.780.70.68:2.243.45 Public expenditure on R&D as % of GDP 0.310.270.350.350.300.29:0.720.64 Scientific publications of the country within the top 10% most cited publications worldwide as % of total publications of the country  9.38.710.311.1:::9.612.3 Researchers (FTEs) employed by public sector (Gov+HEI) per thousand active population 1.501.601.901.901.801.80:4.20: International co-publications as % of total number of publications 64.663.571.972.97473.9:55.939.3 Business enterprise expenditure on R&D (BERD) as % of GDP 0.070.200.370.330.290.28:1.492.70 Business enterprise expenditure on R&D (BERD) performed by SMEs as % of GDP 0.050.160.320.28:::0.400.30 Researchers employed by business per thousand active population 0.400.601.201.201.101.10:5.70: Patent applications filed under the Patent Cooperation Treaty per billion GDP (in PPS €) 0.400.500.900.700.70::2.80: Employment share of high-growth enterprises measured in employment (%) 11.66:2.85::::12.51: SMEs with at least a basic level of digital intensity% SMEs (EU Digital Decade target by 2030: 90%) ::::70.05:74.2972.91: Data analytics adoption% enterprises (EU Digital Decade target by 2030: 75%) :::::33.50:33.17: Cloud adoption% enterprises (EU Digital Decade target by 2030: 75%) :::42.22:45.47:38.86: Artificial intelligence adoption% enterprises (EU Digital Decade target by 2030: 75%) :::2.59:4.677.9013.48: Public-private scientific co-publications as % of total number of publications 9.607.108.309.008.108.50:7.708.90 Public expenditure on R&D financed by business enterprise (national) as % of GDP 0.0030.0030.0070.006:::0.0500.020 Total public sector support for BERD as % of GDP 0.0170.0210.0540.052:::0.2040.251 R&D tax incentives: foregone revenues as % of GDP ::::0.002::0.1020.141 Business entreprise expenditure on R&D(BERD) financed by the public sector (national and abroad) as % of GDP 0.0170.0210.0540.052:::0.1000.110 Venture capital (market statistics) as % of GDP, total (calculated as a 3-year moving average) 0.0140.0220.0690.0610.0460.017:0.078: Seed funding (market statistics) as % of GDP  0.00.04.36.03.246.6:7.3: Start-up and early-stage funding (market statistics) as % of GDP  69.099.889.294.090.939.5:44.0: Later stage and scale-up funding (market statistics) as % of GDP  31.00.26.40.05.914.0:48.7: New graduates in science and engineering per thousand population aged 25-34 9.28.17.27.27.4::17.6: Graduates in the field of computing per thousand population aged 25-34 1.91.81.92.42.2::3.6:20222021Cyprus201220172020Headline indicatorScience and innovative ecosystemsR&D investment & researchers employed in businessesPublic support for business innovationInnovation outputsDigitalisation of businessesAcademia-business collaborationFinancing innovation Innovative talent2023EU average (1)USA2024 
 
  
 
ANNEX 4: MAKING BUSINESS EASIER 

Cyprus  has  become  more  competitive  and  is 
making  business  easier  but  still  faces 
challenges  and  there  is  room  for  further 
improvement in its business environment. The 
focus  is  on  reducing  administrative  burden  and 
creating a more entrepreneurial culture. Moreover, 
further trade integration in goods and reduction of 
barriers  to  competition  in  regulated  professions 
and public procurement would also boost Cyprus’s 
competitiveness. 

Economic framework conditions 

is  experiencing  some  material 
Cyprus 
shortages  but  performs  better  than  the  EU 
average.  Cyprus’s  supply  chains  experienced  a 
significant  worsening  in  material  shortages  in 
2024.  5.7% (33))  of  Cypriot  businesses  reported 
that 
related  constraints 
facing 
(compared with 1.3% in 2023 and 3.7% in 2022). 
Even so, Cyprus came fifth in the EU and the EU-
27 average for 2024 was 10%. 

they  were 

in  terms  of 

Labour  supply  constraints  have  increased, 
but  Cyprus  still  outperforms  its  EU  peers. 
labour 
Cyprus  performed  worse 
shortages  in  2024.  5.15% (34)  of  firms  reported 
labour  supply  constraints  (3.28%  and  2.25%  in 
2023 and 2022 respectively). Nevertheless, Cyprus 
had the lowest levels of labour shortages in the EU 
and  the  EU-27  average  was  20.2%  in  2024. 
Similarly,  Cyprus’s  vacancy  rate  slightly  worsened 
to 3.5% (35) from 3.1% in 2023 and 2.8% in 2022. 
The  EU-27  average  vacancy  rate  was  2.36%  in 
2024. 

levels. 

The  ambitions 

beginning  of  a  recovery  in  2022  was  reversed  in 
2023,  when  the  Cypriot  National  Entrepreneurial 
Context  Index  (NECI)  score  was  well  below  pre-
pandemic 
new 
entrepreneurs in Cyprus were very much economic 
in nature. More than 80% said that their ambition 
was to build up great wealth or a very high income 
–  or  simply  to  earn  a  living  because  jobs  are 
scarce.  Two  out  of  five  new  entrepreneurs  had 
customers outside Cyprus. 46.6% expected to use 
more digital technologies in the next six months.  

of 

Cyprus has recently made progress in digital 
infrastructure  and  particularly  in  deploying 
gigabit  connectivity  infrastructure.  In  2023, 
very  high-capacity  network  (VHCN)  and  the  Fiber 
to  the  Premises  (FTTP)  coverage  in  Cyprus  were 
77.1%  and  had  progressed  significantly  faster 
than the EU  average. However, the share of fixed 
broadband  subscriptions  to  services  providing  at 
least  1 Gbps  (2.1%)  is  much  lower  than  the  EU 
average (18.5%) and the share of fixed broadband 
subscriptions of at least 100 Mbps (63.6%) is also 
below  the  EU  average  (65.9%).  The  recovery  and 
investment 
resilience 
measures  to  expand  coverage  of  VHCN  in  areas 
where  there  are  no  private  investments  and  to 
increase  the  take-up  of  VHCN  services  as  well  as 
internet 
programme  measure 
connections  to  be  ‘Gigabit-ready’  and  promote 
connectivity  take-up. As  regards  5G  connectivity 
overall,  Cyprus  already  reached  the  target  of 
100%  coverage  of  populated  areas  in  2022. 
However,  in  terms  of  5G  coverage  on  the  3.4-
3.8 GHz spectrum band (37), only 35% of populated 
areas in Cyprus are covered (below the EU average 
of 50.6%). 

foresees 

upgrade 

(RRP) 

plan 

to 

The  entrepreneurial  environment  in  Cyprus 
has hardened. According to the GEM 2023/2024 
Global  Report (36),  53.3%  of 
the  surveyed 
respondents  stated  that  starting  a  business  was 
more difficult than a year earlier. 30.1% reported 
that  their  household  income  had  significantly 
fallen in 2023 (from 40% in 2022), reducing their 
investment  capacity  to  start  a  business.  The 
overall  Cypriot 
assessed 
entrepreneurial  environment  declined  during  the 
the 
COVID-19  pandemic.  What 

quality 

looked 

like 

the 

of 

of 

the 

resilience 

Regarding 
digital 
infrastructures, cybersecurity awareness and 
implementation 
in  enterprises  has  been 
increasing.  The  number  of  enterprises  that 
experienced  ICT  security  attacks  (e.g. ransomware 
attacks  and  denial  of  service  attacks)  decreased 
significantly  in  Cyprus  from  4.59%  in  2022  to 
2.79% in 2024 (vs 3.43% in the EU in 2024).  

its 
Cyprus  can  benefit  from 
logistics infrastructure. The World Bank’s 2023 
Logistics Performance Index (LPI) (38) ranks Cyprus 

improving 

(33)  European Commission, ECFIN BCS. 
(34)  European Commission, ECFIN BCS. 
(35)  European Commission, ECFIN BCS. 
(36)  GEM Global Entrepreneurship Monitor. Report 2023. 

(37)  3.4-3.8  GHz  spectrum  band 

is  essential  for  enabling 

advanced applications requiring large spectrum bandwidth. 
(38)  2023 Logistics Performance Index (LPI) of the World Bank. 

36 

 
 
 
 
 
25th out of the EU-27 and 51st worldwide. Cyprus 
is  therefore  among  the  three  worst performers  in 
the EU. Its poorest scores are in infrastructure (2.8 
out  of  5),  customs 
international 
shipments (3.1). 

(2.9)  and 

Cyprus’s  domestic  infrastructure  remains  a 
major obstacle to investment. In 2024, 21.7% 
of  Cyprus’s  firms  stated  that  domestic  transport 
infrastructure was a major obstacle for investment 
(an  improvement  on  25.9%  in  2023).  However, 
Cyprus  remains  well  above  the  EU  average 
the  five-year 
(13.4%).  Moreover, 
average,  Cyprus  has  barely  improved  over  time 
(Cyprus 22.7% vs the EU average of 14.4%) (39). 

looking  at 

Graph A4.1: Making Business Easier: selected 
indicators.* 

Share of (1) enterprises, (2) average intra-EU exports and 
imports in GDP, (3) firms, (4) SMEs. 
*Q4 data on trade integration is not yet available. 
Sources: (1) EIB IS, (2) Eurostat, (3) ECFIN BCS, (4) SAFE 
survey. 

Cyprus  has  attracted  attention  from  foreign 
investors.  In  terms  of  foreign  direct  investment 
(FDI),  a  2022  survey (40)  found  that  29%  of 
respondents  had  plans  to  establish  or  expand 
in  2023.  This  was  a 
operations 

in  Cyprus 

(39)  EIBIS 2024 - Cyprus. 
(40)  EY Attractiveness Survey Cyprus 2022. 

(53%) 

expected 

noteworthy  increase  from  24%  in  2020  but  still 
well  below  the  EU  average  of  53%.  Most 
respondents 
Cyprus’s 
attractiveness to improve over the following three 
years  (the  EU  average  was  64%).  As  for  the type 
investment  activity,  35%  of  companies 
of 
mentioned  supply  chain  and 
logistics,  24% 
mentioned  sales  and  marketing  offices  and 
activities,  and  14%  mentioned  establishing 
headquarters.  Manufacturing  was  also  mentioned 
by  7%  of  respondents,  possibly  driven  by  efforts 
to  increase  near-shore  manufacturing.  Investors 
perceived  Cyprus’s  telecommunication  and  digital 
infrastructure  (43%),  good  quality  of  life  (33%), 
favourable  corporate  taxation  (29%)  and  R&D 
availability  and  quality 
its  most 
attractive attributes for investors.  

(29%)  as 

environment, 

is  scope  to  further 

improve  the 
There 
competitiveness 
reduce 
administrative  burden  and  create  a  more 
entrepreneurial  culture.  Priorities  identified  by 
respondents (41)  for  further  improving  Cyprus’s 
competitiveness  include  allowing  regulation  to 
keep pace with technological and other disruptions 
(43%),  support  for  high-tech 
industries  and 
innovation  (40%)  and  investing  more  in  major 
infrastructure  and  urban  projects  (34%).  There 
were  also  calls  to  reduce  administrative  burden 
and  to  create  a  more  entrepreneurial  culture  by 
being  more  supportive  of  start-ups  and  SMEs. 
the 
Other  areas 
availability  of  venture  capital  and  alternative 
forms of financing; intellectual property protection; 
decarbonisation  of  supply  chains;  investment  in 
green  and  digital  skills;  increased  penetration  of 
renewable  energy  sources  (RES);  and  improving 
collaboration between business and academia. 

improvement 

include: 

for 

In 

business-to-business 

The  late  payments  situation  in  Cyprus  has 
improved. 
(B2B) 
transactions,  44.2%  of  Cypriot  SMEs  experienced 
late payments from private entities in the previous 
6  months  in  2024,  making  Cyprus perform better 
than the EU average (47.94%). In government-to-
business  (G2B)  transactions,  15.73%  of  Cypriot 
SMEs  had  in  2024  experienced  late  payments 
from public entities in the previous six months (vs 
EU average of 16.61%) (42). 

(41)  EY Attractiveness Survey Cyprus 2022. 
(42)  SAFE  Survey  2024;  these  figures  need  to  be  treated  with 
caution because the size of the survey sample was less than 
100, which therefore reduced its representativeness. 

37 

44.215.75.741.03447.916.61041.624.50102030405060from private entitiesfrom public entitiesMaterial shortages as afactor limiting productionEU Trade IntegrationRegulation as a majorobstacle to investment(4) Late payments(3) Shortages(2) SingleMarket(1) RegulatoryburdenShare (%)EU27CY 
      
 
 
Regulatory and administrative 
barriers 

The  general  regulatory  framework  still  has 
room  for  improvement.  According  to  the  EIB 
Investment  Survey (43),  34%  (vs  EU  24.5%)  of 
Cyprus’s firms stated in 2024 that regulation has 
been  a  major  obstacle  for  investment  (worsening 
from  31.5%  in  2023).  As  regards  the  five-year 
average,  Cyprus  has  worsened  over  time  (Cyprus 
32.8% vs the EU average of 23.6%).  

Further  efforts  to  reduce  regulatory  and 
administrative  barriers  would  improve  the 
business  environment (44).  In  the  overall  OECD 
Product Market Regulation (PMR) indicator, Cyprus 
scored  1.63  out  of  6,  performing  worse  than  the 
average  OECD  economy  (1.34),  but  it  has  made 
some  progress  since  2018.  The  various  indicators 
suggest  that  Cyprus  would  benefit  from  reducing 
regulatory  burden  and 
administrative  and 
especially 
simplification 
(including  better  communication)  as  well  as  from 
improving  licensing  and  permitting.  Improving  the 
governance  of  state-owned  enterprises  (SOEs) 
would  contribute  to  ensuring  a  level  playing  field 
for private competitors. Most notably, focus should 
be  on  the  rationale  for  ownership,  the  degree  of 
protection  from  political  interference  and  the 
degree of insulation from market discipline. 

focusing  on 

from 

Some  professions  and  the  retail  sector  in  Cyprus 
have high barriers to entry and competition. This is 
especially  significant  in  retail  sale  of  medicines 
(3.88 in Cyprus vs the EU average of 2.96 (45)) as 
well  as  some  professional  services  such  as 
lawyers  (3.86  in  Cyprus  vs  the  EU  average  of 
3.55),  civil  engineers  (2.21  vs  1.39),  architects 
(2.21  vs  1.39)  and  real  estate  agents  (2.21  vs 
0.61). 

Further  reforms  can  help  reduce  regulatory 
barriers  for  lawyers  and  real  estate  agents. 
There  are  115  specific  regulated  professions  in 
Cyprus,  which  is  at  the  low  end  of  the  EU 
average (46).  Cyprus  has 
implemented  some 
reforms  to  reduce  regulatory  barriers  for  certain 
civil 
professions, 

such  as  architects  and 

(43)  EIBIS 2024 - Cyprus. 
(44)  2023 OECD Product Market Regulation (PMR) Report. 
(45)  EU Average (without Romania, due to lack of data). 
(46)  European Commission, Regulated Professions Database. 

38 

engineers (47). Further progress can be made in the 
case  of  lawyers  and  real  estate  agents  (for 
instance,  on  the  proportionality  of  the  measures 
reserving  activities  related  to  industrial  property 
solely  to  lawyers).  For  real  estate  agents,  Cyprus 
could  consider  opening  access  to  exclusively 
reserved  activities 
professionals; 
to 
reevaluate the duration of mandatory qualification 
requirements;  and  reassess  the  justification  for 
and proportionality of requiring 100% of shares to 
be  held  by  real  estate  agents.  Patent  agents  do 
not  exist  in  Cyprus  as  a  self-standing  profession, 
because these services are exclusively reserved to 
lawyers.  Other  professions,  such  as  accountants 
and tax advisers, remain unregulated. 

other 

Cyprus 

a 
(2.9) 

higher 
than 

The  retail  sector  would  benefit  from  a 
reduction  of  administrative  and  regulatory 
Retail 
barriers. 
has 
Restrictiveness 
the  EU 
Indicator 
median (1.7) (48).  The  most  notable  administrative 
and regulatory barriers are in establishing a retail 
store  (for  example,  the  number  of  entities  to 
contact;  permitting  and 
impact  assessments; 
location-specific 
requirements; 
economic  data 
rules;  the  size  threshold;  and  the  length  of  the 
procedure). 

Tax compliance costs for SMEs in Cyprus are 
the  highest  in  the  EU.  Cyprus  has  the  highest 
ratio  of  total  enterprise  tax  compliance  costs 
(TETCC)  to  turnover  for  SMEs  in  the  EU,  with  a 
mean  average  of  2.3%  in  2022 (49).  The  EU 
aggregate mean is 1.8%. 

Cyprus  has  the  lowest  score  of  business 
bankruptcy  declarations  in  2024  in  the  EU 
and  has  introduced  reforms  to  increase  new 
business  registrations.  Cyprus’s  score  of  35.5 
was  by  far  the  lowest  score  in  the  EU  in  2024 
(125.7) (50).  In  terms  of  business  registrations, 
Cyprus  had  a  score  of  100.7  in  2024,  just  below 
the  EU  average  score  of  101 (51).  In  this  regard, 
Cyprus  government  introduced  a  reform  (as  part 

(47)  European  Commission,  Communication  on  updating  the 
in  professional 

reform  recommendations  for  regulation 
services, COM(2021) 385. 9 July 2021. 

(48)  European Commission, Retail restrictiveness indicator, 2022. 

(50)  European Commission, ECFIN BCS. (Index 2021 = base 100). 
(51)  European Commission, ECFIN BCS. (Index 2021 = base 100). 

 
 
 
 
 
its  RRP)  of  a  one-stop-shop 

of 
for 
the 
registrations, 
simplification  of  new  business 
especially  for  foreign  corporations  interested  in 
investing in the country (52). 

for 

its 

the 

for 

in  Cyprus 

consequences 

Cyprus  is  falling  behind  in  entrepreneurial 
education  and  this  could  have  serious  long-
term 
business 
environment  and  competitiveness.  Successive 
Global  Reports  have  pointed  to  persistent  low 
two  educational 
scores 
Entrepreneurial  Framework  Conditions 
(EFCs): 
Entrepreneurial Education at School (2.1 out of 10) 
and Entrepreneurial Education Post-School (4.3 out 
of  10) (53).  Cyprus’s  score 
in  Entrepreneurial 
Education at School has fallen by more than 25% 
since  2021.  The  GEM  Report  warns  that  Cyprus 
needs to recognise that many new businesses may 
never  come  to  fruition  because  a  generation  of 
schoolchildren  has  grown  up  unaware  that  they 
have  the  option  of  starting  a  business.  Of  most 
concern  was  the  fall  in  the  assessed  quality  of 
Social  and  Cultural  Norms 
in  support  of 
entrepreneurship,  in  which  Cyprus  was  ranked 
43rd out of 49 economies in 2023. 

Single market  

in  services (54) 

Cyprus  has  a  relatively  high  level  of  trade 
in  the  single 
integration 
market  but  not  in  goods (55)  (56).  Cyprus  ranks 
third  in  the  EU  in  terms  of  trade  integration  in 
services  in the  single  market.  Its intra-EU  imports 
and  exports  in  services  represented  25.7%  of  its 
GDP  in  2023  (the  EU  average  was  7.57%).  By 
contrast,  Cyprus’s intra-EU  imports  and  exports in 
goods represented 13.9% of its GDP in 2023 while 
the  EU  average  was  23.81%.  Only  5.69%  of 
Cypriot  SMEs  in  the  industrial  sector  exported 

(52)  European  Commission,  Cyprus  recovery  and  resilience  plan, 

RRP measure C3.3R2. 

(53)  GEM Global Entrepreneurship Monitor. Report 2023. 
(54)  Trade integration in services:  percentage of a country’s  GDP 
represented by EU trade in services (excluding financial and 
transport  services)  with  other  EU  countries  (average  of 
imports and exports). 

(55)  Trade  integration  in  goods:  percentage  of  a  country’s  GDP 
represented  by  EU  trade  in  goods  with  other  EU  countries 
(average of imports and exports). 

(56)  EC, 2025 Single Market and Competitiveness Scoreboard. 

39 

goods  to  other  EU  Member  States  in  2022,  while 
the EU average was 13.08% (57). 

The  conformity  of  the  transposition  of  the 
single  market  directives 
into  national 
legislation has improved but the SOLVIT case 
resolution 
rate  has  decreased.  Cyprus 
improved its conformity deficit in 2024. Only 0.4% 
of  single  market  directives  had  been  transposed 
incorrectly  (it  was  0.9%  in  2023).  Cyprus  is 
therefore  one  of  the  best-performing  EU  Member 
States on this point and doing better than the EU 
average  of  0.9%.  Cyprus’s  transposition  deficit 
was  0.9%  in  2023,  so  just  below  the  EU  average 
of  0.8%.  The  number  of  pending  single  market 
infringement cases (17) was below the EU average 
(24)  and  the  duration  of  the  proceedings  was 
shorter than the EU average. As for SOLVIT, Cyprus 
resolved 88.1% of the cases it handled as the lead 
centre in 2024 (the EU average of 84.9%) (58). 

Cyprus  would  benefit  from  participation  in 
the  unitary  patent  system  and  its  impact  in 
promoting innovation and competitiveness. It 
is expected that Cyprus will begin participating by 
ratifying  the  Unified  Patent  Court  Agreement that 
it has already signed (59). 

Public procurement  

Public  procurement  competition  in  Cyprus 
has  significant  room  for  improvement  (see 
table of indicators). According to the OECD PMR, 
Cyprus  is  less  competition-friendly  than  the  EU 
average  (1.66  vs  0.50  for  the  EU).  This  indicator 
value barely improved between 2018 and 2023. 

Some  gender-responsive  and  green  public 
procurement  has  been  implemented,  but  a 
general  lack  of  knowledge  and  development 
of  socially  responsible  public  procurement 
(SRPP) persists. The SRPP possibilities offered in 
the  legal  framework  seem  to  be  underused. 
Awareness-raising campaigns on the opportunities 
that SRPP offers to contracting authorities, as well 
as tailored training for procurement officers would 
encourage  a  broader  adoption  of  SRPP.  The 

(57)  European Commission, ECFIN BCS. 
(58)  European Commission, ECFIN BCS. 
(59)  European Commission. 

 
 
 
development of a national strategy or action plan 
on  SRPP  could  boost  the  uptake  of  socially 
responsible procurement practices. 

40 

 
Table A4.1:  Making Business Easier: indicators. 

*Change in methodology in 2024: reporting late payments from public and private entities separately. 
**The 2024 data on single bids is provisional and subject to revision. Please note that approximately 95% of the total data is 
currently missing, which may impact the accuracy and completeness of the information. Due to missing data, the EU average of 
direct awards data is calculated without Romania. 
Sources: (1) ECFIN BCS, (2) Eurostat, (3) EIB IS, (4) Digital Decade Country reports, (5) Intrum Payment Report, (6) SAFE survey, 
(7) OECD, (8) up to 2023: Single Market and Competitiveness Scoreboard, 2024: Public procurement data space (PPDS). 

41 

POLICY AREA20202021202220232024EU-27 average2.82.33.71.35.710.02.00.62.33.35.220.21.62.52.83.13.52.321.824.619.425.921.713.4-41.460.077.1-78.8-41.460.077.1-64.0-75.0100100-89.3Regulatory environment25.433.439.731.534.024.5-----15.6-----15.1from public or private entities in the last 6 months52.363.663.641.6--from private entities in the previous or current quarter----44.247.9from public entities in the previous or current quarter----15.716.631.837.141.639.341.041.6-----0.0501.91.80.90.90.90.81.11.00.70.90.40.993.397.098.095.088.184.923.023.020.023.017.024.4252316174-26283931217.0CyprusINDICATOR NAMEInvestment climateShortagesMaterial shortage, firms facing constraints, %1Labour shortage, firms facing constraints, %1Vacancy rate, vacant posts as a % of all available ones (vacant + occupied)2InfrastructureTransport infrastructure as an obstacle to investment, % of firms reporting it as a major obstacle3VHCN coverage, %4FTTP coverage, %45G coverage, %4Reduction of regulatory and administrative barriersImpact of regulation on long-term investment, % firms reporting business regulation as a major obstacle3Late paymentsPayment gap - corporates B2B, difference in days between offered and actual payment5Payment gap - public sector, difference in days between offered and actual payment5Share of SMEs experiencing late payments, %*6Single MarketIntegrationEU trade integration, % (Average intra-EU imports + average intra EU exports)/GDP2EEA Services Trade Restrictiveness Index7ComplianceTransposition deficit, % of all directives not transposed8Conformity deficit, % of all directives transposed incorrectly8SOLVIT, % resolution rate per country8Number of pending infringement proceedings8Competition and transparency in public procurementSingle bids, % of total contractors**8Direct awards, %**8Public procurement 
 
 
      
 
ANNEX 5: CAPITAL MARKETS, FINANCIAL STABILITY AND ACCESS TO FINANCE 

Against  the  backdrop  of  comparatively  low 
net private savings, Cyprus’s capital markets 
are  insufficiently  deep.  Banks,  which  dominate 
the  financial  sector,  are  robust,  both  in  terms  of 
capital  and  liquidity,  and  are  well  prepared  to 
tackle  future  risks.  At  the  same  time,  there  is 
scope for the further development of all non-bank 
financial  intermediaries  to  bridge  the  gap  with 
their  EU  peers.  Cypriot  non-financial  corporations 
(NFCs)  rely  heavily  on  bank  financing  while  their 
demand  for  capital  market  funding  is  limited.  In 
turn,  the  supply  of  capital  market  funding  is 
hindered  by  Cypriot  households’  preference  for 
bank deposits as a means of savings, limiting the 
flow  of  capital  into  more  sophisticated  financial 
investments. 
investors,  such  as 
insurance and pension funds, are key to developed 
capital  markets.  However,  Cyprus's  pension  funds 
sector  is  fragmented,  which  limits  their  ability  to 
play a major role in the country's capital markets. 
Furthermore,  innovative  companies  and  start-ups 
face  funding  challenges  due  to  limited  access  to 
funding  from  private  equity  and  venture  capital 
firms.  While  the  funds  industry  is  growing  and 
contributes  to  the  real  economy,  its  impact  is 
limited.  Encouraging  Cypriot  households  and 
institutional  investors  to  channel  additional  funds 
into  capital  markets  would  reduce  reliance  on 
stability,  boost 
deposits,  enhance 
competitiveness  and  ultimately,  foster  economic 
growth. 

Institutional 

financial 

Availability and use of domestic 
savings 

The  Cypriot  economy  is  a  net  borrower from 
the international community, as domestic net 
private savings are insufficient to finance all 
investment  needs  of  the  economy.  Over  the 
last  decade, the  gross  savings  rate  of  the  private 
sector in Cyprus has hovered around 10% of GDP, 
which  is  below  the  euro  area  average  of  23.8%. 
The  net  private  savings  ratio  (adjusted  for  fixed 
capital 
significant 
it  evolved  from  a  net 
fluctuations.  Notably, 
borrowing  position  in  2014,  to  a  net  savings 
position  reaching  a  peak  of  4.4%  in  2021,  and 
then reverting to a net borrowing position of -4.2% 
in  2023.  On  average,  net  private  savings  ratio 
stands at zero, indicating that private savings are 
just  sufficient  to  meet  fixed  capital  consumption 
without  external  borrowing.  However,  they  are 

consumption)  has 

seen 

insufficient  to  fund  further  investment  via  capital 
markets, either domestically or internationally. The 
net  private  investment  position  has  averaged 
around  7.5%  over  the  past  five  years,  in  contrast 
to  the  financial  crisis  years  when  the  net 
investment position was negative. The amount lent 
to the government has also shown variability over 
last  years,  fluctuating  between  positive  and 
negative values, reflecting the interaction between 
the  government's  funding  needs  and  the  private 
sector's  savings  behaviour.  As  domestic  savings 
alone  have  not  consistently  sufficed  to  finance 
new  investment  and  maintain  the  existing  capital 
infrastructure  coupled  with 
the  government 
irregular net saving position, Cyprus has remained 
a net borrower from the international  community, 
averaging borrowing of about 5.1% of its GDP. 

Graph A5.1: Net savings-investments balance 

Source: AMECO. 

net 

international 

The  Cypriot  economy  has  accumulated 
substantial  foreign  debt,  resulting 
in  a 
investment 
negative 
position  (NIIP)  that  is,  however,  showing 
signs  of  improvement.  In  September  2024, 
Cyprus’s  NIIP  stood  at  -81%  of  GDP  (see  Graph 
A5.2).  The  accumulated  net 
foreign  direct 
investment  (FDI)  (60),  which  reached  35%  of  GDP 
as  of  Q3  2024,  contribute  positively  to  the  NIIP 
(61). Foreign reserve assets amounted to less than 

(60)  The  disproportionate  high  level  of  accumulated  FDIs,  which 
reached  1 627%  of  GDP  in  Q3  2024,  and  the  equivalent 
liability of 1 592%, is attributed to the favourable tax system 
and the country’s role as financial hub, where Cyprus is often 
selected as an intermediary for routing investments to third 
countries.   

(61)  The  net  FDI  is  comprised  predominantly  of  equity  excluding 
reinvested  earnings  (59%  of  total),  followed  by  reinvested 
earnings  (36.4%  of  total),  and  debt  instruments  (4.5%  of 
total).  Inward  FDI  transactions  are  mostly  related  to  real 
estate  activities  for  both  commercial  and 
residential 
purposes, as well as ICT. 

42 

-6-4-202468101214162017201820192020202120222023% of GDPPrivate investment, netLending to the governmentPrivate saving, netPrivate saving, grossBorrowing from the rest of the world 
 
  
 
 
 
5% of GDP are also a positive contribution. The net 
portfolio  investments,  which  are  directly  affected 
by  the  price  volatility  of  equity  valuations  abroad 
(assets)  and  in  Cyprus  (liabilities),  were  also  a 
positive  contributor  in  2024  of  around  23%  of 
GDP.  However,  all  the  above  were  more  than 
offset by the net stock of other investments, which 
amounted to -144% of GDP at the same time (62). 
Cyprus’s NIIP has improved over the years from  -
139%  in  2017  to  -80.5%  in  2024  but  remains 
highly  negative.  When  SPEs  (63)  are  excluded,  the 
NIIP  is  less  negative  at  around  -30%  of  GDP  (64). 
is  well 
Overall,  while  the  Cypriot  economy 
integrated  in  international  capital  flows,  including 
as  a  source  of  foreign  capital,  it  remains  a  net 
capital importer from the rest of the world. 

Graph A5.2: Net international investment position 

Source: ECB. 

Structure of the capital markets and 
size of the financial sector 

equity  funds),  has  more  than  doubled  over  the 
past  decade.  However,  at  9.5%  of  GDP,  Cyprus’s 
market-funding  ratio  is  one  of  the  lowest  in  the 
EU, where the average is close to 50% (see Table 
A5.1). 

Exchange 

Cyprus’s  equity  market  remains  inefficient 
and  underutilised,  despite  having 
the 
necessary  infrastructure  in  place.  The  Cyprus 
Stock 
facilitates  market 
(CSE) 
transactions  through  its  main  and  alternative 
markets  (65).  In  September  2024,  its  market 
capitalisation  was  equal  to  only  36%  of  the 
country’s GDP, mostly driven by investor interest in 
banks’ shares. The shares of financial corporations 
were valued three times more than those of NFCs 
(refer  to  Graph  A5.3).  This  reflects  the  extent  to 
which  the  stock  market  in  Cyprus  is  not  geared 
towards  funding  the  non-banking  segment  of  the 
real  economy.  Despite  recent  improvements,  the 
Cypriot  equity  market  remains  less  efficient  than 
its  European  counterparts.  This  is  evidenced  by 
higher bid-ask spreads, which may have decreased 
from  7.6%  in  2015  to  3.7%  in  2023  but  remain 
significantly above the EU average of 1.6%  (66). A 
lack  of  investable  assets,  shallow  market  depth, 
and  higher  perceived  risks  associated  with  traded 
stocks - partly rooted in legacy issues (67) - are key 
inefficiency  and 
to 
factors  contributing 
underutilisation  of  the  CSE.  With  its  announced 
privatisation  (68),  the  CSE  aims  to  reposition  itself 
as  a  significant  player  in  the  country's  financial 
landscape. Further measures, such as offering tax 
incentives  to  companies  to  get  listed,  and  to 
investors to participate, could significantly improve 
its performance. 

the 

Cypriot  capital  markets  remain  small  and 
play  a  limited  role  in  financing  domestic 
ratio,  which 
firms. 
encompasses funds raised through equity markets 
(stocks),  debt  markets  (bonds)  and  other  market 
instruments  (including  venture  capital  and  private 

The  market-funding 

(62)  The  stock  of  liabilities  in  other  investments  includes  the 
portfolios  of  non-performing 
that  have  been 
transferred  from  the  banks  to  foreign  CACs  and  amount  to 
approximately 33% of the GDP.  

loans 

(63)  Special  purpose  Entities 

(SPEs),  mostly  ship-owning, 
contribute  significantly  to  the  negative  headline  NIIP.  Ship-
owning  SPEs  are  mostly  funded  by  foreign  financial 
institutions  or  other  related  non-resident  entities  and  own 
assets located outside Cyprus and thus NIIP appears inflated 
because of these SPEs. 

(64)  See Commission SWP, 2025, In-depth review for Cyprus, for 

more details. 

The  bond market  remains  virtually  untapped 
by local NFCs. Although the government is active 
in  the  market  and  issues  bonds  to  finance  public 
spending,  the  corporate  bond  market,  other  than 
banks’, is underdeveloped. This is partly attributed 
to  the  economy's  structure.  Cyprus  is  a  service-
less  capital 
oriented  economy 
investment.  In  addition,  large  NFCs,  are  scarce  as 

that  requires 

(65)  CSE Annual report and Fact book 2023 
(66)  The  bid-ask  spread  is  a  measure  of  market  liquidity. 
Typically,  the  higher  the  liquidity of  a  market,  the  lower  the 
bid-ask spread.  

(67)  The CSE stock market bubble and crash of 1999–2000, just 
three  years  after  trading  began,  severely  undermined 
investors’ trust in the exchange. 

(68)  See  C3.3R5  of  the  Cypriot  recovery  and  resilience  plan;  the 
reform  has  already  been  approved  by  the  Council  of 
Ministers. 

43 

-160-140-120-100-80-60-40-200-4000-3000-2000-10000100020003000400020172018201920202021202220232024-Q3% of GDPForeign Direct Investment, AssetsPortfolio Investment, AssetsOther investment, AssetsOfficial reserve assetsForeign Direct Investment, LiabilitiesPortfolio Investment, LiabilitiesOther investment, LiabilitiesNIIP (rhs) 
  
 
 
the  backbone  of  the  economy is  formed by  small 
and  medium  enterprises  (SMEs),  and  in  particular 
very  small  family  business  that  mostly  rely  on 
readily  available  bank  loans.    Moreover,  investor 
appetite  for  Cypriot  corporate  bonds,  other  than 
those  issued  by  credit  institutions,  is  uncertain 
given the absence of credit ratings.  

Graph A5.3: Capital markets and financial 
intermediaries 

Source: ECB, EIOPA, AMECO 

Resilience of the banking sector 

large 

The banking sector in Cyprus is dominated by 
institutions,  with  a  high 
a  few 
concentration of assets.  It  comprises  five  local 
authorized  credit  institutions,  four  subsidiaries  of 
Greek  credit  institutions  and  one  subsidiary  of  a 
foreign  credit  institution  from  a  non-EU  member 
state  (69)  (70).  Additionally,  there  are  three  foreign 
credit institutions from EU member states and five 
from  non-EU  members  operating  via  branches  in 
Cyprus.  The  market  is  dominated  by  the  two 
largest banks, namely Bank of Cyprus and Hellenic 
Bank  (71),  while  the  five  largest  banks  hold 
approximately  92%  of  the  total  banking  assets, 
offering a diverse range of financial services.  

(69)  Refer to the Register of Credit Institutions operating in Cyprus 
(70)  Alpha Services (parent of Alpha Bank SA in Greece) agreed to 
acquire  Astrobank’s  assets,  liabilities,  and  personnel  via 
Alpha Bank Cyprus, with completion expected in Q4 2025. 
(71)  Eurobank  Ergasias  Services  and  Holdings  S.A.  became  the 
majority  shareholder  of  Hellenic  Bank  in  Cyprus  through  a 
series  of  acquisitions  in  2024  and  2025,  but  the  legal 
merger  of  Eurobank  Cyprus  Ltd  and  Hellenic  Bank  has  not 
been completed yet. 

44 

transformed  over 

The  Cypriot  banking  sector  has  significantly 
the 
downsized  and 
previous 10 years. From approximately 720% of 
GDP  at  the  onset  of  the  crisis  in  2013,  total 
in 
banking  assets  stood  at  200%  of  GDP 
September 2024, below the EU average of 248%. 
This downsizing is also reflected in the number of 
bank  branches  and  employees.  While  in  2008, 
Cyprus operated 117.3 bank branches per 100,000 
inhabitants,  twice  the  EU  average  at  the  time,  by 
2023 the number of commercial bank branches in 
Cyprus had reduced to 21.6 branches per 100 000 
population, well below the EU average for 2023 of 
28.7  branches  (72).  Similarly,  the  number  of  bank 
employees  per  100 000  inhabitants  has  declined 
significantly from 1 596 in 2008 to 704 in 2023. 
Despite  the  significant  reduction,  this  ratio  is  the 
fourth  highest  in  the  Euro  area  and  significantly 
higher  compared  to  the  EU  average  of  504 
employees  per  100 000  inhabitants.  The  high 
density  of  bank  employees  in  Cyprus  reflects  the 
significant role that the banking sector plays in the 
local economy, both as a major employer and as a 
crucial part of financial and economic activities.  

In  2024,  Cypriot  banks  maintained  the  high 
profitability  level  achieved  in  the  previous 
year,  supported  by  a  sustained  high  level  of 
net interest income.  Interest income originated 
from  the  banks'  excess  liquidity  placed  with  the 
European  Central  Bank  (ECB)  as  well  as  loans’  -
still- wide lending spread (73) was the main driver 
of  profitability  (74).  A  decline  in  dividend  income 
partially  offset  a  rise  in  net  interest  income. 
Despite  efforts  to  diversify  income,  banks  remain 
income. 
highly  dependent  on  net 
Impairments  further  declined  compared  to  the 
corresponding  period  of 
the  previous  year, 
reflecting improved asset quality. Staff costs have 
risen,  comparing  to  the  corresponding  period  of 
2023,  but  overall,  have  stabilized  at  levels  below 
those  observed  in  the  more  distant  past.    As  a 
result,  the  cost-to-income  ratio  remained  low  at 
34%,  with  the  (annualised)  return-on-equity  at 
19.4%  (as  shown  in  Table  A5.1).  Both  metrics 
compare  favourably  with  the  corresponding  EU 
averages of 53% and 10%, respectively. 

interest 

(72)  Refer to ECB’s The changing landscape of bank offices in the 

euro area 

(73)  Refer to ECB Data Portal lending margins in Cyprus 
(74)  Refer to Central Bank of Cyprus, September 2024, Aggregate 

Cyprus Banking Sector Data 

Non-financial corporationsFinancial corporationsNon-financial corporationsMFIsInsurance  and pension fundsOther financialsGovernmentMFIsPension fundsInsurance corporationsInvestment funds050100150200250 Listed equity                 Bonds                          Assets by sector% of GDP 
   
 
 
Banks’  solvency  reached  a  record  high  level 
in  2024,  and  liquidity  remained  high.  In 
September  2024,  the  CET1  ratio  of  the  banking 
sector, boosted by the high profits of the year, has 
increased  by  2.0%  to  23.5%.  This  is  the  highest 
level ever recorded and the highest across EU. The 
banking system buffer availability i.e., the level of 
capital  which  exceeds  P2G  (Pillar  2  Guidance), 
stood  at  10.5%,  thus  enhancing  the  capability  of 
the  banking  sector  to  absorb  unexpected  losses. 
Cypriot  banks  are  primarily  funded  by  customer 
deposits  and  this  aspect  of  their  operations 
remained  stable.  As  a  result, the  sector’s  average 
liquidity  coverage  ratio  of  333%  and  average  net 
stable  funding  ratio  of  187%  remain  among  the 
highest  in  the  EU  (75).  Additionally,  all  Cyprus’s 
banks  subject  to  MREL  requirements  met  their 
respective MREL targets by December 2024 (76). 

loans 

(NPLs). 

The  asset  quality  continues  to 
improve 
thanks  to  the  rigorous  efforts  to  reduce 
legacy  non-performing 
In 
September  2024,  the  NPL  ratio  declined  to  3.3% 
(77)  from  3.7%  in  2023.  The  coverage  ratio  for 
NPLs  has  improved  to  56%,  higher  than  the  EU 
average  of  42%.  Despite  the  significant  progress, 
the  NPL  ratio  in  Cyprus's  banking  sector  remains 
among  the  highest  in  the  EU,  where  the  average 
stands  at  1.9%.  The  past  two  years,  deleveraging 
was driven mostly by organic actions, such as loan 
repayments,  cures,  and  write-offs.  Progress  in 
reducing  NPLs  has  varied  across  different  banks, 
with  systemic  banks  performing  better  than  less-
significant institutions (LSIs). Approximately a third 
of all NPLs in the banking system are held by LSIs, 
in 
which  continue  facing  ongoing  challenges 
managing them. 

The  main  risks  to  financial  stability  arising 
little 
from  the  banking  sector  remain 
changed.  Households’  and  NFCs’ 
repayment 
ability  has  been  challenged  by  the  high  level  of 

(75)  Refer to EBA Risk Dashboard - Q4 2024 
(76)  Refer to European Banking Authority’s MREL dashboard. 
(77)  The NPL ratio referred to in this report is based on the ECB’s 
data that include, in the denominator, loans and advances to 
central  banks  and  credit  institutions.  In  particular,  the  NPL 
ratio  is  here  calculated  as  the  amount  of  NPLs  as  a 
proportion  of  the  total  amount  of  loans  and  advances, 
including  loans  and  advances  to  central  banks  and  credit 
institutions.  This  ratio  differs  from  the  NPL  ratio  in  Post-
Programme Surveillance Report – Cyprus, Spring 2024, which 
was  based  on  Central  Bank  of  Cyprus’s  data  and  excluded 
from the denominator, loans and advances to central banks 
and  credit  institutions.  Using  Central  Bank  of  Cyprus’s  data, 
the NPL ratio in December 2024 was 6.6%. 

interest  rates  over  the 
last  two  years  but 
thankfully  has  not  been  translated  to  an  overall 
asset quality deterioration. Although profitability is 
expected to decline due to lower interest rates, it is 
projected  to  remain  strong  overall.  The  high 
exposure of financial institutions to the real estate 
sector makes them vulnerable.  However, concerns 
are  mitigated  by  a  resilient  real  estate  market, 
improved  asset  quality  and  the  low  loan  to  value 
ratio,  providing  a  buffer  to  the  banking  sector 
against  potential  collateral  devaluation.  The 
banking sector’s direct exposure to the broad real 
estate sector has been on a steady declining trend 
over  past  years  and  seems  to  be  stabilising  at 
around 26%. This exposure level is considered still 
high  thus  credit  institutions  remain  vulnerable  to 
real  estate  sector  developments.  Lastly,  other 
cross-cutting issues such as challenges from cyber 
risk  and  climate  risk,  particularly  transition  risk, 
remain significant.  

Resilience of the non-bank financial 
intermediaries 

in  gross 

The  Cypriot 
insurance  market,  although 
highly  concentrated  and  smaller  than  its  EU 
counterparts,  plays  a  critical  role  in  the 
country's  financial  landscape.  In  September 
2024,  there  were  33  locally  authorized  insurers 
and  reinsurers  operating  in  Cyprus.  The  insurance 
sector’s  total  assets  amounted  to  15.8%  of  GDP 
(78),  a  level  that  is  significantly  lower  that  the  EU 
average  of  54.8%.  The  sector  registered  a  new 
record 
life  and  non-life  premiums 
combined  in  2023,  equal  to  EUR  1.3  bn  (79).  The 
upward trend, that continues in 2024 (80), indicates 
resilience to market adversities and further growth 
prospects. 
sector 
maintained  strong  solvency,  with  the  life  sector 
corresponding  ratio  standing  at  a  robust  286% 
and  being  at  par  with  the  EU  average,  while  the 
non-life insurers solvency ratio of 272% surpassed 
the  respective  EU  average  of  256%,  though 
varying  across  insurers. Recent  acquisitions  of 
insurance  companies  by  financial  institutions  (81) 

  Overall, 

insurance 

the 

(78)  Refer to EIOPA’s Insurance statistics 
(79)  Refer to Insurance Association of Cyprus statistical results  
(80)  In September 2024, the gross life and the non-life premiums 

were up by 9.7% and 5.5%, respectively.  

(81)  Refer to Hellenic Bank’s agreement with CNP Assurances on 

CNP Cyprus Insurance Holdings 

45 

 
 
 
underscore 
country’s economy. 

the  sector's  significance 

in 

the 

in 

of, 

size 

Cyprus  has  a  relatively  small  and  rather 
fragmented  second  and  third  pillar  pension 
system.    The  first-pillar  pension  system  is  the 
main  public  pension  scheme  in  Cyprus  and  forms 
the  backbone  of  the  country’s  retirement  system. 
The  second  pillar  typically  consists  of  employer-
sponsored  occupational  schemes,  while  the  third 
pillar  encompasses  private,  voluntary  retirement 
through  personal  pension  plans  or 
savings 
and 
the 
investments.  However, 
participation  in,  the  second  and  third  pillars  are 
relatively  low  compared  to  other  EU  countries. 
Access to second-pillar pensions is often limited to 
large  companies  or  unionised 
employees 
sectors,  leaving  many  workers  in  small  family 
businesses  or  non-unionised  sectors  without 
access to occupational  pension funds. As a result, 
in  December  2023,  the  total  pension  fund  assets 
stood  at  13.1%  of  GDP,  compared  to  the  EU 
average  of  23.4%.  A  pension 
reform  was 
announced and is underway. Its primary objectives 
include  strengthening  the  adequacy  of  state-
provided 
first-pillar 
investment policies, and improving the second and 
third pillars. Encouraging the build-up of universal 
funded  supplementary  pension  schemes  would 
positively  contribute  to  (i)  the  sustainability  and 
adequacy  of  pension  benefits;  (ii)  investment  in 
equity;  (iii)  access  to  finance;  (iv)  growth;  and  (v) 
innovation. 

rationalising 

pensions, 

Sources of business funding and the 
role of banks 

Loans are the primary source of financing for 
NFCs  in  Cyprus,  with  corporate  bonds  and 
listed  shares  being  underutilised.    Cyprus 
operates  a  bank-based  financial  system,  where 
banks  serve  as  the  primary  source  of  funding  for 
individuals  and  corporations.  Specifically,  bank 
loans  account  for  45%  of  NFCs'  total  financing 
needs,  a  level  significantly  higher  than  the  EU 
average  of  27%.  In  contrast,  other  forms  of 
financing, such as unlisted equity and participation 
in  quasi-corporations  (e.g.  partnerships),  account 
for  52%  of  total  financing,  exceeding  the  EU 
average  of  45%.  Consequently,  the 
level  of 
financing  through  capital  markets  in  Cyprus  is 
substantially 
In 
particular,  listed  shares  account  for  just  over  1% 
of total financing needs, while NFC bond issuance 
is  virtually  non-existent,  compared 
the 
respective EU averages of 19% and 5%.  

lower  than  the  EU  average. 

to 

Graph A5.4: Composition of NFC funding as % of 
GDP 

The  fund  management  sector  is  flourishing, 
and Cyprus has matured as a destination for 
investment  funds.  In  September  2024,  there 
were 323 licensed companies managing a total of 
EUR 9.1 bn,  an 
increase  of  6.35%  since  the 
beginning of the year (82). The main types of funds 
operating  in  Cyprus  are  alternative  investment 
funds 
(AIFs)  and  undertakings  for  collective 
investment in transferable securities (UCITS). 

(82)  Cyprus  Securities  and  Exchange  Commission  Quarterly 

statistics report of Q3-2024. 

46 

(1) Reference period is end-2023 
Source: Eurostat. 

The  Cypriot  banking  sector  has  experienced 
consistent  growth  in  lending  over  the  past 
several  years.  Despite  the  high-interest-rate 
environment  and  geopolitical  challenges  in  2024, 
credit  activity  remained  robust.  The  first  half  of 
the year saw a weak annual  growth rate for pure 
new 
In  contrast,  NFCs 
reduced  their  demand  for  credit  during  the  same 
period,  amidst  growing  uncertainty  about  the 
impact  of  geopolitical  risks  on  the  business 
environment,  prices  and  investor  confidence.  This 
led  to  a  deceleration  in  NFC  credit  growth  in  the 

loans  to  households. 

050100150200250300350CYEU% of GDPLoansTrade credit and advancesBondsListed sharesUnlisted sharesOther equity 
 
  
first six months of the year. However, as concerns 
eased  in  the  second  half  of  the  year,  lending  to 
NFCs gained momentum. As a result, for the entire 
year,  banks  provided  EUR 3.86 bn  in  pure  new 
lending to households and NFCs, marking an 18% 
year-on-year  increase,  driven  largely  by  a  robust 
27%  growth  in  NFC  lending  (83).  Repayments 
broadly  offset  the  volume  of  pure  new  lending, 
leaving  the  outstanding  amount  of  loans,  as 
shown in Table A5.1, largely unchanged. The most 
recent  Bank  Lending  Survey  by  the  ECB  indicates 
that demand is expected to increase further (84). 

Bank credit is expected to remain accessible 
for  corporates.  The  banking  system's  abundant 
liquidity  (85)  indicates  that  there  is  sufficient 
headroom  for  additional  lending.  Businesses  are 
therefore  unlikely  to  face  challenges  in  accessing 
stable and affordable bank loans in the near term. 
However, this may  not be the case for firms with 
no  established  credit  history,  such  as  innovative 
start-up  companies,  which  may  continue  to  face 
difficulties in securing credit. 

The participation of retail investors in 
capital markets 

their  financial  assets 

Cypriot  households  heavily  favour  holding 
their  financial  assets  in  deposits  over  other 
types of investments. On average, they allocate 
59%  of 
to  deposits, 
significantly  higher  than  the  EU  average  of  32%. 
Their second largest exposure is in unlisted shares, 
which  indicates  a  strong  culture  of  private  or 
family-owned  businesses.  Unlike  most  EU 
households,  Cypriot  households  tend  to  avoid 
diversified  investment  products,  allocating  only 
13%  of  their  financial  assets  to  insurance  and 
pension  funds,  and  3%  to  investment  funds, 
compared  to  the  EU  averages  of  28%  and  10%, 
respectively.  A  key  factor  contributing  to  this 
investment  behaviour 
the  higher  private 
is 
indebtedness  of Cypriot  households,  which  results 
in a lower saving rate and restricts the availability 
of funds for investment in capital markets. 

(83)  Refer to CBC Monetary and Financial Statistics December 

2024 

Graph A5.5: Composition of HH financial assets per 
capita and as % of GDP 

(1) Reference period is end-2023 
Source: Eurostat 

in 

investing 

inadequate 

Getting Cypriot household to fund productive 
investments  with  their  savings  requires 
reforms.  The  stark  gap  between  Cypriots  and 
other  Europeans 
in  alternative 
products  suggests  a  lack  of  access  to  diversified 
investment  types  or  a  lack  of  trust  in  the  capital 
markets.  Other  factors,  such  as  fewer  market 
offerings, 
incentives  and  weak 
financial  literacy  may  also  contribute  to  this 
investing  behaviour.  To  address  this  issue,  the 
government  may 
tax 
consider 
incentives and further advancing financial  literacy 
through public awareness campaigns. For example, 
tax  incentives  for  investing  in  innovative  SMEs, 
which are already in place until 2026 (86), could be 
expanded  to  include  other  investment  options.  A 
dedicated  long-term  investment  savings  account 
with  appropriate  tax  advantages,  which  has  been 
successfully  implemented  in  other  EU  countries 
(87), could encourage alternative saving strategies. 

introducing 

The role of domestic institutional 
investors 

Insurance  and  pension 
in 
financing  the  economy  becomes  increasingly 
important.  In  terms  of  asset  allocation (88),  the 

fund’s 

role 

(84)  Refer  to  ECB  Data  Portal,  April  2025,  Bank  Lending  Survey 

(86)  See the tax incentives for legal and natural persons investing 

statistics: Loan demand-Overall-Enterprise-Cyprus. 

in innovative SMEs. 

(85)  The  system’s  “loan-to-deposit”  ratio  stood  at  48%  in  June 
2024 and was the lowest in EU. See ECB data portal, Loan-
to-deposit ratio, Cyprus, quarterly data 

(87)  See for example the Swedish ISK. 
(88)  See  the  European  Insurance  and  Occupational  Pensions 
Authority’s (EIOPA) Insurance statistics – Asset Exposures. 

47 

0501001502002500102030405060708090CYEUCYEUper capita (000 EUR) (lhs)% of GDP GDP (rhs)Currency and depositsInsurance and pension fundsInvestment fundsBondsListed sharesUnlisted sharesOther equityHH Debt (liability) 
 
  
 
insurance sector invests approximately 44% of its 
portfolio in collective investment undertakings (89), 
ensuring risk diversification. A third of the portfolio 
is  invested  in  government  bonds  (20%)  and 
corporate bonds (11%), in line with the traditional 
insurance  approach  of  seeking  stable  returns. 
Equity  investments  account  for  less  than  7%  of 
the total portfolio, roughly the same proportion as 
cash and deposits. The remaining 11% is allocated 
to  properties,  deposits  and  other  holdings.  As 
regards the pension funds, the existence of many 
small  company-specific  independent  funds  (90) 
leads  to  inefficiencies  and  limits  their  ability  to 
play a major role in the country's capital markets. 
includes 
In  contrast, 
voluntary 
through 
professionally managed personal pension plans or 
investments, is underutilised due to unaffordability 
or lack of awareness. Pension funds invest 92% of 
their assets either domestically or in the euro area, 
with  only  8%  of  their total  assets invested  in  the 
rest of the world, including the US. The majority of 
their  assets  are  allocated  to  investment  funds, 
mainly  bond  and  equity  funds,  and  the  rest  are 
invested in deposits, debt securities and listed and 
unlisted shares. 

the  third  pillar,  which 
retirement 

savings 

The  investment  fund  industry  in  Cyprus  is 
thriving,  channelling  significant  amounts  of 
private  capital  into  the  real  economy  and 
financing  innovation  and  development.  Of  a 
total  of  EUR 9.1 bn  of  assets  under  management 
(91),  approximately  28% 
in  September  2024 
(EUR 2.6 bn),  is  invested  in  key  sectors  of  the 
Cypriot  economy,  such  as  energy,  sustainable 
investments,  shipping,  and  financial  technology, 
thus  contributing 
the  country's  transition 
to 
towards a more sustainable economic model. 

(89)  The  investment  holdings  of  Cypriot  insurers  in  CIUs  were 
mainly  split between  equity  funds  (39%),  debt  funds  (41%) 
and  money  market  funds  (15%),  but  virtually  nothing 
(0.03%) was invested in private equity funds.  

(90)  In September 2024, there were 837 pension funds in Cyprus, 
a number that is disproportionately large compared to bigger 
EU Member States with more developed pension systems.   
(91)  Cyprus  Securities  and  Exchange  Commission  Quarterly 

statistics report of Q3-2024. 

The depth of venture and growth 
capital  

The  domestic  venture  capital  and  private 
equity  market  in  Cyprus  is  underdeveloped, 
failing  to  meet  the  financing  needs  of 
innovative 
innovative  firms.  Start-ups  and 
companies face significant challenges in accessing 
credit  due  to  the  inherently  riskier  nature  of  their 
activities, compared to other NFCs, and the lack of 
tangible  assets.  As  a  result,  access  to  funding 
remains  a  major  obstacle  for  these  companies. 
Funding  from  venture  capital  (VC)  firms  and 
private  equity  funds  is  limited,  with  the  value  of 
annual  venture capital investment relative to GDP 
standing  at  0.02% in  December  2023,  which  was 
approximately 60% lower than the EU average VC 
fund  intensity  in  that  year.  Furthermore,  there 
were  no  significant  investments  from  private 
equity  funds  in  Cyprus  in  2022  and  2023  (see 
Table  A5.1)  (92).  As  a  result,  innovative  firms  and 
start-ups in Cyprus largely rely on the public sector 
including  commercialisation  of 
for 
research  results  (93).  To  address  this  finance  gap 
from  private  non-bank 
increasing 
participation  from  domestic  institutional  investors 
and  attracting  foreign  investment  could  help 
bridge the funding gap and enable the creation of 
scalable enterprises in innovative sectors.  

sources, 

funding, 

Financing the green transition  

strides 

initiatives. 

significant 

Cyprus  made 
in 
sustainable  finance  both  by  means  of 
In 
government  and  corporate 
2023,  the  government 
introduced  a  national 
Sustainable  Finance  Framework,  resulting  in  the 
country's  first  sustainable  bond 
issuance,  a 
EUR 1 bn  ten-year  bond  in  April  2023.  The  CSE 
introduced  initiatives  to  promote  green  bond 
listings, leading to the first Cypriot company to list 
a  green  bond  in  March  2024.  The  two  largest 
banks,  Bank  of  Cyprus  and  Hellenic  Bank,  are 
their  Environmental,  Social,  and 
progressing 
(ESG)  agendas.  Building  on  this 
Governance 

(92)  See  also  Commission  staff  working  document  Monitoring 
progress  towards  a  Capital  Markets  Union:  a  toolkit  of 
indicators. 

(93)  See Annex on Innovation to business.  

48 

 
 
 
Table A5.1:  Financial sector indicators 

Source: ECB, Eurostat, EIOPA, GD FISMA CMU dashboard, AMECO. 

commitment,  the  Bank  of  Cyprus  issued  the  first 
EUR 300 mn green bond in April 2024, earmarked 
for  eligible  green  projects.  These  developments 
to 
demonstrate 
environmental  sustainability  and 
its  growing 
presence in the green finance market. 

commitment 

Cyprus's 

Financial literacy 

is 

issue  – 

literacy 

financial 

repercussions, 

in  Cyprus  has 
Low 
significant 
including  poor 
saving  habits  and  hindered  capital  market 
growth. Low financial literacy (94) – recognised as 
a  major 
linked  to  high  private 
indebtedness and increased financial vulnerability. 
To  address  this,  the  Cypriot  Council  of  Ministers 
adopted  a  national  strategy  to  combat  financial 
illiteracy  in  June  2022(95),  as  part  of  the  Cypriot 
recovery  and  resilience  plan  (RRP).  The  strategy 
aims  to  promote  financial  literacy  and  education, 
including the use of digital  financial  products and 
services,  among  all  demographic  groups.  Several 

(94)  Monitoring  the  level  of  financial  literacy  in  the  EU  -  July 

2023 - Eurobarometer survey (europa.eu). 

(95)  National  strategy  for  financial  literacy  and  education  in 

Cyprus. 

49 

including 

initiatives  are 
the 
recommended, 
introduction of a financial education course for all 
high  school  students.  Once  fully  implemented, 
these measures are expected to improve financial 
literacy, 
to  better  management  of 
everyday  financial  issues, improved  saving habits, 
the  financial 
and 
markets. 

increased  participation 

leading 

in 

20172018201920202021202220232024-Q3EUTotal assets of MFIs (% of GDP)395.9320.9280.0290.1280.1230.5218.8200.2248.4Common Equity Tier 1 ratio14.914.817.417.617.617.821.523.516.6Total capital adequacy ratio16.317.119.920.320.621.325.827.820.1Overall NPL ratio (% of all loans)30.720.218.111.05.64.53.73.31.9NPL (% loans to NFC-Non financial corporations)48.333.724.814.68.27.96.65.53.5NPL (% loans to HH-Households)52.437.735.223.714.812.010.28.52.2NPL-Non performing loans coverage ratio46.449.853.746.343.548.049.755.742.1Return on Equity1-11.97.13.5-3.30.65.121.819.410.0Loans to NFCs (% of GDP)100.079.776.356.747.138.028.726.630.0Loans to HHs (% of GDP)101.365.660.259.648.243.135.533.144.5NFC credit annual % growth0.41.50.81.52.71.6-3.4-1.00.8HH credit annual % growth0.0-0.2-0.23.02.57.31.31.80.7Stock market capitalisation (% of GDP)23.738.339.538.536.036.832.736.069.3Initial public offerings (% of GDP)0.000.000.000.000.000.000.00-0.05Market funding ratio5.36.19.29.09.59.59.5-49.6Private equity (% of GDP)0.060.070.450.210.130.030.02-0.41Venture capital (% of GDP)0.060.030.060.110.010.020.02-0.05Financial literacy (composite)------45.5-45.5Bonds (as % of HH financial assets)2.42.52.62.52.22.43.4-2.7Listed shares (as % of HH financial assets)2.32.32.12.02.72.43.4-4.8Investment funds (as % of HH financial assets)0.91.11.61.62.01.53.2-10.0Insurance/pension funds (as % of HH financial assets)11.412.113.713.113.312.113.1-27.8Total assets of all insurers (% of GDP)19.817.517.518.617.815.015.615.854.8Pension funds assets (% of GDP)-----13.613.213.123.41-34-1011-1718-2425-27Colours indicate performance ranking among 27 EU Member States.1 Annualized data.Credit growth and pension funds EU data refers to the EA average.Banking sectorNon-banks sector 
 
 
 
 
 
  
 
ANNEX 6: EFFECTIVE INSTITUTIONAL FRAMEWORK 

Cyprus’s  institutional  framework  influences 
its competitiveness. Although public trust in the 
national  government  remains  relatively  low,  trust 
in  regional  and  local  authorities  has  recently 
increased.  Cyprus  could  enhance  its  regulatory 
reduce 
practices, 
administrative burdens. Efforts are being made to 
digitalise public services although Cyprus still lags 
behind  the  EU  average.  The  implementation  of 
several  reforms under  the  recovery  and  resilience 
plan  has  been  delayed.  The  efficiency  of  the 
justice system also faces challenges. 

bureaucracy 

tackle 

and 

has 

government  reform,  which  came  into  effect  in 
consolidated  municipalities, 
July 2024, 
reducing  the  number  from  30  to  20,  while 
introducing  new  governance 
to 
improve  efficiency  and  responsiveness  to  local 
needs. 

frameworks 

Quality of legislation and regulatory 
simplification 

impact  assessments  and 

Performance  in  developing  and  evaluating 
legislation  remains  below  the  EU  average. 
Practices  in  regulatory  tools  like  ex-ante  impact 
assessments,  public  consultation  and  reviews  of 
existing regulations have shown little change over 
2021-2024.  Performance  is  stronger  for  primary 
laws  than  for  subordinate  regulations  and  for ex-
stakeholder 
ante 
engagement  than  for  ex  post  evaluation  of 
legislation. Compared with the EU average, Cyprus 
has  an  underdeveloped  oversight  and  quality 
control  systems  as  well  as  weak  methodological 
these 
and 
regulatory 
the 
Technical  Support  Instrument,  Cyprus  will  receive 
dedicated  technical  support  for  building  capacity 
on evidence-informed policy- making (98) 

(Graph  A6.2).  Through 

requirements 

transparency 

tools 

for 

can 

further 

Cyprus 
its 
strengthen 
mechanisms  for  simplifying  regulation.  For 
example,  periodic  ex  post  evaluations  of  primary 
legislation  are  not  mandatory.  When  conducted, 
these  evaluations  are  not  required  to  contain  an 
assessment  of  administrative  burdens  and  of 
substantive 
costs  either.  Other 
practices,  like  doing  in  depth  reviews  of  specific 
regulatory  areas  and  public  stocktakes  of 
legislation 
the 
enhance 
abovementioned mechanisms (Table A6.1). 

compliance 

further 

could 

Public perceptions 

Graph A6.1: Trust in justice, regional / local 
authorities and in government 

(1) EU27 from 2019; EU28 before 
Source: Standard Eurobarometer surveys 

Trust  in  public  institutions  is  below  the  EU 
average.  Trust  in  the  national  government  is 
relatively  low,  standing  at  21%  in  autumn  2024. 
This is below the level of trust in the judiciary and 
in  the  regional  and  local  public  authorities  (Graph 
A6.1). Aspects which could increase public trust in 
the  public  administration  are  lower  bureaucracy, 
better 
and  more 
communication  with  citizens (96).  The  perceived 
quality  of  government  has  deteriorated  and 
remains  below  the  EU  average  (97).  A  local 

servants 

skilled 

civil 

(96)  Understanding Europeans’ views on reform needs - April 
2023 - - Eurobarometer survey, Country Fact Sheet. 

(97)  Inforegio - European Quality of Government Index 

(98)  Supporting evidence-informed policymaking and science for 

policy in seven European Member States, TSI request 
25CY16. 

50 

00.10.20.30.40.50.60.7AutumnSpringAutumnSpringAutumnSpringAutumnSpringAutumnSpringAutumnSummerWinterSummerWinterSpringAutumnSpringAutumn2014201520162017201820192020202220232024Justice,  legal system EU27Justice,  legal system CYRegional or local public authorities EU27Regional or local public authorities CYGovernment  EU27Government  CY 
 
      
 
 
 
 
Table A6.1:  Selected indicators on administrative burden reduction and simplification 

(1) This table presents a subset of iREG indicators focusing on regulatory costs. The indicators refer to primary legislation. 
Source: OECD (2025), Regulatory Policy Outlook 2025 [https://doi.org/10.1787/56b60e39-en] and Better Regulation across the 
European Union 2025 (forthcoming). 

Graph A6.2: Indicators of Regulatory Policy and 
Governance (iREG) 

Source: OECD (2025), Regulatory Policy Outlook 2025 and 
Better Regulation across the European Union 2025 
(forthcoming). 

to  uncertainty 

thus  contributing 

Member  States  to  complete  procedures.  For 
example,  the  mean  time  for  decision-making  by 
public  buyers, measured  as  the time  between  the 
deadline  for  receiving  offers  and  the  date  of  the 
contract award, is well above the EU average (144 
days in Cyprus compared to an EU average of 99 
days), 
for 
companies. Furthermore, the OECD product market 
regulation  indicators  show  that  Cyprus’s  licensing 
system is slightly more burdensome than the EU-
27 average and could be further aligned with best 
practices.  Although  the  government  keeps  an  up-
to-date  inventory  of  all  permits  and  licences 
required/issued to businesses by public bodies, the 
inventory  is  not  available  online  for  consultation. 
Furthermore,  there  is  no  requirement  for  the 
government  to  regularly  assess  whether  such 
licences and permits are still required or should be 
at 
withdrawn.  Moreover, 
central/federal  level  are  not  required  to  observe 
the  once-only  principle  and  ask  for  the  same 
information  from  citizens  or  business  more  than 
once (see also Annex 4).  

bodies 

public 

Efficiency of selected administrative 
procedures 

Social dialogue 

Selected  indicators  point  to  Cyprus’s  public 
longer  than  other 
administration  taking 

The  labour  relations  system  in  Cyprus  is 
based  on  free  collective  bargaining,  but  the 

51 

0.00.51.01.52.02.53.03.54.0Primary lawsSubordinateregulationsPrimary lawsSubordinateregulationsPrimary lawsSubordinateregulationsCY_StakeholderengagementCY_Regulatory ImpactAssessmentCY_Ex-post evaluation oflegislationMethodologySystematic adoptionTransparencyOversight and quality control2021EU-27Ex ante impact assessment of legislationEx post evaluation of legislationIdentify and assess the impacts of the baseline or ‘do nothing’ option.Is required to consider the consistency of regulations and address areas of duplication.Identify and assess the impacts of alternative non-regulatory options.Is required to contain an assessment of administrative burdens.Quantify administrative burdens of new regulations.Is required to contain an assessment of substantive compliance costs.Quantify substantial costs of compliance of new regulations.Compares the impact of the existing regulation to alternative options.Assess macroeconomic costs of new regulations. Periodic ex post evaluation of existing regulations is mandatory.Assess the level of compliance.Government uses stock-flow linkage rules when introducing new regulations (e.g., one-in one-out).Identify and assess potential enforcement mechanisms.A standing body has published an in-depth review of specific regulatory areas in the last 3 years.In the last 5 years, public stocktakes have invited businesses and citizens to assess the effectiveness, efficiency, and burdens of legislation.When developing new legislation, regulators are required to …Yes /  For all primary laws For major primary laws For some primary lawsNo / Never 
     
 
   
 
Table A6.2:  Key Digital Decade targets monitored through the Digital Economy and Society Index 

Source: State of the Digital Decade report 2024 

coverage  remains  low.  Industrial  relations  in 
Cyprus are based on two pillars: i) the commitment 
of  the  government  and  social  partners  to  use 
social  dialogue  and  tripartite  cooperation;  and  ii) 
the  safeguarding  of  the  fundamental  rights  to 
organise  and  to  bargain  collectively  provided  for 
by the Constitution and by International Standards 
ratified  by  the  Republic  of  Cyprus.  Despite  these 
commitments  and  high  historical  levels  (reaching 
almost  90%  in  the  1980s),  the  coverage  by 
collective agreements is currently around 40% (99). 
To  increase  participation,  Cyprus  is  in  the  process 
of developing an action plan to promote collective 
bargaining, 
Council 
the 
according 
(100)  on 
Recommendation  of  12  June  2023 
strengthening  social  dialogue  in  the  European 
Union.  Furthermore,  there  are  actions  under  the 
ESF+ for enhancing the administrative capacity of 
social partners.(101) 

to 

Digital public services 

There is room for improving the digitalisation 
of public services  (Table A6.2). Despite a recent 
positive  trend  in  its  average  annual  progress  in 
digital  public  services  for citizens,  Cyprus  remains 

(99)  Cyprus: Developments in working life 2023 | European 
Foundation for the Improvement of Living and Working 
Conditions 

(100) Council Recommendation of 12 June 2023 on strengthening 

social dialogue in the European Union    

(101) For an analysis of the involvement of Cyprus’ social partners 
at national level in the European Semester and the Recovery 
and Resilience Facility, see Eurofound (2025), National-level 
social  governance  of  the  European  Semester  and  the 
Recovery and Resilience Facility. 

below the EU average, with a score 74 out of 100 
(EU  average  of  79.4)  and  has  progressed  almost 
five  times  faster  (16.3%)  than  the  EU  average 
(3.1%). In terms of the availability of digital public 
services for businesses, Cyprus was slightly above 
the  EU  average,  scoring  86.1  out  of  100  (EU 
average  of  85.4).  Most  digital  investment  under 
Cyprus’s  recovery  and  resilience  plan  is  dedicated 
to  digitalisation  of  public  services  and  the 
administration (EUR 100.8 million). The percentage 
of e-government users demonstrates potential for 
improvement  at  72.4%,  below  the  EU  average  of 
75%.  As  part  of  the  digitalisation  of  public 
services,  Cyprus  will  acquire  100.000  eIDs  from 
the  national  eID  provider  to  be  offered  to  Cypriot 
citizens. The eID adoption will enable (a) access to 
governmental  systems  using  eID  as  alternative 
integration  of  electronic 
login  method, 
signature 
(c) 
into 
electronic  submission  of  not  fully  digitalized 
services,  transitioning  away  from  paper-based 
process. 

(b) 
information  systems  and 

In  terms  of  access  to  e-health  records, 
Cyprus is significantly below the EU average, 
scoring  68.1  out  of  100  in  2023  compared  to  an 
EU  average  of  79.1.  This  also  represents  a  slight 
decrease  compared  to  2022  (70.2)(102).  The  main 
gaps  in  Cyprus’s  e-health  maturity  concern  the 
lack  of  user  authentication  via  a  notified  eID 
scheme and an access service which fails to follow 
web  accessibility  guidelines.  As  part  of  this 
ongoing  digitalization  process  of  eHealth,  the 
integration  of  an  enhanced  authentication  login 
method  through  the  notified  eID  scheme  is  being 
evaluated  as  part  of  forthcoming  implementation 

(102) European Commission. Digital Decade 2024: Country reports 

52 

Digital Decadetarget by 20302022202320242024EU-27Digitalisation of public services156647479100Score (0 to 100)20212022202320232030286858685100Score (0 to 100)202120222023202320303na706879100Score (0 to 100)20212022202320232030CyprusEU-27Digital public services for citizensDigital public services for businessesAccess to e-health records 
 
 
 
  
 
stages.  Whilst  Cyprus  notified  an  eID  scheme  to 
the Commission in 2023, Cyprus has not yet set up 
and  notified eID  schemes for  legal  persons  under 
the eIDAS Regulation(103).  This means that Cypriot 
businesses  cannot  authenticate  themselves  to 
access  public  services  provided  by  other  Member 
States,  including  those  enabled  by  the  Once-Only 
Technical  System,  part  of  the  EU  Single  Digital 
Gateway (104). 

Cyprus 
is  advancing  towards  seamless, 
automated exchange of authentic documents 
and  data  across  the  EU.  It  has  developed  the 
necessary  infrastructure  and  is  beginning  the 
process  of  connecting  the  first  authorities  to  the 
Once-Only Technical System (105). 

Civil service  

system 

for  public 

Cyprus  aims 
to  enhance  merit  and 
performance  of  its  civil  service,  but  there 
in  these  efforts.  A 
have  been  delays 
significant  reform 
implemented  on  1 January 
2024 as part of the critical milestones frontloaded 
in  the  recovery  and  resilience  plan  introduced  a 
sector 
new  evaluation 
appointments  and  promotions,  shifting  the  focus 
from  knowledge-based  assessments  to  skills  and 
abilities.  Transitional  issues  caused  the  promotion 
weighting  criteria  to  be  temporarily  revised,  with 
the reform due to be phased in by 2026 (106). The 
examination  centres  responsible  for  conducting 
recruitment  examinations  for  middle  and  senior 
managers have faced several challenges. Concerns 
over  examination 
fairness,  and 
procedural  clarity  have  been  expressed  by  the 
public servants' trade unions.  

frequency, 

There  is  a  shift  towards  an  ageing  civil 
service.  This  trend  may  signal  the  need  for 
targeted  workforce  planning  strategies,  including 

strategies  to  increase  the  attractiveness  of  the 
public sector as an employer (107).  

Integrity 

there  have  been 

law  enforcement  authorities 

A  far  higher  percentage  of  companies  than 
the  EU  average  consider  corruption  to  be 
widespread  and  a  problem  when  doing 
business.  In  Cyprus,  96%  of  companies  consider 
that  corruption  is  widespread  (EU  average  64%), 
while  72%  consider  that  corruption  is  a  problem 
when  doing  business  (EU  average  36%) (108). 
Moreover,  only  10%  of  companies  believe  that 
people and businesses caught for bribing a senior 
official  are  appropriately  punished  (EU  average 
31%) (109).  While 
some 
improvements in the staffing and performance of 
investigating 
the 
corruption, few cases advanced including cases of 
high-level 
the  number  of 
convictions remained limited (110). The government 
has put forward an ambitious reform of the Office 
of  the  Attorney  General  aiming  to  strengthen  the 
independence 
the 
prosecution  service  and  address  previously 
the 
identified 
Independent 
Corruption, 
established under the recovery and resilience plan, 
has  made  steady  progress  in  building  up  its 
human and technical resources in order to function 
effectively.  Cyprus  is  not  a  signatory  party  to  the 
OECD Anti-Bribery Convention.  

(111).  Moreover, 

corruption,  and 

accountability 

Authority 

concerns 

against 

and 

of 

Public  procurement  continues  to  be  an  area 
at high risk of corruption in Cyprus, with the 
Government having taken specific initiatives. 
61%  of  companies  (EU  average  27%)  think  that 
corruption  has  prevented  them  from  winning  a 
public  tender  or  a  public  procurement  contract  in 
(112).  The 
practice 

three  years 

last 

the 

in 

(103) European Commission, eIDAS Dashboard. 

(107) Eurostat. Employment by sex, age and economic activity.  

(108) Flash Eurobarometer 543 on businesses’ attitudes towards 

corruption in the EU (2024).   

(104) European Commission, The Once Only Principle System: A 

breakthrough for the EU’s Digital Single Market. 

(109) Ibid. 

(105) European Commission, Once-Only Technical System 

Acceleratormeter. 

(106) In-Cyprus, 2024, available at: https://in-

cyprus.philenews.com/local/new-civil-service-evaluation-
system-to-commence-in-2024/  (Accessed on 25/01/2025). 

(110) See the 2024 country specific chapter for Cyprus of the Rule 

of Law Report, pp. 15-16. 

(111) Ibid., pp. 4-6. 

(112) Flash Eurobarometer 543 on businesses’ attitudes towards 

corruption in the EU (2024).   

53 

 
 
 
government adopted a set of guidelines to oversee 
the  implementation  of  projects  related  to  the 
national  recovery  and  resilience  plan,  including  a 
measure  to  strengthen  the  verification  of  public 
is  also 
procurement  against  corruption. 
the 
for 
promoting  an 
implementation  of  the 
international  standard 
against  bribery  and  corruption  in  the  private  and 
public sectors, including local administrations (113). 

incentive 

scheme 

It 

is 

the 

but 

scope 

Cyprus has implemented a public register for 
lobbyists, 
for 
there 
improvement.  Since  November 2023,  lobbyists 
have been able to register on the lobbying register 
held  by 
independent  Authority  Against 
Corruption  and  since  March  2024,  as  in  most 
lobbying  activities  shall  be 
Member  States, 
entered,  too.  However,  there  is  no  information  on 
the 
implementation  of  existing  measures  on 
conflicts  of  interest  for  public  officials  (114).  This 
in 
would  help 
corporate lobbying. 

to  strengthen 

transparency 

Justice 

the 

justice  system 
The  efficiency  of 
continues to face serious challenges, despite 
positive  trends.  The  disposition  time in  civil  and 
commercial  cases  at  first  instance  courts  has 
decreased  further  (from  761 days  in  2022  to 
605 days in 2023). However, it continues to be one 
of  the  highest  in  the  EU.  The  disposition  time  for 
administrative  cases  at  first  instance  has  also 
decreased (from 461 days in 2022 to 380 days in 
2023). Efforts to improve the quality of the justice 
system  are  ongoing,  in  particular  regarding  the 
level of digitalisation, which remains low. The lack 
of  an  integrated  electronic  case  management 
system 
the  digital 
transformation  of  justice  (115).  Plans  to  upgrade 
the  existing  i-justice  system  are  still  at  an  early 
stage.  As 
independence,  no 
judicial 
systemic deficiencies have been reported (116). 

impacts  adversely  on 

regards 

(113) Ibid., p.20. 

(114) Ibid., pp. 17-18. 

(115) Ibid., pp. 7-8. 

(116) For more detailed analysis of the performance of the justice 
system  in  Cyprus,  see  the  upcoming  2025  EU  Justice 
Scoreboard and the 2024 Rule of Law Report. 

54 

 
 
SUSTAINABILITY 
ANNEX 7: CLEAN INDUSTRY AND CLIMATE MITIGATION 

Cyprus faces significant challenges regarding 
its  clean  industry  transition  and  climate 
mitigation:  The  country  has  minimal  clean  tech 
manufacturing capacity, and its reliance on petrol-
powered  cars  indicates  a  lack  of  incentives  and 
infrastructure for greener vehicles. Dependence on 
raw  materials  underscores 
imported  critical 
Cyprus's  strategic  vulnerability,  exacerbated  by  a 
low  circular  material  use  rate.  Additionally,  the 
nation  struggles  with  high  emissions  intensity  in 
in  waste 
manufacturing  sectors  and 
management, 
policy 
necessitating 
enhancements.  This  annex  reviews  the  areas  in 
need of urgent attention in Cyprus's clean industry 
looking  at 
transition  and  climate  mitigation, 
different dimensions. 

lags 
urgent 

Strategic autonomy and technology 
for the green transition  

Net zero industry 

Cyprus has no net zero industry, and its clean 
is  minimal. 
tech  manufacturing  capacity 
in  2023,  Cyprus  surpassed  the 
Nevertheless, 
required  minimal 
installed  solar  photovoltaic 
capacity  of  500  MW  required  by  2025,  reaching 
581  MW  of  installed  capacity.  That  is  a  36.9% 
increase with respect to 2022. (117) 

Transforming the car industry 

Cyprus has no car industry. However, it may be 
worth  noting  that,  in  2023,  the  highest  shares  of 
petrol-powered  cars  (including  hybrids)  among 
new  registrations  were  noted  in  Cyprus  (91.6%) 
(118). This shows a lack of incentives to green and 
electrify the vehicle fleet, mainly due to the lack of 
the necessary infrastructure. 

Critical raw materials  

is 

policies 

Cyprus 
to 
implementing 
strengthen  supply  chains  and  the  uptake  of 
circular  solutions  for  critical  raw  materials. 
Cyprus  has  adopted  measures  to  improve  the 
performance  of  Extended  Responsibility  Schemes 
(EPR)  for  products  rich  in  critical  raw  materials 
(CRM),  such  as  waste  electric  and  electronic 
equipment (WEEE), batteries and construction and 
demolition  waste.  EPR  schemes  have  been 
established  for  batteries,  WEEE,  construction  and 
demolition  waste,  while  for  vehicles  end-of-life 
procedures  are 
rational 
management.  As  regards  the  use  of  secondary 
critical  raw  materials,  public  procurement  will  be 
considered  in  the  future;  when  it  comes  to 
research  and 
is 
planning  to  carry  out  a  mapping  of  old  mining 
waste  to  extract  copper  (Cu).  Finally,  Cyprus  has 
reported  the  deployment  of  measures  that  could 
remove  regulatory  barriers  to  cross-border  waste 
treatment.  

innovation  aspects,  Cyprus 

in  place 

their 

for 

Cyprus  does  not  extract  any  critical  raw 
materials  and  depends  entirely  on  imports. 
Cyprus’  main  critical  raw  material  imports  are 
aluminium  (EUR  14.7m)  and  nickel  (EUR  3.18m). 
Aluminium  is  mainly  imported  from  the  United 
Arab  Emirates  (UAE),  while  nickel 
is  mostly 
imported  from  Switzerland  and  Cote  d’Ivoire  (in 
smaller  quantities).  (119)  As  regards  the  level  of 
strategic  dependency  on  raw  materials,  Cyprus 
finds  itself  below  the  EU  average  (0.21  vs  0.23). 
(120)  

The  circular  use  of  material  would  help 
reduce Cyprus’ dependency on imports. In this 
regard,  Cyprus’  circular  material  use  rate  is  well 
below the EU average (5.4 vs 11.8%) and could be 
improved. (121) 

(117) EC, Net Zero Technologies (NZT) Monitoring Dashboard. 

(120) EC, 2025 Single Market and Competitiveness Scoreboard. 

(118) Eurostat, Passenger Cars in the EU (December 2024). 

(121)EC, 2025 Single Market and Competitiveness Scoreboard. 

(119) EC, Raw Materials Information System (RMIS) – Country 

Profile - Cyprus 

55 

 
 
 
 
 
 
 
Climate mitigation  

Industry decarbonisation 

The  greenhouse  gas  emissions  intensity  of 
Cyprus’s  manufacturing  sector  is  very  high, 
dominated  by 
industrial  processes  and 
product  use.  17%  of  Cyprus’s  total  greenhouse 
gas  emissions  comes  from  the  manufacturing 
sector,  less  than  in  the  EU  overall  (21%)  (122).  In 
2022,  industrial  production  in  Cyprus  emitted 
1.4 kg CO2eq  of  greenhouse  gases  per  euro  of 
gross  value  added  (GVA),  the  highest  level  in  the 
EU. Since 2017, the emissions intensity of Cyprus’s 
manufacturing industry declined by 13%, less than 
the  EU  average  reduction  (20%).  In  Cyprus’s 
greenhouse  gas  emissions  from  manufacturing, 
the  shares  of  energy  and  non-energy-related 
emissions account for 30%  and 70% respectively, 
with  the  latter  relating  to  industry  processes  and 
product  use.  The  share  of  process  and  product 
use  -related  emissions  is  comparatively  high  in 
Cyprus and has increased lately (123).  

In  recent  years,  energy-related  greenhouse 
emissions intensity in Cypriot manufacturing 
has  improved  in  line  with  the  EU  average, 
unlike  the  process  and  product  use-related 
part (124).  Between  2017  and  2022,  the intensity 

(122) In  2023.  Manufacturing  includes  all  divisions  of  the  “C” 
section  of  the  NACE  Rev.  2  statistical  classification  of 
economic  activities.  In  the  remainder  of  this  section,  unless 
indicated  otherwise,  data  on  manufacturing  refer  to  the 
divisions  of  the  NACE  section  C  excluding  division  C19 
(manufacture  of  coke  and  refined  petroleum  products),  and 
the  year  2022.  The  source  of  all  data  in  this  section  is 
Eurostat;  data  following  the  UNFCCC  Common  Reporting 
Framework (CRF) are from the European Environment Agency 
(EEA), republished by Eurostat. 

(123)The  significant  increase  in  emissions  from  industrial 
processes  appears  to  relate  to  increased  emissions  from 
the  use  of  F-gases.  The  change  rests  on  a  methodology 
used to calculate emissions that relies on the use of GDP 
as  an  indicator  for  emissions.  This  is  estimated  to 
overestimate  emissions,  as 
is 
considered  to  be  constantly  increasing;  it  will  be  revised 
once  the  equipment  inventory  is  completed,  before  the 
2026 emissions inventory. 

installed  equipment 

(124) For the GHG emissions intensity of GVA related to energy use 
and  industrial  processes  and  product  use  respectively,  GHG 
emissions  are  from  inventory  data  in  line  with  the  UNFCCC 
Common  Reporting  Format  (CRF),  notably  referring  to  the 
source sectors CRF1.A.2 –  fuel combustion in manufacturing 
industries  and  construction  and  CRF2  –  industrial  processes 
and  product  use.  The  CRF1.A.2  data  broadly  correspond  to 

same 

period, 

intensity 

emissions 

of  manufacturing 
in  Cyprus  with  regard  to 
emissions related to industry process and product 
use  declined  by  7%,  the  lowest  improvement  in 
the EU and much less than the average of 23%. In 
the 
in 
manufacturing related to energy use improved by 
17%,  comparable  to  the  EU  average  (16%). 
Between  2017  and  2022,  the  share  of  electricity 
and renewables in the final energy consumption of 
Cyprus’s  manufacturing  sector  increased  by  10 
percentage points, to 40%, the largest increase in 
the  EU.  The  energy  intensity  of  manufacturing 
production  declined  by  about  4%,  from  2.5 GWh 
per  euro  of  gross  value  added  in  2017  to 
2.3 GWh/€ in 2022.  

The  manufacture  of  non-metallic  minerals 
contributes to the high emissions intensity of 
manufacturing 
in  particular. 
in  Cyprus 
Energy  -intensive  industries (125)  account  for  17% 
of  Cyprus’s  manufacturing  gross  value  added 
(2022).  Of 
this,  11  percentage  points  are 
accounted  for  by  the  processing  of  non-metallic 
minerals.  With  11 kg CO2eq  per  euro  of  GVA,  the 
emissions  intensity  of  production  in  this  sector  is 
the highest in the EU, more than five times the EU 
average of 2.2 kg/€. High energy prices and global 
competition more broadly put pressure on energy-
intensive  industries.  In  the  first  half  of  2024, 
Cyprus  had  the  third  highest  average  electricity 
price in the EU (126).  

decarbonisation 

Cyprus  envisages  some  policies  to  promote 
the 
of  manufacturing 
production  in  the  longer  term.  In  addition  to 
the  policies  and  measures  presented  in  its  final 
energy  and  climate  plan  (December  2024),  for 

the NACE C and E sectors, excluding C-19. GVA data (in the 
denominator  for  both  intensities)  are  aligned  with  this 
sectoral  coverage.  Therefore,  they  are  not  fully  consistent 
with the data referred to in other part of this section. 

(125)Notably,  the  manufacture  of  paper  and  paper  products 
(NACE  division  C17),  of  chemicals  and  chemical  products 
(C20),  “other”  non-metallic  mineral  products  (C23;  this 
division  includes  manufacturing  activities  related  to  a 
single substance of mineral origin, such as glass, ceramic 
products, tiles, and cement and plaster), and basic metals 
(C24). To date, these industries are energy-intensive – i.e. 
consuming much energy both on site and/or in the form of 
purchased  electricity  –  and  greenhouse  gas  emissions 
intensive, in various combinations. 

(126)With an average electricity price of EUR 0.1776 per KW/h 
(against  an  EU  average  of  0.1389).  Source:  European 
Commission,  Eurostat.  For  a  detailed  analysis  of  energy 
prices, see Annex 8 on the affordable energy transition. 

56 

 
 
 
 
achieving  de-carbonisation  by  2050,  Cyprus  is 
considering  introducing  (i)  a  carbon  tax  and  (ii) 
carbon  capture  and  storage  activities  for  ETS 
installations 
the  electricity,  cement,  and 
ceramics  sectors  (20%  in  2040-2049,  70%  in 
2050), and a plan to phase down F-gases.  

in 

Graph A7.1: GHG emission intensity of manu-
facturing and energy-intensive sectors, 2022 

implementation of the full set of measures. While 
Cyprus  could  use  domestic  flexibilities  available 
under the effort sharing regulation, this would not 
be sufficient to close the gap to target. 

Swift  action  on  decarbonising  buildings 
appears  particularly  needed 
in  Cyprus. 
Between  2005  and  2023,  greenhouse  gas 
emissions  from  buildings  decreased  by  14 %  in 
Cyprus, much less than by the 33 % seen in the EU 
overall.  Speeding  up  climate  mitigation  in  this 
sector  would  help  protect  households  and 
businesses  in  Cyprus  from  the  impact  of  the 
forthcoming carbon price.  

Graph A7.2: Greenhouse gas emissions in the 
effort sharing sectors in Mt CO2eq, 2005-2023 

Source: Eurostat. 

Reduction  of  emissions  in  the  effort  sharing 
sectors 

To  attain  its  2030  effort  sharing  target, 
Cyprus  needs 
to  swiftly  specify  and 
implement further climate mitigation policies 
(127). In 2023, GHG emissions from Cyprus’ effort 
sharing  sectors  are  expected  to  have  been  4.6% 
above those of 2005. By 2030, current policies are 
projected to reduce them by 3.8% relative to 2005 
levels.  Additional  policies  considered  in  Cyprus’s 
final  updated  NECP  are  projected  to  entail 
reductions  by  a  further  22.1 percentage  points. 
This results in a shortfall regarding Cyprus’s effort 
-32%,  by  6.1  percentage 
sharing 
points (128).  Given  this  shortfall  and  the  large 
distance between current and additional measures, 
swift  and  steady  adoption  will  be  critical  for  the 

target, 

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

(128) The effort sharing emissions for 2023 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’ final updated NECP. 

57 

Source: European Environment Agency 

Sustainable industry 

Circular economy transition 

Cyprus’s  circular  transition  is  progressing 
slowly,  but  with  some  encouraging  policy 
steps. Circular use of material in Cyprus was at its 
highest  rate  in  2022,  when  it  reached  8.5% 
following  a  steady  increase,  thus  showing  the 
country’s  potential.  However,  with  a  decrease  to 
5.4%  in  2023,  it  is  far  behind  the  EU  average  of 
11.8%.  With  EUR  1.36  generated  per  kg  of 
material  consumed  in  2023,  resource  productivity 
in  Cyprus  is  well  below  the  EU  average  of  EUR 
2.22  EUR  per  kg.  Cyprus's  2021-27  Circular 
Economy  Action  Plan,  reinforced  by  the  Recovery 
is  advancing  the 
and  Resilience  Plan  (RRP), 
resource 
country's 
management. 
several 
ministries,  the  action  plan  focuses  on  cultivating 

to  sustainable 
across 

Coordinated 

transition 

024681012C-C19C17C20C23C24KG CO2eq / €CyprusEU-2700.511.522.533.544.5520052023MtCO2eDomestic transport (excl. aviation)Buildings (under ESR)AgricultureSmall industryWaste 
  
 
      
economy 

circular 
awareness, 
encouraging 
infrastructure 
investment,  developing  essential 
and managing municipal waste effectively. Priority 
sectors  such  as  agriculture,  food,  manufacturing, 
and  hospitality  are  being  targeted,  due  to  their 
for  circular 
economic 
integration. 

impact  and  potential 

Graph A7.3: Municipal waste treatment 

Source: Eurostat 

To  meet  its  circular  economy  and  waste 
objectives, Cyprus  needs  to  increase  circular 
economy investment by an estimated EUR 40 
million a year, with an additional EUR 13 million 
for waste management action not belonging to the 
circular  economy.  Combined,  this  amounts  to  EUR 
53  million  a  year,  representing  0.2%  of  Cyprus’ 
GDP. Of the circular economy gap, EUR 11 million 
relates to recent initiatives, such as eco-design for 
sustainable  products,  packaging  and  packaging 
waste,  labelling  and  digital  tools,  critical  raw 
materials recycling, and measures proposed under 
the  Waste  Framework 
the  amendment  of 
Directive,  and  EUR  30  million  constitutes  further 
investment  needed  to  unlock  Cyprus’  circular 
economy potential.  

Zero pollution industry 

is  meeting 

Air  quality  in  Cyprus  is  generally  good  with 
some  exceptions.  The  emissions  of  several  air 
pollutants  have  decreased  significantly  in  Cyprus 
since  2005,  while  GDP  growth  has  continued. 
Cyprus 
reduction 
commitments  for  2020-2029  for  air  pollutants 
NOx,  non-methane  volatile  organic  compounds 
(NMVOC),  ammonia  (NH3)  and  PM2.5.  It  is  not 
meeting  them  for  sulphur  dioxide  (SO2).  Cyprus 
projects 
reduction 
its 
commitments for 2030 onwards for NOx, NMVOC, 
SO2, NH3 and PM2.5. 

its  emission 

to  meet 

emission 

Cyprus’s  waste  management  performance  is 
still  lagging  significantly  behind.  Municipal 
waste  generation  per  capita  in  Cyprus  slightly 
decreased  between  2010 and  2023.  In  2023,  the 
country generated 674 kg of municipal waste per 
capita,  which  is  significantly  above  the  estimated 
EU27  average  of  511  kg  per  capita  (see  Graph 
A7.3). For municipal waste, little progress has been 
made recently: in 2022, only 15% of the municipal 
waste  was  prepared  for  re-use  or  recycled, 
significantly  below  the  49%  EU27  average  in  the 
same year. The country’s overall packaging waste 
recycling  rate  reached  70%  in  2022.  However, 
data  quality 
in 
overestimating the recycling rate. Cyprus is in the 
category  of  countries  at  risk  of  missing  both  the 
municipal waste and the packaging waste targets. 
Cyprus  is  also  at  risk  of  not  meeting  the  2035 
target  of  max  10%  of  municipal  waste  landfilled. 
The  preparing  for  re-use  and  recycling  rate  of 
mineral  construction  and  demolition  waste  in 
Cyprus  in  2022  was  92.3%,  compared  to  the  EU 
average of 79.8%. 

issues  are 

result 

likely 

to 

in  Cyprus  are 

Emissions  to  water 
low 
compared to other EU Member States. Cyprus 
ranks  last  in the  EU  in terms  of  both  the  amount 
of  emissions  of  heavy  metals  to  water,  and 
emissions intensity (EU average intensity is 0.864 
kg/billion  EUR  GVA).  The  main  contributor  to 
emissions to water in Cyprus is the livestock sector 
for total phosphorus and total nitrogen. 

The costs of pollution remain higher than the 
investment  into  pollution  prevention  and 
control. The latest available annual estimates (for 
2022)  by  the  European  Environment  Agency (129) 
for  Cyprus  attribute  690 deaths  a  year  (or  6  600 
years  of  life  lost  (YLL))  to  fine  particulate  matter 
(PM2.5) (130),  260  deaths  a  year  (or  2 500  YLL)  to 

(129) European Environment Agency, Harm to human health from air 

pollution in Europe: burden of disease 2024. 

(130) Particulate matter (PM) is a mixture of aerosol particles (solid and 
liquid) covering a wide range of sizes and chemical compositions. 
PM10 refers to particles with a diameter of 10 micrometres or less. 

58 

664625650673674010020030040050060070080020192020202120222023Kg per capitaMaterial recyclingComposting and digestionLandfill/disposalTotal incineration (incl. energy recovery)Waste treatment unspecifiedEU-27 total waste per capita 
      
 
 
nitrogen dioxide (NO2) (131), and 140 deaths a year 
(or 1 400 YLL) to ozone (132). At the same time, to 
meet  its  environmental  objectives  on  pollution 
prevention  and  control  (towards  zero  pollution), 
Cyprus  needs  to  provide  an  additional  EUR  33 
million per year (0.12% of GDP), mostly related to 
clean air. 

PM2.5 refers to particles with a diameter of 2.5 micrometres or less. 
PM is emitted from many human sources, including combustion. 

(131) Nitrogen dioxide (NO2) pertains to a group of gases called NOx, which 
also comprises nitrogen monoxide (NO). NOx is emitted during fuel 
combustion e.g. from industrial facilities and the road transport 
sector. 

(132) Low-level ozone is produced by photochemical action on pollution. 
This year, for the first time, the impact of long-term exposure to 
ozone has also been taken into account. In previous analysis by the 
European Environment Agency, only the impact of short-term 
exposure was estimated. 

59 

 
 
Table A7.1:  Key clean industry and climate mitigation indicators: Cyprus 

Source:  Net zero industry: European Commission: The net-zero manufacturing industry landscape across Member States: final 
report, 2025. Automotive industry transformation: Eurostat. Critical raw materials: Eurostat. Climate mitigation: See 
footnotes in the "climate mitigation" section; reduction of effort sharing emissions: EEA greenhouse gases data viewer; European 
Commission, Climate Action Progress Report, 2024. Sustainable industry: Years of life lost due to PM2.5: Eurostat and EEA, 
Harm to human health from air pollution in Europe: burden of disease status, 2024. Air pollution damage: EEA, EU large industry 
air pollution damage costs intensity, 2024. Emissions covered: As, benzene, Cd, Cr, Hg, NH3, Ni, NMVOC, NOX, Pb, dioxins, PM10, 
PAH, SOX. Water pollution intensity: EEA, EU large industry water pollution intensity, 2024. Releases into water covered from 
cadmium, lead, mercury, nickel. Other indicators: Eurostat. 

60 

Strategic autonomy and technology for the green transitionNet zero industryOperational manufacturing capacity 2023- Solar PV (c: cell, w: wafer, m: module), MW-- Electrolyzer, MW-- Wind (b: blade, t: turbine, n: nacelle), MW-- battery, MWh-Automotive industry transformation201720182019202020212022202320182021Motorisation rate (passenger cars per 1000 inhabitants), %609629645645655653665539561New zero-emission vehicles, electricity motor, %0.140.040.460.410.743.465.381.038.96Critical raw materials201720182019202020212022202320182021Material import dependency, %34.031.432.431.931.132.724.222.6Climate mitigationTrendIndustry decarbonisation201720182019202020212022202320172022GHG emissions intensity of manufacturing production, kg/€1.621.281.151.271.261.41 0.340.27Share of energy-related emissions in industrial GHG emissions66.466.968.367.368.769.069.344.842.5Energy-related GHG emissions intensity of manufacturing312.1239.3220.2231.7232.6259.3-158.4132.9and construction, kg/€Share of electricity and renewables in final energy consumption30.136.035.037.439.939.840.443.344.2in manufacturing, %Energy intensity of manufacturing, GWh/€2.482.081.902.102.122.382.321.291.09Share of energy-intensive industries in manufacturing production16.67.3GHG emissions intensity of production in sector [...], kg/€- paper and paper products (NACE C-17)0.180.200.180.240.130.15--0.730.68- chemicals and chemical products (NACE C20)0.260.170.170.200.270.31--1.251.26- other non-metallic mineral products (NACE C23)12.9610.438.899.099.7311.26--2.532.24- basic metals (NACE C24)0.380.180.170.140.080.11--2.793.49Reduction of effort sharing emissions20182019202020212022202320182023GHG emission reductions relative to base year, % 3.44.34.6- domestic road transport0.61.8-8.8-2.4-3.7-3.41.45.2- buildings-22.0-9.6-14.7-19.5-14.7-14.421.432.92005202120222023TargetWEMWAMEffort sharing: GHG emissions, Mt; target, gap, %4.34.44.44.5-32.0-28.2-6.1Sustainable industryTrendCircular economy transition20182019202020212022202320182021Material footprint, tonnes per person19.420.519.620.720.620.714.715.0Circular material use rate, %2.8        3.2        3.8        5.9        8.5        5.4        11.611.1Resource productivity, €/kg1.4        1.4        1.4        1.4        1.6        1.6        2.12.3Zero pollution industryYears of life lost due to PM2.5, per 100,000 inhabitants655      692      674      729      827      -702571Air pollution damage cost intensity, per thousand € of GVA    123.8        27.5      Water pollution intensity, kg weighted by human factors per bn € GVA    0.0   0.9CyprusEU-27CyprusEU-27CyprusEU-27 
 
 
 
 
 
  
 
ANNEX 8: AFFORDABLE ENERGY TRANSITION 

This  annex  outlines  the  progress  made  and 
the  ongoing  challenges  faced  in  enhancing 
energy  competitiveness  and  affordability, 
while advancing the transition to net zero.  It 
examines  the  measures  and  targets  proposed  in 
the  final  updates  to  the  national  energy  and 
climate plans (NECPs) for 2030. 

Cyprus  has  shown  progress  in  introducing 
renewable  energy  and  implementing  energy 
efficiency  measures,  but  the  energy  sector 
still  faces  considerable  challenges.  Ending  its 
the  Great  Sea 
through 
isolation 
energy 
Interconnector,  diversifying 
supplies, 
energy 
expanding  grids  and  empowering  consumers  will 
be crucial for Cyprus in order to achieve its goals. 

Energy prices and costs 

Graph A8.1: Retail energy price components for 
household and non-household consumers, 2024 

and 25%, respectively), while the share of network 
costs were considerably lower than the EU average 
(6.6%  and  9.8%  of  the  final  price  of  electricity, 
compared to an EU average of 15.5% and 27.2%, 
respectively).   

Throughout  2024,  Cyprus  kept  in  place  the 
support  measures  to  help  consumers  – 
including  vulnerable  groups  –  mitigate  high 
energy  costs.  These  measures  aimed  to  reduce 
tackle  energy  poverty  by 
energy  bills  and 
compensating for a proportion of electricity prices 
above  a  set  limit,  covering  up  to  85%  of  cost 
increases  for  consumption  below  400  kWh  and 
decreasing  for  higher  consumption  levels.  For 
vulnerable  consumers,  the  compensation  reached 
100%  of  the  excess  cost  above  the  set  limit. 
Reductions  in  excise  duty  on  petroleum  products 
were also applied during the first quarter of 2024. 

Flexibility and electricity grids 

(i) For household consumers, consumption band is DC for 
electricity and D2 for gas. Taxes and levies are shown 
including VAT. 
(ii) For non-household consumers, consumption band is ID for 
electricity and I4 for gas. Taxes and levies are shown 
excluding VAT and recoverable charges, as these are typically 
recovered by businesses. 
Source: Eurostat 

Cyprus’s retail energy prices dropped in 2024 
but  remained  above  EU  average  for  both 
non-household  and  household  prices.  Notably 
for  non-household  consumers,  electricity  prices  in 
Cyprus  were  the  highest  in  the  EU  while  for 
households,  Cyprus  ranked  sixth.  The  share  of 
taxes  and  levies  remained  above  EU  average 
(25.9%  and  35.5%  of  the  final  price  of  electricity 
for  non-household  and  household  consumers 
respectively, compared to an EU average of 15.4% 

(PCI) 

known  as 

Cyprus is currently isolated from the internal 
energy market. Despite delays, work is currently 
underway  to  implement  the  project  of  common 
the  Great  Sea 
interest 
Interconnector,  which,  in  the  first  phase,  will 
connect, Cyprus to Greece through Crete. As a PCI, 
the  project  has  received  substantial  EU  funding 
from  the  Connecting  Europe  Facility,  in  particular 
the 
largest  ever  grant  to  a  single  PCI  of 
EUR 658 million,  for  constructing  the  part  of  the 
Great  Sea  Interconnector  between  Cyprus  and 
Crete. 

There  have  been  significant  delays 
in 
connecting  new  plants  that  use  renewable 
energy sources (RES) to the grid. This is due to 
the need for further expanding and upgrading the 
Cypriot  electricity  system  and  grid.  Based  on  the 
Cypriot Transmission System Operator curtailment 
projections  the  curtailments  projected  for  2025 
are  estimated  around  4-5%(133) 
for  small 
commercial  and  residential  systems,  due  to  the 

https://www.eac.com.cy/EL/EAC/NewsAndAnnouncemen

ts/Pages/perikopesparagvgisfvsystimata.aspx 

(133)

61 

 
 
 
 
 
 
 
 
 
large  increase  in  the  number  of  photovoltaic 
systems  and  the  isolated  electricity  system  in 
Cyprus. 

Cyprus  has  currently  no  operational  fossil-
free  electricity  storage  capacity.  With  respect 
to flexibility in the power system, in August 2024, 
the  Cyprus  Energy  Regulatory  Authority  (CERA) 
adopted  a  decision  granting 
the  Electricity 
Authority  of  Cyprus  (EAC)  a  licence  to  install  an 
energy  storage  system  for  commercial  use  in  the 
Dhekelia  power  station(134).  The  storage  project 
will have a maximum output power of 80 MW and 
storage power of 160 MWh, and its construction is 
reported to be commencing in 2025. Even though 
the  regulatory  system  for  storage  has  been  set 
already from 2019(135) and there have been some 
permits  issues  in  2023,  both  for  stand-alone  and 
collated  storage  facilities,  no  project  has  been 
realised yet(136). 

The  installation  of  smart  electricity  meters 
began  in  early  2025,  after  procurement 
challenges  and  delays.  Deployment  of  smart 
meters  will  empower  consumers  and  support 
integration  of  new  loads  and  photovoltaics  in  the 
electricity  system,  through  smart  energy  services. 
Cyprus has included provisions for both renewable 
energy  communities  (RECs)  and  citizen  energy 
communities (CECs) in its national framework. The 
Cyprus  Energy  Regulatory  Authority 
(CERA) 
adopted a  regulatory decision entitled ‘Regulatory 
the 
framework 
and 
energy 
development 
renewable  energy  communities’,  with  the  aim  of 
facilitating the activation of energy communities. 

facilitate 
communities 

to  promote  and 

of 

last  decade(137).  When  it  comes  to  households, 
electricity  accounts  for  43.3%  of  final  energy 
consumption, while in industry it represents 21.4% 
(see  also  Annex  7).  For  the  transport  sector,  this 
proportion  remains  negligible  at  0.1%.  Further 
is 
progress 
required  for  cost  effectively  decarbonising  the 
economy  and  bringing  the  benefits  of  affordable 
renewable generation to consumers. 

in  electrification  across  sectors 

Renewables and long-term contracts 

Cyprus has shown progress in deploying RES, 
with 24% of its electricity mix being supplied 
by  renewables  in  2024,  compared  to  20%  in 
2023. This share leaves Cyprus far behind the EU’s 
overall RES share of 47%(138). In 2024, renewables 
reaching  895  MW. 
capacity  grew  by  19%, 
Regarding  solar  deployment,  the  total  installed 
capacity  in  2024  was  724  MW  (+  143  MW,  an 
increase  of  24.6%  compared  to  2023),  while 
installed  wind  capacity  remained  at  158  MW,  all 
onshore(139). In 2023, 20.2% of gross final energy 
consumption  came  from  renewable  sources,  from 
19.4%  in  2022.  In  its  final  updated  NECP,  Cyprus 
sets a RES target of 33.17% for 2030, just above 
the  contribution  calculated  by  the  Governance 
Regulation.  The  RES  curtailment  issues  seriously 
hamper  the  increase  of  RES  consumption  in 
Cyprus. 

In  2023,  electricity  accounted  for  26.0%  of 
Cyprus’s  final  energy  consumption  (above 
the  EU  average  of  22.9%),  and  this 
proportion  has  seen  a  slight  increase  in  the 

(134) CERA – Decision 274/2024. 
(135) Decree 224/2019 (Κ.Δ.Π.) 

https://www.cera.org.cy/Templates/00001/data/nomothesia/e
thniki/hlektrismos/rythmistikes_apofaseis/2019_03.pdf 

(136) 

CAGR (compound annual growth rate) of 0.6% 

(137) 
between 2013 and 2023 and minimum/maximum share of 
24.6% and 26.0%, respectively. 
(138) Yearly electricity data, Ember. 
(139) Renewable capacity statistics 2025, IRENA 

62 

 
 
 
 
 
 
 
Graph A8.2: Cyprus' installed renewable capacity 
(left) and electricity generation mix (right) 

Energy efficiency 

“Other” includes renewable municipal waste, solid biofuels, 
liquid biofuels, and biogas. 
Source: IRENA, Ember 

its 
Cyprus  has  taken  steps  to  simplify 
procedures  on  permits  and  align  them  with 
the  EU  framework,  but  work  is  still  ongoing. 
Cyprus  was  one  of  the  first  countries  to  set  up  a 
digital  one-stop-shop/single  point  of  contact. 
Nevertheless,  the  ministries  and  authorities  that 
participate  in  the  licensing  process  do  not  always 
coordinate  their  work  in  such  a  way  as  to  allow 
RES  projects  to  receive  the  licences  they  need 
within  the  stipulated  time  frame.  Regarding 
visibility  for  future  development,  as  part  of  the 
wind  pledges  under  the  European  wind  power 
action plan, Cyprus committed to installing 12 MW 
of  onshore  wind  capacity  by  2024  but  did  not 
make any further commitments in this regard. No 
schedule on the expected allocation of support for 
renewables  has  been  published  on  the  platform 
Union  Renewables  Development  Plans.  However, 
the Cypriot government announced a new support 
scheme  for  the  installation  of  a  photovoltaic 
system  and/or  roof  thermal  insulation  in  existing 
homes(140). 

Cyprus  has  yet  to  register  any  corporate 
renewable power purchase agreement, which 
can  be  explained  in  part  by  ongoing  market 
liberalisation.  In  its  final  updated  NECP,  Cyprus 
in  order  for  power  purchase 
mentions  that, 
agreements  to  become  possible, 
its  national 
electricity  market  rules  need  to  be  changed. 
Similarly,  there  is  no  visibility  regarding  contracts 
for difference. 

(140) https://resecfund.org.cy/en/SX_2024. 

Energy  efficiency  gains  have  slowed 
in 
Cyprus,  although  there  is  still  untapped 
potential in energy efficiency. In 2023, primary 
energy  consumption  (PEC)  increased  by  1.4%  to 
2.52  Mtoe.  Final  energy  consumption 
(FEC) 
increased  by  2.8%  to  1.87  Mtoe  compared  to 
2022; FEC increased in all the main sectors apart 
from  the  residential  sector,  where  a  reduction  of 
6.68%  was  registered.  More  specifically  FEC 
increased  in  transport  by  4.40%,  in  industry  by 
0.85%  and  in  services  by  2.2%.  Under  Annex  I  of 
the  recast  Energy  Efficiency  Directive  (Directive 
(EU) 2023/1791),  the target for  Cyprus  stemming 
from  the  formula  is  a  PEC  of  2.02  Mtoe  and  an 
FEC of 1.81 Mtoe by 2030. 

investment  and 

supportive  national 
Cyprus  deploys  a 
financing  framework  that  mobilises  energy 
efficiency 
is  composed 
mainly  of  grants  and  tax  rebates.  In  2024, 
Cyprus  continued  to  implement  several  relevant 
financing  measures  and  launched  new  schemes 
for  the  residential  and  services  sectors.  It  would 
also  be  beneficial  if Cyprus  were to  provide more 
support  to  the  transition  and  sustainability  of  the 
transport sector. In addition, Cyprus could consider 
creating  more  sustainable  energy  efficiency 
financing  by  mobilising  more  private  financing  as 
well as its financial institutions in the frame of the 
European Energy Efficiency Financing Coalition. 

By the submission of the final NECP of 2024, 
Cyprus  also  notified  the  Commission  the 
updated  comprehensive  heating  and  cooling 
assessment  (Annex  10  of  the  final  NECP 
identified  with  the 
update).  The  technology 
greatest  economic  potential  to  meet  the  heating 
and cooling requirement in the residential, tertiary 
and  agricultural  sectors  comes  from  heat  pumps 
combined  with  photovoltaic  panels,  while  the 
technology with the greatest economic potential to 
meet  the  requirement  of  hot  water  is  solar 
thermal systems.  

Cyprus’s  energy  reduction  trend 
in  the 
residential  sector  (corresponding  to  a  7.7% 
decrease  from  2018-2022  of  final  energy 

63 

 
 
 
 
 
 
 
consumption,  climate  corrected  for  space 
heating)  seems  to  have  reversed  in  2023, 
while  greenhouse  gas  emissions 
in  the 
household  and  service  sectors  saw  a  0.3% 
increase  between  2022  and  2023.  In  2022, 
heating  and  cooling  represented  71%  of  the 
country’s  residential  final  energy  consumption. 
Heat pumps accounted for 23% of residential final 
energy  consumption,  whereas  boilers  made  up 
41.5%. 

Electricity  in  Cyprus  was  3.5  times  more 
expensive than oil in 2023, which affects the 
financial  savings  linked  to  the  energy  saved 
by  using  heat  pumps  for  heating.  Financial 
support for heat pumps covering up to 60% of the 
installation cost is available, depending on certain 
eligibility criteria. 

Security of supply and diversification 

In  2023,  the  energy  mix  in  Cyprus  continued 
to be dominated by fossil fuels, with oil and 
petroleum  products  accounting  for  85%  of 
gross  inland  consumption,  and  renewables 
(and biofuels) reaching 12%. 

Cyprus  aims  to  include  natural  gas  in  its 
is  developing  an  LNG 
energy  mix  and 
terminal  at  the  port  of  Vasilikos.  This  was  a 
project of common interest until the 5th Union list. 
The  project  is  experiencing  significant  delays  and 
is  expected  to  be  in  operation  in  2026.  No 
progress  has  been  registered  with  the  internal 
Cypriot distribution grid. 

Cyprus  benefits  from  a  temporary  exemption  as 
regards natural gas interconnections as part of the 
Union  list  of  projects  of  common  interest  and 
projects  of  mutual  interest.  This  applies  to  the 
Eastmed  project,  which  seeks  to  bring  gas  from 
the  Levantine  fields  to  Cyprus  and  further  to 
Greece and link Cyprus to the continental European 
gas grid through Greece. The project is in the pre-
application  phase,  as  the  application  file  has  not 
been completed yet by the project promoter.  

Fossil fuel subsidies 

In  2023,  environmentally  harmful  (141)  fossil 
fuel  subsidies  without  a  planned  phase-out 
represented  0.16%(142)  of 
before  2030 
Cyprus’ GDP(143), below with the EU weighted 
average of 0.49%. Tax measures accounted for 
79%  of  this  volume,  while  the  remaining  share 
were  direct  grants.  However,  Cyprus’  2023 
Effective Carbon Rate(144) averaged EUR 76.47 per 
tonne of CO₂, below the EU weighted mean of EUR 
84.80(145). 

141 Direct fossil fuel subsidies that incentivise maintaining or 
increasing in the availability of fossil fuels and/or use of 
fossil fuels. 

142 Numerator is based on volumes cross-checked with the 

Cypriot authorities. For all Member States, it includes public 
R&D expenditures for fossil fuels as reported by the IEA 
(Energy Technology RD&D Budgets) and excludes, for 
methodological consistency, excise tax exemption on 
kerosene consumed in intra-EU27 air traffic. 

143 2023 Gross Domestic Product at market prices, Eurostat. 

144 The Effective Carbon Rates is the sum of carbon taxes, ETS 
permit prices and fuel excise taxes, representing the 
aggregate effective carbon rate paid on emissions. 

(145) OECD (2024), Pricing Greenhouse Gas Emissions 2024 

64 

 
 
 
 
Table A8.1:  Key Energy Indicators 

Source: Eurostat, ENTSO-E, S&P Platts 

65 

20212022202320242021202220232024Household consumer - Electricity retail price (EUR/KWh)0.2143          0.2919              0.3589              0.3246          0.2314              0.2649          0.2877          0.2879          Energy & supply [%]51.0%62.7%52.7%54.7%36.6%54.3%55.6%47.8%Network costs12.7%8.9%8.7%9.8%26.7%25.3%24.8%27.2%Taxes and levies including VAT36.3%28.4%38.7%35.5%36.7%20.3%19.6%25.0%VAT15.6%12.4%15.7%15.7%14.5%13.4%13.8%14.6%Household consumer - Gas retail pricen/an/an/an/a0.0684              0.0948          0.1121          0.1128          Energy & supplyn/an/an/an/a43.7%61.0%64.5%53.9%Network costsn/an/an/an/a22.5%17.3%17.1%18.3%Taxes and levies including VATn/an/an/an/a33.8%21.7%18.4%27.8%VATn/an/an/an/a15.5%11.6%10.2%13.6%Non-household consumer - Electricity retail price0.1735          0.2783              0.2702              0.2452          0.1242              0.1895          0.1971          0.1661          Energy & supply53.2%58.1%54.6%57.4%43.0%66.5%63.0%55.8%Network costs7.8%5.1%5.8%6.6%15.8%10.7%11.9%15.5%Taxes and levies excluding VAT28.8%26.1%29.5%25.9%30.4%9.9%11.2%15.4%Non-household consumer - Gas retail pricen/an/an/an/a0.0328              0.0722          0.0672          0.0517          Energy & supplyn/an/an/an/a66.2%77.3%77.3%68.7%Network costsn/an/an/an/a7.7%3.8%5.3%7.1%Taxes and levies excluding VATn/an/an/an/a12.5%6.1%7.3%11.6%Wholesale electrity price (EUR/MWh)n/an/an/an/a111.0233.299.184.7Dutch TTF (EUR/MWh)n/an/an/an/a46.9123.140.534.420172018201920202021202220232024Gross Electricity Production (GWh)5,004             5,061                5,141                4,849             5,119                5,268             5,329             -Combustible Fuels4,621         4,640             4,685             4,313         4,405            4,442         4,290         -Nuclear-              -                 -                 -              -                 -              -              -Hydro-              -                 -                 -              -                 -              -              -Wind211             221                239                240             246                224             208             -Solar172             199                218                296             468                602             831             -Geothermal-              -                 -                 -              -                 -              -              -Other Sources-              -                 -                 -              -                 -              -              Gross Electricity Production [%]Combustible Fuels92.3%91.7%91.1%88.9%86.0%84.3%80.5%-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%-Wind4.2%4.4%4.6%5.0%4.8%4.3%3.9%-Solar3.4%3.9%4.2%6.1%9.1%11.4%15.6%-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)-                 -                    -                    -                 -                    -                 -                 -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%0.0%Share of renewable energy consumption - by sector [%]Electricity8.9%9.4%9.8%12.0%14.8%17.0%20.9%-Heating and cooling26.4%37.2%35.1%37.1%42.6%41.6%42.8%-Transport2.6%2.7%3.3%7.4%7.2%7.2%7.3%-Overall10.5%13.9%13.8%16.9%19.1%19.4%20.2%-20202021202220232020202120222023Import Dependency [%] 93.2%89.5%92.0%92.2%57.5%55.5%62.5%58.3%of Solid fossil fuels 105.4%97.6%147.3%41.9%35.8%37.2%45.9%40.8%of Oil and petroleum products 101.7%98.4%100.2%102.5%96.8%91.7%97.8%94.5%of Natural Gas 0.0%0.0%0.0%0.0%83.6%83.6%97.6%90.0%Dependency from Russian Fossil Fuels [%]of Natural Gas 0.0%0.0%0.0%0.0%41.0%40.9%20.7%9.3%of Crude Oil0.0%0.0%0.0%0.0%25.7%25.2%18.4%3.0%of Hard Coal100.0%100.0%74.2%0.0%49.1%47.4%21.5%1.0%CyprusEU 
 
   
 
ANNEX 9: CLIMATE ADAPTATION, PREPAREDNESS AND ENVIRONMENT 

Cyprus 
is  subject  to  climate  risks  and 
extreme  weather  events,  with  wildfires 
posing  the  highest  risk,  and  it  still  lacks 
substantial resources for climate adaptation. 
Sustainable  water  management  is  also  a  major 
environmental  issue,  in  particular  in  terms  of 
water scarcity. The state of nature and ecosystems 
remains a cause for concern, presenting significant 
risks  to  the  economy  and  to  competitiveness. 
Carbon  removals  are  in  line  with  the  level  of 
ambition needed to meet the 2030 target for land 
use, 
land-use  change  and  forestry.  However, 
Cyprus performs below the EU average in terms of 
use of organic farming and it produces the highest 
volume of food waste per capita in the EU. 

Climate adaptation and preparedness 

In  Cyprus,  wildfires  pose  the  highest  risk. 
Each year over the period 2006-2023, Cyprus lost 
an average of over 1 728 hectares from wildfires. 
The country is also vulnerable to extreme weather 
events  such  as  irregular  but  intense  rainfall, 
droughts and storms. Floods can occur suddenly in 
urban  and  rural  areas.  Cyprus  is  prone  to  high 
summer 
temperatures  and  heatwaves  are 
becoming  increasingly  frequent  and  severe.  This 
contributes to serious impacts to public health and 
to the environment. 

Cyprus is subject to a range of climate risks. 
In  particular,  decreasing  rainfall  is  expected  to 
exacerbate  water  stress.  Less  rainfall  affects 
agriculture and results in lower crop yields  due to 
soil  degradation  and  desertification.  Water 
management  requires  particular  attention  due  to 
the risk of electricity disruption as floods, heat and 
drought affect energy production. Cultural heritage 
and  tourism,  major  sources  of  income  for  the 
economy,  are  affected  by  higher  temperatures, 
erosion and extreme weather events, which affect 
the  stability  of  historical  monuments  and  tourist 
flows. 

Although  Cyprus  has  put  in  place  some 
strategies and measures, it lacks substantial 
resources  for  adaptation  action.  There  are 
measures  planned  with  EUR 7 million  for  water 
resources,  EUR 1 million 
for  agriculture  and 
for  health (146).  The  national 
EUR 0.2 million 
adaptation  strategy  for  climate  change  includes 
both  mitigation  and  adaptation  actions,  with  the 

through 

long-term goal to boost the country’s resilience to 
the impacts of climate change. Cyprus is stepping 
up  coastal  protection 
infrastructure 
development and measures that mitigate the risks 
of  sea-level  rise  and  coastal  erosion.  Water 
management  is  another  key  area  of  focus,  given 
the  water  scarcity  issues.  Action  is  needed  to 
improve  water  efficiency,  build  desalination 
capacity  and  improve  wastewater  treatment  and 
reuse.  Cyprus  revised  its  urban  planning  and 
building codes to integrate climate adaptation into 
urban  development,  including  the  use  of  climate-
resilient  building  materials,  green  infrastructure 
and energy-efficient technologies. 

the 

Improving 

Cyprus’s  approach  to  adaptation  is  mostly 
institutional 
non-binding. 
arrangements  is  key  to  boosting  climate 
resilience  and  competitiveness.  The 
first 
national strategy for adaptation to climate change 
in  Cyprus  was  adopted  in  2017,  coordinated  and 
led  by  the  Department  of  Environment  of  the 
Ministry of Agriculture, Rural Development and the 
Environment.  A  review  process  started  at  the  end 
of  2023  and  included  a  risk  and  vulnerability 
assessment process. Stakeholder consultations are 
still  ongoing.  Coordination  across  ministries  and 
local  authorities  remains  a  challenge  but  Cyprus 
plans  to  create  an  intra-governmental  working 
group on adaptation to climate change. Cyprus has 
a  small  insurance  protection  gap,  meaning  the 
difference  between  the  cost  of  natural  disasters 
and  how  much  is  covered  by  insurance  is  minor 
(0.75),  yet  this  gap  is  larger  for  wildfires  (2.5), 
indicating 
insurance  coverage  for  these 
events (147).  The  impacts  of  climate  change  may 
affect  vulnerable  groups  disproportionately,  such 
as low-income families, farmers and older people, 
making  social  inclusion  an  important  aspect  of 
action on climate adaptation.  

less 

Water resilience 

Parts  of  Cyprus  are  subject  to  water  stress, 
in particular due to demand from agriculture, 
which  is  heavily  dependent  on  water  supply, 
with irrigation crucial in many rural areas. In 
2022,  Cyprus’s  water  productivity  was  EUR 111 
per  m3  of  abstracted  water,  on  an  upward  trend 

(146) National adaptation plan (2021). 

natural catastrophes  

(147) EIOPA, 2024, Dashboard on insurance protection gap for 

66 

 
 
 
 
 
 
over a five-year period (148). The Water Exploitation 
Index Plus (WEI+) reached 71 in 2022. The highest 
WEI+  value  (92)  was  reached  in  the  third  quarter 
of 2021 and in 2022 (149). The highest demand for 
water  consumption  is  from  agriculture.  Between 
the 
2018  and  2022,  water  abstraction 
agricultural sector increased slightly by 2.4%, and 
accounted  for  most  water  consumption  at  122 
million  m3,  i.e.  88%  of  all  consumption  in  2022, 
putting  a significant  strain  on  the  country’s  water 
resources.  The  challenges 
remain  significant, 
particularly  in  regions  with  high  levels  of  water 
stress. 

in 

The  quality  of  Cyprus’  water  cannot  be 
properly  assessed  due  to  late  reporting. 
Cyprus  did  not  submit  the  third  river  basin 
management plan (RBMP) or the second flood risk 
management  plan  (FRMP)  by  March  2022,  as 
required under the Water Framework Directive and 
the  Floods  Directive.  Cyprus  finally  reported  its 
third  RBMP  in  June  2024.  At  the  same  time,  the 
second  FRMP  is  being  compiled  and  due  to  be 
reported  shortly.  As  a  result  of  the  late  reporting 
as at early 2025, the Commission has not been in 
a  position  to  assess  the  plans  and  include  an 
the  European 
report 
assessment 
Parliament  and  to  the  Council. The  second  RBMP 
reports  and  data  published  in  2020,  reveal  that 
58.3% of all surface water bodies in Cyprus have 
good  ecological  status  (with  1.8%  unknown)  and 
only  84.8%  have  good  chemical  status  (with 
11.8% unknown). 33.3% of groundwaters failed to 
achieve  good  chemical  status  and  76.2%  are  in 
poor quantitative status.  

its 

to 

in 

the 

improving 

Wastewater  treatment  remains  a  cause  for 
concern.  Despite 
level  of 
compliance  over  the  years,  in  particular  thanks  to 
EU  funding,  Cyprus  has  experienced  serious 
difficulties in implementing the Urban Wastewater 
Treatment  Directive.  Overall,  the  compliance  rate 
was  84%  in  2020.  28  agglomerations  generating 
159 700 p.e. of urban wastewater fail to meet the 

(148) Measured as GDP in 2010 chain linked volumes over total 

fresh surface water abstracted in cubic metres. 

(149) Values equal or greater than 40% indicate situations of 
severe water scarcity, meaning the use of freshwater 
resources is unsustainable. 

67 

requirements  of  the  Directive.  Therefore,  the 
country has scope to take additional measures and 
implement  the  projects  needed  to  fully  meet  the 
requirements  of  the  Directive,  drawing  on  the 
available  EU  funding,  i.e.  the  European  Regional 
the  Recovery  and 
Development  Fund  and 
Resilience  Facility.  As  shown  in  Graph  A7.2,  the 
investment  needs  for  water  protection  and  water 
management are substantial. To meet the various 
environmental targets under the Water Framework 
Directive  and  the  Floods  Directive,  Cyprus  has  a 
water  investment  gap  of  EUR 29  million  per  year 
(0.11%  of  gross  domestic  product  (GDP)),  with 
around  half  the  need  for  drinking  water  (EUR 15 
million  per  year). 
in  wastewater 
measures needs to rise by EUR 10 million per year, 
with  an  additional  EUR 5  million  a  year  to  meet 
the 
the  Water  Framework 
Directive, on top of existing levels of financing. 

requirements  of 

Investment 

Biodiversity and ecosystems 

The state of nature and ecosystems remains 
a cause for concern in Cyprus. Cyprus is host to 
42  habitat  types  and  55  species  covered  by  the 
Habitats  Directive (150).  In  2018,  the  proportion  of 
habitats  assessed  as  having  a  good  conservation 
status  was  45.2%.  63.9%  of  protected  species 
were  reported  as  having  a  good  conservation 
status  in  2018.  Both  figures  are  above  the  EU 
average.  The  main  forms  of  pressure  and  threats 
for  habitats  and  species  in  Cyprus  are  related  to 
the 
agriculture, 
development  and  operation  of  transport  systems 
and  natural  processes.  There  seems  to  be  a 
in  maintaining  or 
general 
restoring  the  favourable  conservation  status  of 
species  and  habitats  protected  under  the  Nature 
Directives. 

lack  of  progress 

infrastructure 

development, 

Nature degradation presents significant risks 
to  the  economy  and  to  competitiveness. 
Cyprus’s  economy  has  a  particularly  high  level  of 
direct  dependency  on  ecosystem  services,  with 
50%  of  gross  value  added  highly  reliant  (against 
the  EU  average  of  44%).  Several  sectors  such  as 
agriculture,  forestry,  fisheries,  construction  and 
water  utilities,  mining  and  metals,  healthcare 
delivery  and  transport  (see  Graph  A9.1)  are 
particularly  dependent  on  ecosystem  services. 
100% of the gross value added of these sectors is 

(150) EEA, 2019, Number of habitats and species per Member 

State. 

 
 
 
 
 
directly  dependent  on  ecosystem  services. 
In 
particular, the transport sector has a higher degree 
of  dependency  than  in  other  Member  States.  In 
addition,  the  degree  of  supply  chain  dependency 
on ecosystem services in Cyprus is well above the 
EU average at 32% of gross value added, against 
the  EU-27  average  of  22%.  This  means  that 
failure  to  maintain  the  capacity  of  ecosystems  to 
deliver  services  could  entail  significant  costs  or 
even  stop  production  in  these  sectors.  Protecting 
and restoring key ecosystems would help maintain 
the long-term competitiveness of these sectors. 

other  nationally  designated  protected  areas, 
Cyprus  protects  37.8%  of  its  terrestrial  area  and 
8.6% of its marine areas. The country’s investment 
needs 
for  biodiversity  and  ecosystems  are 
estimated to be EUR 149 million per year over the 
level  of 
The 
2021-2027  period. 
biodiversity  financing  is  estimated  to  be  EUR 54 
million per year over the same period. To meet the 
environmental  objectives  on  the  protection  and 
restoration  of  biodiversity  and  ecosystems  and 
other  related  horizontal  measures,  Cyprus  has  an 
estimated  investment  gap  of  EUR 96  million  per 
year, corresponding to 0.4% of its GDP. 

current 

Graph A9.1: Direct dependency(1) on ecosystem 
services(2) of the gross value added generated by 
economic sector in 2022 

Graph A9.2: Investment needs and gaps in EUR 
million, in 2022 constant prices 

(1) Dependency based on the sector’s own operations, 
excluding value chain operations within countries and across 
international value chains. A high dependency indicates a high 
potential exposure to nature-related shocks or deteriorating 
trends, which means that the disruption of an ecosystem  
service could cause production failure and severe financial 
loss. 
(2) Ecosystem services are the contributions of ecosystems to 
the benefits that are used in economic and other human 
activity, including provisioning services (e.g. biomass 
provisioning or water supply), regulating and maintenance 
services (e.g. soil quality regulation or pollination), and cultural 
services (e.g. recreational activities). 
Source: Hirschbuehl et al., 2025, The EU economy's 
dependency on nature 

Targeted  action 
is  needed  on  nature 
protection  and  restoration.  In  2022,  29.5%  of 
the  terrestrial  area  under  the  effective  control  of 
the  government  of  the  Republic  of  Cyprus  was 
covered  by  the  Natura  2000  network.  Including 

Source: European Commission, DG Environment, 
Environmental investment needs & gaps assessment 
programme, 2025 update. 

Sustainable agriculture and land use 

Cyprus’s  carbon  removals  fall  short  of  the 
level  of  ambition  needed  to  meet  its  2030 
target  for  land  use,  land-use  change  and 
forestry  (LULUCF).  Cyprus’  LULUCF  sector  has 
seen a modest decline in net removals since 2017. 
To meet its 2030 LULUCF target, additional carbon 
removals of  -0.1 million tonnes of CO2 equivalent 
(CO2eq)  are  needed  (151).  The  latest  available 
projections  show  a  gap  to  target  of  0.02  million 

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

Regulation (EU) 2023/839. 

68 

0%20%40%60%80%100%AgricultureForestryFishery and acquacultureMining and metalsConstructionWater utilitiesHealthcare deliveryAviation travel and tourismFood beverages and tobaccoSupply chain and transportPublic services and othersElectricityChemical and materials industryElectronicsOil and gasReal estateHeat utilitiesAutomotiveRetail consumer goods and…Information technologyBanking and capital marketsInsurance and asset…Digital communicationsHighMediumLow - 20 40 60 80 100 120 140 160 180BiodiversityWaterBaselineGap 
   
   
 
(152).  Therefore, 
tonnes  of  CO2eq  for  2030 
additional measures are needed to reach the 2030 
target. 

Agriculture  is  still  a  notable  source  of 
greenhouse  gas  emissions  and  continues  to 
have  a  significant  impact  on  air,  water  and 
soils.  In  2022,  agriculture  generated  534 000 
tonnes  of  CO2eq,  representing  6%  of  total 
emissions,  excluding  LULUCF.  This 
includes 
481 000  tonnes  of  CO2eq  from  livestock.  The 
utilised  agricultural  area  in  Cyprus  decreased 
between  2018  and  2023  to  reach  122 000 
hectares.  The  livestock  density  index  was  1.73  in 
2020, significantly above the EU average of 0.75. 
Ammonia  emissions  have  been  increasing,  rising 
by 3.9% between 2018 and 2022. Between 2017-
2022, pesticides were detected at levels exceeding 
thresholds in 5% of Cyprus’s surface water bodies. 

Cyprus  performs  below  the  EU  average  in 
terms of organic farming practices. The share 
land  that  had  non-productive 
of  agricultural 
landscape  features  in  Cyprus  was  21%  in  2022, 
well above the EU average of 5.6. Organic farming, 
which  reduces  the  use  of  synthetic  fertilisers  and 
pesticides,  made  up  6.3%  of  Cyprus’s  agricultural 
land.  This  is  below  the  EU  average  of  10.50%. 
Cyprus 
is  currently  making  a  below-average 
contribution to the target to have 25% of the EU’s 
agricultural  land  under  organic  farming  by  2030. 
The bioeconomy, encompassing the production and 
processing  of  biological  products,  contributed 
EUR 1.033  billion  of  added  value  to  the  country’s 
GDP  in  2021.  Agriculture  generated  EUR 348 
million,  while 
industry  contributed 
EUR 404  million (153). At  294 kg  in  2022,  Cyprus 
produces  the  highest  volume  of  food  waste  per 
capita  in  the  EU,  with  the  main  source  being 
primary production, processing and manufacturing. 

the  food 

(152) Climate Action Progress Report 2024, COM/2024/498. 

(153) European Commission, 2023, EU Bioeconomy Monitoring 

System dashboards 

69 

 
 
 
Table A9.1:  Key indicators tracking progress on climate adaptation, resilience and environment 

(1) The data show the average for the timespan 2006-2023 based on EFFIS - European Forest Fire Information System. 
(2) Scale: 0 (no protection gap) – 4 (very high gap). EIOPA, 2024, Dashboard on insurance protection gap for natural catastrophes. 
(3) van Daalen, K. R. et al., 2024, The 2024 Europe report of the Lancet Countdown on health and climate change: unprecedented 
warming demands unprecedented action, The Lancet Public Health. 
(4) This indicator measures total water consumption as a percentage of the renewable freshwater resources available for a given 
territory and period. Values above 20% are generally considered to be a sign of water scarcity, while values equal or greater than 
40% indicate situations of severe water scarcity. 
(5) European Commission, 2024, 7th Implementation Report from the Commission to the Council and the European Parliament on 
the implementation of the Water Framework Directive (2000/60/EC) and the Floods Directive (2007/60/EC) (Third River Basin 
Management Plans and Second Flood Risk Management Plans). 
(6) For this indicator, the EU average includes figures for the UK under the previous configuration, EU-28. 
(7) European Commission, 2023, EU Bioeconomy Monitoring System dashboards. 
(8) Nitrates can persist in groundwater for a long time and accumulate at a high level through inputs from anthropogenic sources 
(mainly agriculture). The EU drinking water standard sets a limit of 50 mg NO3/L to avoid threats to human health. 
(9) 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. 
Source: Eurostat, EEA. 

70 

Climate adaptation and preparedness:20182019202020212022202320182021Drought impact on ecosystems6.4600.026.252.740.686.772.76[area impacted by drought as % of total]Forest-fire burnt area (1)1 728       1 728       1 728       1 728       1 728       1 728       [ha, annual average 2006-2023]Economic losses from extreme events-           -           -           6              -           1              24 142       62 981       [EUR million at constant 2022 prices]Insurance protection gap (2)----0.75         0.75         [composite score between 0 and 4]Heat-related mortality (3)142          142          142          142          142          [number of deaths per 100 000 inhabitants in 2013-2022]Sub-national climate adaptation action57            59            58            59            59            60            4144[% of population covered by the EU Covenant of Mayors for Climate & Energy]Water resilience:20182019202020212022202320182021Water Exploitation Index Plus, WEI+ (4)69.266.771.171.271.0-4.54.6[total water consumption as % of renewable freshwater resources]Water consumption130          123          138          141          139          -           [million m3]Ecological/quantitative status of water bodies (5)[% of water bodies failing to achieve good status]Surface water bodies-------59%Groundwater bodies-------93%Biodiversity and ecosystems:20182019202020212022202320182021Conservation status of habitats (6)45.2-----14.7-[% of habitats having a good conservation status]Common farmland bird index115.0120.0115.0110.081.0-72.274.42000=100Protected areas---3838--26[% of protected land areas]Sustainable agriculture and land use:20182019202020212022202320182021Bioeconomy's added value (7)942          1 025       1 015       1 033       634 378     716 124     [EUR million]Landscape features----21            -[% of agricultural land covered with landscape features]Food waste--273285294-[kg per capita]Area under organic farming4.65.04.66.46.37.99-[% of total UAA]Nitrogen balance------[kg of nitrogen per ha of UAA]Nitrates in groundwater (8)55.348.87.87.8--[mgNO3/l]Net greenhouse gas removals from LULUCF (9)302-          297-          299-          235-          299-          -           256 077-     240 984-     [Kt CO2-eq]CyprusEU-27CyprusEU-27CyprusEU-27CyprusEU-27 
 
 
  
 
FAIRNESS 
ANNEX 10: LABOUR MARKET 

The Cypriot labour market is performing well 
overall,  but  some  challenges  persist.  On  the 
back of robust  economic growth, the employment 
rate  continued  to  increase  in  2024  while  the 
unemployment  rate  is  lower  than  ever.  However, 
the  country  still 
faces  specific  challenges. 
Decreasing  real  wages  and  a  large  share  of 
temporary  and  part-time  work 
involuntary 
highlight poor job quality for many. Moreover, the 
capacity of the active labour market policy system 
low  while  young  people  not  in 
is  relatively 
employment,  education  or 
(NEETs), 
persons  with  disabilities,  and  women  are  much 
less integrated into the labour market. At the same 
in 
shortages  are 
time, 
construction  and  accommodation,  and 
for 
occupations  requiring  specific  skills  or  knowledge 
for  the  green  transition.  The  projected  decline  of 
further 
the  working-age 
exacerbating these labour shortages. 

population 

significant 

training 

labour 

risks 

The  Cypriot  labour  market  has  continued  to 
improve. In line with the continued robust growth 
of  the  economy,  the  employment  rate  increased 
further  from  79.5%  in  2023  to  80%  in  Q4-2024, 
4.1 percentage points (pps) above the EU average 
(75.9%). Also, in Q4-2024 the unemployment rate 
(4.6%)  remained  below  the  EU  average  (5.8%), 
while the annual unemployment rate and its long-
term  component  fell  to  4.9%  and  1.3%  in  2024, 
respectively. These positive developments suggest 
that Cyprus  could  reach  its  employment  target  of 
80% much earlier than 2030. 

Employment  challenges  persist  for  NEETs 
and  persons  with  disabilities.  While  the  share 
of  young  people  neither  in  employment  nor  in 
education  and  training  (NEET)  decreased  by  1 pp 
from the previous year to 12.9% in 2024, it is still 
higher than the EU average (11%) and among the 
largest  in  the  EU  (see  Graph  A10.1).  Notably,  the 
NEET  rate  is  higher  for  young  women  than  men 
(14.1% versus 11.7%) and for young persons with 
disabilities (at  43%,  also above the  respective  EU 
average  of  27.3%).  This  situation  is  concerning 
even though youth  unemployment  rate  decreased 
further  to  10%  in  2024,  and  it  is  now  below  the 
It  reflects  structural 
EU  average  of  11.4%. 
challenges  such  as 
job  opportunities, 
inadequate support for transitions from education 
to  work,  and  young  people’s  potential  being 
underused in general. Persons with disabilities face 
persistent challenges as indicated by the relatively 

limited 

71 

wide  disability  employment  gap  (24.5 pps  versus 
24.0 pps  in  the  EU  in  2024),  even  after  a 
narrowing  of  2.5 pps  from  2021.  Cyprus  has  not 
yet  set  an  employment  target  for  persons  with 
disabilities.  Employer  support  programmes  for 
persons with disabilities could be extended with a 
greater  emphasis  on  sectors  that  can  offer 
prospects  for  further  career  development.  The 
disability  quota  system  would  also  need  to  be 
extended  to  the  private  sector  to  increase  the 
employment  rates  for  persons  with  disabilities. 
This  would  further  ensure  their  fair  and  non-
discriminatory  recruitment  in  the  labour  market, 
not just in the public sector. 

Graph A10.1: Share of young people neither in 
employment nor in education and training (15-29; 
NEET rate) and disability employment gap (20-64) 

Source: Eurostat [sdg_08_20] EU LFS and [tepsr_sp200] EU-
SILC 

care 

responsibilities 

Informal 
create 
persistent  disadvantages  for  women.  The 
gender  employment  gap  in  Cyprus  increased  by 
1 pp  since  2023  and  is  now  at  the  EU  average 
(10 pps  vs  10 pps).  The  gender  pension  gap 
narrowed greatly, to 29.0% in 2024 from 34.3% in 
2022,  vs  the  EU  average  of  24.7%.  Yet,  it  is  still 
one  of  the  widest  in  the  EU,  due  largely  to  low 
employment  rates  for  older  women.  The  share  of 
the population who do not form part of the labour 
force  due  to  caregiving  stood  at  20.7%  in  2021, 
well  above  the  EU  average  of  11.9%.  Inadequate 
supply  of  formal 
the 
caregiving burden mainly on informal carers (most 
often  women  –  for  more,  see  Annex  11).  They 

long-term  care  puts 

19.20.21.22.23.24.25.26.27.28.29.10.11.12.13.14.15.16.17.18.19.20.2015201620172018201920202021202220232024% (20-64)% (15-29)NEET rate CYNEET rate EUDEG CYDEG EU 
 
 
     
 
 
often  withdraw  from  or  limit  their  participation  in 
the labour market with negative consequences for 
the  economy  and  their  own  current  and  future 
income  and  health,  which  manifests  in  gender 
employment and pensions gaps. 

Wage  growth  in  Cyprus  remains  subdued, 
resulting  in  real  wages  growing  moderately 
in  2024.  Nominal  wage  growth  reached  4.5%  in 
2024 but is expected to decrease to 3% in 2025, 
after  growing  by  5.0%  in  2023,  which  is  at  or 
below  the  euro  area  and  EU  averages  for  all 
years (154). In turn, real wages were stable in 2022 
and grew by 0.9% in 2023, to increase by 2.1% in 
2024  and  are  set  to  decelerate, to  grow  by  0.5% 
in  2025.  The  relatively  low  wage  growth  over  the 
past  10  years  has  allowed  for  some  cost 
competitiveness gains, particularly within the euro 
area, as illustrated by raising export market shares 
and decreasing imbalances. Wage growth was also 
below  what  could  be  expected  based  on 
developments 
the  usual  macroeconomic 
drivers (155).  Over  recent  years,  unit  labour  costs 
(ULCs)  increased  by  less  than  in  most  euro  area 
countries.  ULC  growth  is  set  to  decrease  from 
3.8%  in  2023  to  3.1%  in  2024,  before  declining 
further in 2025 (1.5%). Relatively high productivity 
growth  in  Cyprus  and  wage  moderation  leaves 
some  room  for  further  wage  increases  without 
compromising  competitiveness.  Cyprus  introduced 
a  national  statutory  minimum  wage  (replacing  its 
previous mixed  system) in  January  2023  and  has 
updated  its  level  in  January  2024  from  EUR 940 
to  EUR 1 000.  Another  revision  is  expected  at  the 
beginning  of  2026  after  the  Minimum  Wage 
Adjustment Committee tripartite consultation, also 
examining the update revision mechanism. 

in 

The  labour  market  in  Cyprus  is  flexible  but 
this  is  largely  involuntarily.  In  2024,  the 
temporary  employment  rate  of  14.1%  was  above 
the  EU  average  of  12.9%,  and  the  transition  rate 

(154) For nominal wage growth, pay per employee is considered. It 
includes: i) wages and salaries payable in cash or in kind; and 
ii) social contributions payable by employers. For real gross 
wages, the deflator used is the Harmonised Index of 
Consumer Prices (HICP). Real wages using this deflator can 
then differ from real wages shown in AMECO (which uses 
private consumption as the deflator). Data for 2024 and 
2025 are based on the European Commission Autumn 2024 
economic forecast. 

(155) Wage benchmarks are predicted by developments in 
inflation, productivity, the trade balance and the 
unemployment rate. 

to  permanent  contracts  was 
relatively  high 
(49.5%),  pointing  to  a  flexible  and  relatively 
dynamic  labour  market.  Nevertheless,  when  it 
comes  to  involuntary  temporary  employment (156), 
Cyprus  has  one  of  the  largest  shares  amongst 
Member  States,  with  12.7%  for  2024  (vs  the  EU 
average  of  3.4%).  While  part-time  employment  is 
not widespread in Cyprus (only 7.6% of employees 
were affected in 2024 vs 21.5% in the EU), almost 
(43.2%)  were 
half  of  part-time  workers 
involuntarily  on  such  contracts,  which  was  one  of 
the largest shares in the EU (vs EU 18.2%). 

Graph A10.2: Labour shortages (%) and the job 
vacancy rate (%) 

Source: ECFIN business and consumer survey data and 
Eurostat [jvs_q_nace2]. 

exacerbate 

Persisting  labour  shortages  in  some  sectors 
further 
competitiveness 
challenges.  Labour  shortages,  as  measured  by 
the  job  vacancy  rate,  were  at  3.1%  in  Q4-2024, 
above  its  pre-pandemic  level  (1.7%  in  Q4-2019), 
reaching the highest level since the last quarter of 
2019  –  see  Graph  A10.2.  In  particular,  severe 
shortages  (with  vacancy  rates  above  5%)  are 
reported  in  the  energy  sector,  in  accommodation 
and 
service  activities,  arts, 
entertainment  and  recreation  sectors.  In  January 
2025,  the  share  of  employers  expecting  labour 
shortages  to limit their  production  was  quite  high 
in  the  construction  sector  (24.6%)  and  in  the 
service  sector  (19.3%)  but  below  the  EU  level  in 
both  sectors  (27.9%  and  24.1%  respectively), 

food 

the 

in 

(156) I.e. because ’no permanent job was found’. 

72 

0.0.51.1.52.2.53.3.54.05101520253035Job vacancy rate (%)Labour shortages (%)IndustryConstructionServicesJob vacancy rate (rhs) 
 
  
 
while  in  the  industry  sector  it  stood  at  4.5% 
compared to 18.6% at EU level. The lack of quality 
jobs  coupled  with  poor  working  conditions  and 
wage  disparities  across  different  occupations  can 
be  also  attributed  to  labour  shortages  in  some 
CEDEFOP-EURES 
professions. 
data (157),  the  occupations  most  requested  in  the 
country  were  handicraft  and  printing  workers, 
healthcare  assistants,  domestic  cleaners  and 
assistants, and office associate professionals (158). 

According 

to 

Graph A10.3: Foreign workers in Cyprus 
(thousands, 20-64) 

Source: Eurostat [lfsa_egan], EU LFS 

increases 

The  ageing  population  and  declining  birth 
rates pose long-term challenges. In Cyprus, the 
share  of  the  population  aged  65  and  over  is 
expected to increase from 16.5% in 2022 to 19% 
in  2030  and  then  to  23.9%  in  2050.  Despite 
anticipated 
labour  market 
in 
participation  rate,  the  working-age  population  is 
projected  to  decline,  leading  to  a  decrease  in  the 
share  of  the  labour  force  (20-64)  in  the  total 
population  by  9.4%  (7%  for  the  EU) (159).  At  the 
same time, the inflow of foreign workers to Cyprus 
has  been  steady  since  2018  with  a  small 
slowdown  only  in  2021.  A  shift  towards  non-EU 
citizens  is  apparent  (see  Figure  A10.3),  whose 

the 

(157) Source: ECFIN European Business and Consumer Surveys. 

(158) EURES: countries and occupations Jan to Sept 2024. 

(159) European Commission, 2024 ageing report – Economic & 
budgetary projections for the EU Member States (2022-
2070), Publications Office of the European Union, 2024, 
Statistical Annex, Table II.1.10. 

73 

is 

unemployment  rate  is  so  far  substantially  higher 
than that for all foreign workers and, in particular, 
Cypriot  nationals  (at  8.9%  in  2023  vs  7.5%  and 
5.3%,  respectively) (160).  This 
likely  to  be 
connected  to  the  large  share  of  asylum  seekers 
among  them  and  the  barriers  they  face  on  the 
labour  market (161).  These  demographic  shifts  will 
exacerbate  labour  market  tightness,  underscoring 
the  urgency  of  activating  and  better  integrating 
non-EU  citizens  into  the  labour  force,  improving 
working conditions, and reaching out those outside 
the  labour  force.  In  addition  to  targeted  active 
labour  market  policies  along  with  upskilling  and 
reskilling,  fostering  legal  migration  and  attracting 
talent,  particularly  from  third  countries,  would  be 
increasingly  needed  to  maintain  human  capital  a 
sufficient number of skilled workers in key sectors 
and  bolster  Cyprus’  competitiveness.  Activation 
schemes  are  currently  being  implemented  under 
the  European  Social  Fund  Plus  and  the  recovery 
and  resilience  plan  and  an  updated  strategy  for 
the  employment  of  non-EU  citizens  is  being 
revised,  where  the  expected  result  remains  to  be 
seen.  Furthermore,  the  ageing  population  will  put 
further pressure on the health system, which also 
faces shortages (see Annex 14). 

The  public  employment  service  (PES)  could 
in 
assist  with  more  specific  measures 
tackling  activation  challenges.  The  active 
labour  market  policy  strategy 
implementation 
report  of  2024  indicates  some  positive  activation 
results  on  the  various  schemes  implemented  but 
there is scope for improvements in the design and 
volume  of  schemes.  Support  through  incentive 
schemes,  especially  for  persons  with  disabilities, 
could  be  better  targeted,  by  offering  different 
amounts  and  services  based  on  the  needs, 
specificities, skills and tasks required for each job. 
Furthermore,  the  PES  needs  to  still  strengthen  its 
core  business  model  and  transform  employer 
engagement. 

(160) Eurostat [lfsa_urgan], EU Labour Force Survey. 

(161) Eurostat explains that in September 2024, the EU total rate 
for first-time asylum applicants was 16.9 per 100 000 
people. Compared with the population of each EU country 
(on 1 January 2024), the second highest rates of first-time 
applicants were recorded in Cyprus (31.9). Asylum seekers 
are restricted to only nine employment categories. 
Beneficiaries of international protection face practical 
limitations in recognising their qualifications and experience. 
Language knowledge, information about working conditions, 
labour rights, complaint rights and access to Ministry of 
Labour Services are all limited. See the report of the Cyprus 
Refugee Council on the access to the labour market. 

0.20.40.60.80.100.120.201320142015201620172018201920202021202220232024thousand persons, 20-64EU nationals (non-Cypriot)Non-EU citizensForeign country 
   
 
 
ANNEX 11: SOCIAL POLICIES 

Cyprus  has  made  progress  in  the  social 
domain  and  by  2023  had  nearly  reached  its 
national  2030  poverty  targets,  but  some 
challenges  persist.  Public  expenditure  on  long-
term care is low while  out of pocket expenditures 
are  high,  raising 
issues  of  affordability  and 
accessibility  of  care  services.  In  addition,  some 
population  groups, 
such  as  persons  with 
disabilities  and  older  people,  still  face  relatively 
high  social  exclusion  and  risk  of  poverty.  Energy 
poverty  is  also  high  in  Cyprus  while  the  social 
economy  sector  needs  to  be  further  developed. 
Addressing  these  challenges  will  contribute  to 
inclusive growth and competitiveness. 

Cyprus  has  demonstrated  robust  social 
outcomes  in  the face of  improving  economic 
conditions.  The  at-risk-of-poverty  or  social 
exclusion  rate  was  17.1%  overall  and  14.8%  for 
children in 2024 (vs 21.4% overall and 24.2% for 
children in the EU). Ιn 2024 the number of people 
at-risk-of-poverty  or  social  exclusion 
(AROPE) 
increased  significantly  by  11 000,  exceeding  its 
target  reference  point  of  2019  and  thus  shifting 
away  from  reaching  its  national  2030  target  of 
reducing its AROPE rate by at least 10 000 people. 
However,  Cyprus  has  exceeded 
its  2030 
complementary target on child poverty in 2024 (to 
reduce by 3 000, with a decrease by 9 000). It also 
contrasts  the  relatively  low  impact  of  social 
transfers 
(other  than  pensions)  on  reducing 
poverty  for  the  general  population,  standing  at 
30.48% in 2024 below the EU average (34.41%). 

Persons with disabilities and older people are 
particularly  affected  by  poverty  and  social 
exclusion.  Between  2022  and  2024,  the  at-risk-
poverty  or  social  exclusion  rates  of  persons  with 
disabilities  increased  further  (31%  in  2024  from 
29.7%  in  2023,  see  Graph  A11.1),  and  so  did the 
AROPE  gap  compared 
to  persons  without 
disabilities,  now  among  the  widest  in  the  EU 
(17.7 pps  vs  EU  10.9 pps).  Women  over  sixteen 
with disabilities have seen a slight improvement of 
their  situation,  with  their  AROPE  rates  slightly 
reducing  from  32.4%  in  2023  to  31.7%  in  2024. 
While men over sixteen with disabilities have seen 
a  worsening  of  their  situation,  with  their  AROPE 
rates rising from to 26.8% in 2023 and 30.2% in 
2024. Active inclusion is key also for persons with 
disabilities  and  minimum  income  benefits  criteria 
could  exempt  them  from  strict  rules  regarding 
employment to incentivise further their activation. 
The  stagnation  in  public  transport  use  poses 
challenges  in  promoting  sustainable  and  inclusive 

income 

pensioners’ 

is  weak,  as  both 

The  at-risk-poverty  and 

transportation systems, especially for persons with 
social 
disabilities. 
exclusion rates of people aged sixty-five and over 
increased too, standing also above the EU average 
(31.5% in 2024 against 19.4% in the EU, up from 
24.8%  in  2023).  The  income  of  older  women  is 
determined  to  a  great  extent  by  a  persistently 
wide  gender  pension  gap,  (29%  in  2024  from 
in  2023,  vs  EU  average  of  24.7%). 
27.6% 
replacement 
However, 
situation 
the  aggregate 
replacement  ratio  for  pensions  and  the  median 
relative income of older people (sixty-five or over) 
are  also  worse  than  the  EU  average  and  on  a 
slightly  downward  trend.  To  further  strengthen 
support  to  vulnerable  groups,  Cyprus  developed  a 
national  strategy  for  gender  equality  and  a 
national  strategy  for  active  ageing,  updated  its 
disability  strategy,  and 
the 
European Child Guarantee according to its national 
action plan. Furthermore, a reform of the pension 
system is  being  devised  to  improve the  adequacy 
of  pensions  for  vulnerable  groups  and  ensure  its 
sustainability. 

implementing 

is 

Graph A11.1: At-risk-of-poverty or social exclusion 
rate, selected population groups 

Note: Break in series in 2024 
Source: Eurostat, EU-SILC [ilc_peps01n], [hlth_dpe010] 

Access  to  long-term  care  services  remains 
limited.  The  share  of  the  population  sixty-five  or 
over  in  need  of  long-term  care  (having  severe 
in  performing  personal  care  and/or 
difficulty 
household  activities)  was  well  above  the  EU 
average  (26.6%)  in  2019  at  34.3%  in  Cyprus. 
Long-term  care  needs  are  also  expected  to  rise 

74 

0.5.10.15.20.25.30.35.40.2015201620172018201920202021202220232024% of respective populationTotalTotal womenPwD (16+)PwD women (16+)Older (65+)Older (65+) women 
 
  
 
 
further  with  population  ageing.  The  share  of  the 
population  aged  sixty-five  or  over  is  expected  to 
increase  from  16.5%  in  2022  to  reach  19%  in 
2030  and  23.9%  in  2050.  The  offer  of  formal 
long-term  care  services  is  very  low.  The  share  of 
public  funding  going  to  residential  care  is  the 
lowest  in  the  EU,  at  4.2%  in  2024,  with  public 
funding  for  LTC  going  mainly  to  cash  benefits 
(60.6%). At the same time, funding levels of long-
term care in Cyprus are extremely low, standing at 
0.2% of the GDP in 2022, significantly lower than 
the  EU  average  of  1.7%  of  GDP  and  the  second 
lowest  value  among  the  EU-27.  Public  spending 
for  LTC  is  primarily  directed  to  cash  benefits 
(60.6% in Cyprus, 25% in EU in 2024), while long-
term  care  services  are  underdeveloped,  and  long-
term  care  is  not  adequately  regulated  (e.g.  there 
are no objective criteria on degrees of dependency 
and  waiting  times).  As  a  result,  many  are  left 
without  formal  care.  Only  19.3%  of  people  aged 
sixty-five  and  over  with  severe  difficulties  have 
used  home  care  services  in  the  past  twelve 
months, which is below the EU average of 28.6%, 
severely  affecting  their  quality  of  life.  Cyprus 
experiences  worker  shortages  in  the  long-term 
care sector. The number of long-term care workers 
is  well  below  the  EU  average  (6  LTC  workers  per 
1000  people  aged  65+  in  Cyprus  vs  EU  32  in 
2023) and their wages are low. There are only 5.3 
nurses  per  1 000  inhabitants,  well  below  the  EU 
average  of  7.6,  and  the  number  of  graduates  in 
this  field  is  falling.  Due  to  this,  informal  carers 
shoulder much of the care responsibilities, a factor 
labour  market 
that 
limits 
participation,  (see  Annex  10).  As  an 
interim 
solution,  a  number  of  migrant  domestic  workers 
provide care with an often precarious employment 
status.  However,  Cyprus  has  not  yet  ratified  the 
International  Labour  Organization  Convention  on 
domestic  workers.  De-institutionalisation  services 
and  the  related  social  housing  that  offered  is  in 
Cyprus is limited. 

severely 

their 

increased  significantly  over  the 

Housing  affordability  has  improved  over  the 
last  decade  for  buyers  but  worsened  for 
renters, and housing and energy poverty pose 
challenges,  in  particular  for  the  vulnerable 
populations. Since 2015, the standardised house 
price-to-income ratio has decreased by more than 
30%. House price-to-income ratios are in line with 
those of many other EU countries. While the rental 
market  is  rather  small,  the  ratio  of  new  rents  to 
incomes 
last 
decade.  The  share  of  people  having  experienced 
housing difficulties in their lifetime was among the 
highest  in  Cyprus  at  11.2%,  standing  well  above 
the  EU  average  (4.9%).  The  reason  for  this  high 
figure  is  attributed  to  the  housing  difficulties 
people  were  facing  due  to  the  Turkish invasion in 
Cyprus  (90.5%).  The  rate  of  those  with  such 
experience  is  higher  for  those  at  risk  at  risk  of 
poverty  or  social  exclusion  at  14.7%,  but  also 
rather  high  at  10.5%  and  well  above  the  EU 
average  (3.9%)  for  those  not  at  risk.  Energy 
poverty,  in  particular,  remains  a  pressing  issue  in 
Cyprus, 
environmental 
together  with 
inequalities,  poses  challenges  to  a  fair  green 
transition. The share of those unable to keep their 
home adequately warm was 14.6% in 2024, which 
stood much higher than the EU average (at 9.2%), 
despite  having  dropped  by  4.6 pps  compared  to 
2022.  For  the  population  at  risk  of  poverty,  the 
share 
in  the  EU. 
Moreover,  7.8%  of  the  population  had  arrears  on 
utility bills in 2024, stood above the EU average of 
6.9%,  yet  showed  an  improvement  of  1.3 pps 
compared  to  2021.  Structural  issues  in  housing, 
such as leaks, damp, or rot, affected 31.6% of the 
population  in  2023,  showing  an  improvement  of 
7.5 pps since 2020 but still much higher than the 
EU  average  of  15.5%.  The  cost  of  cooling  houses 
is  also  a  significant  burden,  having  accounted  for 
10.6% of final energy consumption of households 
in  2021,  one  of  the  highest  values  in  the  EU 
(compared to an EU average of 0.5%). 

is  42.5%,  second  highest 

and 

The  Cypriot  residential  property  market 
remains  resilient.  House  prices  have  increased 
by 12% since 2015 in nominal terms. Following a 
decline in 2021, house prices have risen in recent 
years,  driven  by  foreign  and  domestic  demand. 
House  prices  show  no  significant  deviation  from 
market  fundamentals  and  their  evolution  was 
moderate  in  2023  (+2.9%,  following  +2.7%  in 
2022 and a 3.4% decrease in 2021). House prices 
have  continued  to  increase  moderately  in  2024 
(+2.7% year-on-year in Q3-2024). 

Cyprus  implements  a  range  of  measures  to 
address  housing  challenges.  The  country  will 
implement  the  newly  approved  Technical  Support 
Instrument  project  on  ‘Comprehensive  Housing 
for 
Policy  Review  and  Strategic  Reform 
Sustainable  and  Affordable  Housing’.  While  also 
offering  reduced  electricity  tariffs  for  vulnerable 
consumers  (20%  lower  than  the  normal  tariff), 
national  programmes 
improving  energy 
efficiency  in  housing,  financial  aid  for  installing 
residential  solar  energy  systems,  and  a  2022 
in  energy 
targeting  households 
programme 

for 

75 

 
poverty  where  persons  with  disabilities  live.  In 
addition,  there  are  protective  rules  against  grid 
disconnections  for  vulnerable  consumers  during 
critical  periods.  In  its  final  national  energy  and 
climate  plan,  Cyprus  has  set  a  set  a  mandatory 
cumulative  end-use  energy  savings  target  of 
349,04  ktoe  in  2021-2030  and  an  obligation  of 
52,7 ktoe (15.1 % of the target) to be achieved by 
implementing  energy  efficiency  measures  among 
people  affected  by  energy  poverty,  vulnerable 
customers  in  low-income  households  and,  where 
applicable, people living in social housing. 

not 

people 

entitled 

Access  to  social  protection  is  uneven.  Self-
employed 
to 
are 
unemployment  benefits  or  benefits  for  accidents 
at  work  or  occupational  diseases.  As  a  result,  the 
impact of social transfers on poverty reduction for 
the  self-employed  is  significantly  lower  in  Cyprus 
than in the EU (at 8.6% in 2024 vs 26.6% in EU), 
and worsening. The revised law on social insurance 
that  is  included  in  the  RRP  will  only  partly  solve 
these 
in  Cyprus  the  share  of 
dependent  self-employed  (i.e.  those  working  with 
only  one  client)  is  4.3%  as  a  share  of  all  self-
employed without employees (EU: 4.0%). 

issues  since 

in 

terms 

social 

sector 

notably 

economy 

outcomes, 

The 
remains 
underdeveloped.  Development  of  these  sectors 
in  Cyprus  can  be  very  rewarding  and  generate 
positive 
of 
employment  and  social  cohesion.  A  draft  law 
amending the Social Enterprises Law of 2020 and 
a 
registry  for  social 
enterprises  were  approved  in  December  2023. 
However, progress is slow  with the registration of 
social  enterprises.  including  the  employment  and 
entrepreneurial  opportunities  for  persons  with 
disabilities. 

regulation  creating  a 

76 

 
ANNEX 12: EDUCATION AND SKILLS 

Labour and skills shortages and low levels of 
basic  skills  and  adult  learning  are  key 
challenges limiting Cyprus’s competitiveness. 
Weaknesses in skills development start at an early 
age  with  low  participation  of  children  in  quality 
early  childhood  education  and  care  (ECEC)  and 
continue  with  more  than  half  of  15-year-olds 
failing to meet minimum standards in basic skills. 
Higher  education  and  vocational  education  and 
training (VET) do not adequately respond to labour 
market  needs,  leading  to  skills  mismatches.  The 
low  share  of  science,  technology,  engineering  and 
mathematics  (STEM)  graduates  and  the  low  level 
of digital skills further exacerbate skills shortages. 
Moreover,  significant  progress  is  lacking  in  key 
areas of the Cypriot adult learning system, such as 
the  national  qualifications  framework,  and  the 
share  of  adults  engaged  in  learning  activities 
skills 
low.  These  weaknesses 
remains 
development  and  participation  in  adult  learning 
hinder  Cyprus’s  potential  for  productivity  growth 
and competitiveness. 

in 

for  children 

learning  and 

A  lack  of  basic  skills  among  young  people 
constitutes  a  major  barrier 
to  skills 
development. Although between 2022 and 2023, 
there is an increase of 2.3 percentage points (pps) 
in participation in ECEC of children above the age 
of  three (162),  the  participation  rate,  86.7%,  keeps 
below the EU target of 96% and the EU average of 
93.3%.  Access  to  quality  ECEC  is  essential  for 
foundational 
in 
is  beneficial, 
particular, 
from  disadvantaged 
backgrounds. However, there is a participation gap 
between children below the age of three in poverty 
(26.5%) and the others (42% for all children under 
three),  suggesting  that  barriers  to  access  remain 
and  that  there  is  need  for  targeted  actions. 
Furthermore,  in  the  2022  OECD  Programme  for 
International Student Assessment (PISA), 60.6% of 
15-year-olds underperformed in reading, 53.2% in 
mathematics  and  51.8%  in  science,  which  are 
among  the  highest  levels  in  the  EU.  Cyprus  has 
also 
in 
underachievement  since  2018.  More  worryingly, 
severe 
the 
Cyprus 
underachievement  rate,  with  over  40.3%  of 
in  all 
students  underachieving  simultaneously 

recorded 

recorded 

increase 

highest 

highest 

the 

three  subjects  tested.  Early  school  leaving  is  also 
on the rise. In 2024, the share of 18-24-year-olds 
leaving  education  and  training  early  rose  further 
by  0.9 pps  to  11.3%  compared  to  the  previous 
year  (EU:  9.3%).  Young  people  with  disabilities 
(aged 18-24) also tend to leave school earlier than 
their  peers  without  disabilities  (19.2%  compared 
to 8.6% in 2022). 

Graph A12.1: Underachievement rates by field, 
PISA 2012, 2018 and 2022 (%) 

Source: OECD (2023). 

for 

These  negative  trends  point  to  significant 
challenges 
the  education  system’s 
performance.  Education  outcomes  could  be 
improved  by  strengthening  school  autonomy, 
supporting teachers in implementing competence-
based teaching methods, and developing a culture 
of  evaluation  to  assess  the  impact  of  recent 
reforms.  Cyprus  is  benefiting  from  EU  support 
under  the  Technical  Support  Instrument  (TSI) (163) 
to  further  identify  drivers  behind  the  declining 
trend. 

The  low  share  of  top  performers  in  basic 
skills  and  creative  thinking  hamper  the 
country’s  innovation  capacity.  In  PISA  2022, 
very few students demonstrated advanced skills in 
all  three  subjects  tested.  Only  1.4%  of  young 
Cypriots  demonstrated  advanced  skills  in  reading 
(EU:  6.5%),  3.9%  in  mathematics  (EU:  7.9%)  and 
2%  in  science  (EU:  6.9%).  In  addition,  Cypriot  15-
year-olds  proved  to  be  among  the  weakest  in 
creative thinking (164), with a top performance rate 
of  only  10.4%  (vs  EU-23:  25.1%).  Moreover,  the 

(163) TSI approved in 2024: ‘Support to specify factors and 

effectively implement policy measures to address decline in 
basic skills of secondary education students in Cyprus’. 

(162) More children are in ECEC from the age of four (87.7%) as 

four years and eight months is currently the age that children 
start compulsory education. 

(164) Young people’s ability to engage productively in ideas that 
can result in effective solutions in their lives is negatively 
impacted by weak critical thinking. 

77 

010203040506070CYEUCYEUCYEUMathematicsReadingScience%2012201820222030 EU target 
 
 
 
  
 
 
 
demonstrated  lack  of  excellence  constitutes  a 
major  barrier  to  participation  in  STEM  studies, 
hindering the economy’s innovation capacity. 

The  decline  in  performance  in  basic  skills 
was  the  most  pronounced  among  students 
from  all  socio-economic  backgrounds.  The 
decline  in  students’  low  performance  in  PISA  was 
particularly sharp among students in the top socio-
economic quartile (10.6 pps vs 2.2 pps at EU level). 
The share of low-performing students in this group 
(32.7%) is three times higher than the EU average 
(10.9%).  In  addition, two thirds  of  students in the 
lowest  socio-economic  quartile  did  not  reach  a 
minimum proficiency level in mathematics (69.8% 
vs 48.0% in the EU). Their underachievement rate 
also increased sharply by 17.6 pps between 2018 
and  2022.  The  Ministry  of  Education,  Sport  & 
Youth  put  in  place  an  action  plan  specifically  to 
improve  the  low  PISA  results,  including  new 
curricula,  new  teaching  methods  and  updated 
teacher evaluations. 

Participation  in  secondary  VET  is  low,  and 
work-based  learning  opportunities  are  rare, 
limiting  employability  and  productivity. 
Participation  in  and  the  attractiveness  of  VET 
remain low, despite coordinated measures. Cyprus 
has  a  relatively  small  VET  sector:  in  2023,  only 
17.9%  of  pupils  in  upper  secondary  education 
attended programmes with a vocational focus (EU: 
49%). Only 4 out of 10 recent graduates aged 20-
34  (39.2%  in  2023)  experienced  work-based 
learning during their VET studies (EU: 64.5%). The 
employment  rate  of  recent  VET  graduates  in 
Cyprus is below the EU average (71.4% in 2023 vs 
81%).  Furthermore,  measures  to  improve  the 
national  qualifications  framework  for  awarding 
qualifications, 
in  particular  micro-credentials, 
based  on  skills,  knowledge  and  competencies  are 
lagging behind. 

Improving  and  upgrading  VET  by  aligning 
training  programmes  with  labour  market 
needs  is  a  focal  point  of  the  annual  action 
plan  for  2023-2024  of  the  Ministry  of 
Education, Sport & Youth.  The European Social 
Fund  Plus  (ESF+)  co-funded  a  project  titled 
‘Further  development  of  technical  and  vocational 
education  and  training’,  which  aims  to  advance 
and refine VET. Specific measures include updating 
curricula,  equipping 
schools  with  essential 
resources  and  keeping  teachers  abreast  of  recent 
technological  developments. 
the 
Human Resource Development Authority of Cyprus 

In  addition, 

(HRDA)  has  completed  a  study  which  provides 
forecasts of job market demand and supply in the 
Cypriot  economy  for  a  10-year  period  and  an 
additional study to map out the green economy of 
Cyprus and identify green skill needs in the Cyprus 
economy up to 2030. To strengthen the quality of 
training  in  higher  VET  public  schools,  all  post-
secondary  VET  institutes  underwent  an  external 
evaluation in 2023 focusing on the quality of the 
infrastructure and programmes. Recommendations 
include  increasing  the  involvement  of  employers’ 
representatives  in  the  design  of  VET  curricula  to 
reduce  skill  mismatches  and  to  better  link  post-
secondary  VET  institutes  (MIEEK)  with  the  job 
market.  Furthermore,  the  country’s  recovery  and 
resilience plan (RRP)  includes measures to update 
200 curricula, upgrade equipment in 20 labs, train 
a minimum of 285 educators (out of 700 in total) 
and  develop  new  study  programmes.  The 
construction  of  one  VET  school  also  started  in 
2022,  with  a  budget  of  EUR 28.8  million,  funded 
by the Recovery and Resilience Facility (RRF). 

For  many  years,  despite  policy  efforts, 
Cyprus  had  the  lowest  share  of  students 
enrolled in STEM subjects over total tertiary 
enrolments in the EU. Although the country has 
one  of  the  highest  shares  of  tertiary  educational 
attainment  in  the  EU (165)  (60.1%  in  2024  vs 
44.2%  in  the  EU),  skills  and  labour  shortages 
persist, especially in sectors key for the green and 
digital  transitions.  Students  enrolled  in  STEM 
subjects  as  a  share  of  total  tertiary  enrolment 
(ISCED 5-8) is the lowest in the EU at only 13.7% 
in  2022  (EU:  27.1%).  The  share  of  students 
enrolled  in  ICT  subjects  was  only  3.6%  of  all 
tertiary  enrolments  (EU:  5.2%),  one  of  the  lowest 
shares  in  the  EU.  The  picture  is  even  worse  when 
looking  at  women:  only  1.4%  of  all  women 
enrolled  in  tertiary  education  were  enrolled  in  ICT 
against 6.8% of men. Similarly, the share of R&D 
researchers in the total active population is below 
0.5%  in  Cyprus  and  three  other  countries (166).  By 
contrast, the leading EU countries have a share of 
between 1.6% and 1.9% (167). 

Developing  digital  skills 
is  also  very 
important for persons with disabilities. This is 

(165) Along with Ireland and Luxembourg. 

(166) Romania, Malta and Latvia. 

(167) Eurostat, November 2024, R&D personnel 
https://ec.europa.eu/eurostat/statistics-
explained/index.php?title=R%26D_personnel. 

78 

 
 
reported 

well-documented  and 
in  previous 
European  Disability  Expertise  (EDE)  reports  (see 
reports on digitalisation (168) and employment (169). 
Neither  the  official  national  curriculum  nor  VET 
schemes and incentives have shown any essential 
towards  digital  capacity 
change  and  shift 
development  and  empowerment  of  persons  with 
disabilities. 
deteriorating 
educational prospects of students with disabilities 
statistical 
are  documented 
information  published  in  2023.  The  data  suggest 
that Cyprus has one of the lowest scores in terms 
of  the  share  of  persons  aged  16  or  over  with  a 
disability by educational attainment level. 

increasingly 

latest 

The 

the 

in 

a 

focus 

policy 

related 

strong 

Despite 
on 
sustainability  education,  Cypriot  students 
lack  knowledge  of  environmental  and 
sustainable  development.  Cyprus  is  one  of  the 
few countries in the EU (170) where the curriculum 
for  sustainable  development  contains  specific 
learning outcomes that students should be able to 
identify  and  assess.  These  are 
to 
environmental  and  sustainable  values  and  go 
beyond  individual  responsibility  for  sustainable 
development (171).  However,  Cypriot  students’ 
scores 
International  Civic  and 
Citizenship  Education  Study  (ICCS)  on  knowledge 
of sustainable development are the second lowest 
among the 17 participating EU countries, 452.7 vs 
EU-17 506.7 (172). There is also a wide gender gap 
of  29.3 pps  in  favour  of  girls.  Those  results  point 
to 
implementing 
sustainability learning. One of the main challenges 
is 
in  setting  up  monitoring  and  evaluation 
mechanisms  for  any  policy  choice  related  to 
in 
education  and  programmes 

in  the  2022 

implemented 

challenges 

complex 

in 

(168) EDE Report. Digitalisation and digital transformation: 

Implications for persons with disabilities – Cyprus (2022) 

(169) EDE Report. Striving for an inclusive labour market in Cyprus 

(2023) 

(170) Along with Czechia, Hungary, Montenegro and Serbia. 

(171) European Commission, European Education and Culture 
Executive Agency, Learning for sustainability in Europe – 
Building competences and supporting teachers and schools 
– Eurydice report, Publications Office of the European Union, 
2024, https://data.europa.eu/doi/10.2797/81397. 

(172) European Commission (Joint Research Centre) calculations, 
based on a special extraction of data from the 2022 
International Civic and Citizenship Education Study conducted 
by the IEA. 

schools (173).  This  reflects  a  typical  weakness  of 
Cyprus’s  education  system.  In  addition,  whole-
school  approaches  and  school  engagement  for 
sustainability  need time to be  rolled  out  in full to 
yield  results.  There  is  also  the  need  for  more 
teacher  support  and  training  in  the  use  of  digital 
education in the learning process for sustainability 
and the green transition. A reform to tackle these 
issues is under way as part of the RRP. Cyprus has 
identified  the  lack  of  professional  guidance  for 
students  on  the  circular  economy  and  the  green 
transition  as  a  barrier  to  further  expanding 
sustainability learning. 

labour  market  with 

Skills  mismatches  and 
labour  shortages 
remain  a  pressing  challenge  in  an  otherwise 
low 
well-performing 
unemployment  rates.  Macroeconomic  skills 
mismatch (174)  stood  at  17.1%  in  2024,  down 
0.7 pps  from  2022,  remaining  below  the  EU 
(19.2%).  Overqualification  remains  a 
average 
structural  issue.  In  2024,  28.2%  of  workers  with 
higher  education  qualifications  were  employed  in 
occupations  that  did  not  require  that  level  of 
qualification (175). This figure is considerably higher 
compared  with  the  2023  EU  average  (21.9%). 
Sectors  with  particularly  high  overqualification 
rates compared to the EU are accommodation and 
food service activities (74.5%), administrative and 
support  services  (66.8%),  agriculture  (78.5%)  as 
well  as  wholesale,  retail  and  repair  of  motor 
(60.2%).  Cyprus  has  developed  a 
vehicles 
European  Year  of  Skills  action  plan  titled  ‘Modern 
Professional Development for the green and digital 
transitions’,  which  is  financed  under  the  RRF  and 
ESF+.  It  sets  out  several  initiatives  that  are 
expected 
reduce  skills  mismatches  and 
contribute  to  upskilling  and  training  100 000 
people.  This  includes  vulnerable  groups,  such  as 
those  not  in  education,  employment  or  training 
(NEETs), persons with disabilities and people aged 
55  and  over.  Additionally,  an  RRP-funded  project 
aims  to  collect  national  data  on  graduates’ 
pathways  after  they  have  left  higher  education 
and  data  on  the  labour  market’s  current  and 

to 

(173) Zachariou, A. (2019), Reporting on implementation of the 

UNECE Strategy for Education for Sustainable 
Development. 

(174) The macroeconomic skills mismatch indicator measures the 
dispersion of employment rates across skill groups (proxied 
by qualification levels, with ISCED 0-2 low; 3-4 medium and 
5-7 high). 

(175) Source: Eurostat [lfsa_eoqgan2], EU-LFS. 

79 

 
 
 
future  knowledge  and  skills  needs.  Labour 
shortages in 2024 were reported for a number of 
occupations  in  Cyprus  requiring  specific  skills 
related  to  the  green  transition,  including  garbage 
and  recycling  collectors,  refuse  sorters  and  air 
conditioning and refrigeration mechanics. 

The  low  levels  of  digital  skills  aggravate 
skills  shortages.  Digital  literacy  is  low:  only 
49.5%  of  adults  had  at  least  a  basic  level  of 
digital skills in 2023 (against 55.6% in the EU and 
a slight decline from 50.2% in 2021), which poses 
challenges to the green and digital transitions. The 
share  is  higher  among  young  people  aged  16-19 
at 76.89% (vs the EU average of 66.49%) (2023), 
but  this  has  been  decreasing  in  recent  years 
(81.62% in 2021). Digital skills, which are rising in 
demand  across  occupations,  are  an  enabler  of 
effective  participation  in  modern  societies.  In 
December  2021,  the  country  adopted  the  2021-
2025  national  e-skills  action  plan  to  enable  the 
development  of  digital  skills  and  the  continuous 
upskilling  of  all  population  groups.  The  RRF 
finances training programmes in digital and green 
skills for employees to be rolled out. The RRP also 
includes  upskilling  training  programmes  in  digital 
skills and skills for the blue and green economies. 

in 

adult 

participation 

learning 
Low 
undermines Cyprus’s potential to improve its 
economic  competitiveness.  In  2022,  28.3%  of 
in  education  and 
Cypriot  adults  participated 
training  (during  the  last  12  months),  lower  than 
the EU average of 39.5% (see Graph A10.2). Unlike 
the  EU  overall  trend,  participation  has  fallen 
considerably  since  2016  (by  16 pps,  the  sharpest 
fall  in  the  EU),  moving  Cyprus  away  from  its 
national  2030  target  of  61%.  People  with  higher 
levels  of  education  have  a  much  higher  rate  of 
participation  in  learning  than  people  with  lower 
levels  of  education  (35.5%  vs  10.9%).  This  gap 
has shrunk since 2016, but this is due to a greater 
decline  in  participation  among  people  with  higher 
levels of education than those with lower levels. In 
Cyprus, fewer women participate in education and 
training than men (20.4% vs 36.7%) unlike in most 
other  Member  States.  Young  adults  (aged  25-34) 
are  substantially  more  likely  to  participate  in 
training than older adults (aged 55-64) (43.3% vs 
10.3%).  People  who  are  not  in  the  labour  market 
also  participate  much  less  in  learning  than  the 
working  population  (30.2%  v  16.8%).  The  rate  is 
relatively  similar  across  cities,  towns  and  rural 
areas  (28%,  27.9%  and  29%,  respectively).  To 
remedy  these  issues,  Cyprus’s  National  e-Skills 

action  plan  continues  to  help  meet  the  ambitious 
national  target.  In  addition,  the  Human  Resource 
Development Authority of Cyprus (HRDA) launched 
a  pilot  project  in  2024  on  individual  learning 
accounts (ILAs), co-funded by the ESF+. 

Graph A12.2: Participation in education and 
training (during the past 12 months), by 
educational attainment level for 2016 and 2022 

(1) Excluding guided-on-the-job training. 
Source: Eurostat, AES, special extraction available on 
CIRCABC. 

centre 

training 

Cyprus 
is  also  taking  measures  partly 
to  emphasise 
supported  by  EU  funds 
upskilling  in  active  inclusion.  For  example,  to 
integrate  young  NEETs  into  the  labour  market, 
training programmes are financed under the ESF+. 
The 
for  employment  and 
entrepreneurship  for  vulnerable  groups  offers 
tailored  training  and  support  services,  helping 
people  integrate  into  the  workforce  and  develop 
entrepreneurial  skills.  Participants 
ILA 
project  –  people  with  secondary  education  and 
long-term  unemployed  people  –  will  receive  a 
fixed  amount  to  participate  in  HRDA’s  approved 
training programmes of their choice over a three-
year period. 

in  the 

80 

1020304050607020072008200920102011201220132014201520162017201820192020202120222030% of people aged 25-64EU TotalCY TotalCY with low educationCY with high educationCY 2030 target 
  
ANNEX 13: SOCIAL SCOREBOARD 

Table A13.1:Social Scoreboard for Cyprus 

(1) Update of 5 May 2025. 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 2025 for details on the 
methodology (https://employment-social-affairs.ec.europa.eu/joint-employment-report-2025-0). 
Source: Eurostat 

81 

28,311,349,512,910,04,4079,84,91,3114,617,114,830,524,52,440,10,1Critical situationTo watchWeak but improvingGood but to monitorOn averageAdult participation in learning (during the last 12 months, excl. guided on the job training, % of the population aged 25-64, 2022)Equal opportunities and access to the labour marketSocial Scoreboard for CyprusBest performersBetter than averageEarly leavers from education and training(% of  the population aged 18-24, 2024)Young people not in employment, education or training(% of the population aged 15-29, 2024)Gender employment gap(percentage points, population aged 20-64, 2024)Income quintile ratio (S80/S20, 2024)Dynamic labour markets and fair working conditionsSocial protection and inclusionShare of individuals who have basic or above basic overall digital skills(% of the population aged 16-74, 2023)Impact of social transfers (other than pensions) on poverty reduction(% reduction of AROP, 2024)Children aged less than 3 years in formal childcare (% of the under 3-years-old population, 2024)Self-reported unmet need for medical care (% of the population aged 16+, 2024)Disability employment gap (percentage points, population aged 20-64, 2024)Housing cost overburden (% of the total population, 2024)At risk of poverty or social exclusion (AROPE) rate (% of the total population, 2024)Employment rate(% of the population aged 20-64, 2024)Unemployment rate(% of the active population aged 15-74, 2024)Long term unemployment(% of the active population aged 15-74, 2024)Gross disposable household income (GDHI) per capita growth(index, 2008=100, 2023)At risk of poverty or social exclusion (AROPE) rate for children(% of the population aged 0-17, 2024) 
 
 
 
 
  
 
ANNEX 14: HEALTH AND HEALTH SYSTEMS 

The  performance  of  the  health  system  in 
Cyprus  leaves  room  for  improvement.  Health 
workforce  and  bed  shortages  are  a  key  capacity 
constraint.  These  issues  are  being  addressed  by 
the  country’s  recent  reform  which  has  already 
made  healthcare  more  affordable  and  reduced 
self-reported  levels  of  unmet  needs  for  medical 
care, although there are still shortcomings in rural 
areas.  

Graph A14.2: Treatable mortality 

Life  expectancy  at  birth  in  Cyprus  remains 
well  above  the  EU  average  and  rebounded 
above  its  pre-COVID-19  levels.  In  2023,  life 
expectancy at birth stood at 82.9 years, one and a 
half  years  above  the  EU  average,  linked  to  low 
levels of treatable mortality. However, there is still 
a clear gender gap in life expectancy, with women 
expected  to  live  4  years  longer  than  men.  That 
said, they can only expect to live around 7 months 
more  than  men  in  good  health.  In  2022,  the 
leading  causes  of  death  were  cardiovascular 
diseases, with mortality rates decreasing over the 
last  decade,  followed  by  cancer,  for  which 
mortality 
relatively 
unchanged.  The  third  leading  cause  of  death  was 
COVID-19. Compared to other EU countries, Cyprus 
fares  relatively  well  on  treatable  mortality,  which 
is  also  reflected  in  its  relatively  low  cancer 
mortality  rate  (189  per  100 000  population  in 
2022, below the EU average of 235). Lung cancer 
remains  the  most  frequent  cause  of  death  by 
cancer,  followed  by  breast  and  then  by  colorectal 
cancer. This has prompted a number of initiatives 
to  prevent  cancer  (such  as  tobacco  smoking 
reduction policies) and to promote better access to 
cancer screening and treatment. 

remained 

rates 

have 

Graph A14.1: Life expectancy at birth, years 

Source: Eurostat (demo_mlexpec) 

Age-standardised death rate (mortality that could be 
avoided through optimal quality healthcare) 
Source: Eurostat (hlth_cd_apr) 

Health  spending  in  Cyprus  is  low,  including 
for  capital  formation,  but  out-of-pocket  spending 
on  health  was  greatly  reduced  since  2019.  In 
2022,  health  spending  per  inhabitant  in  Cyprus 
was  far  below  the  EU  average,  with  the  largest 
share  going  to  inpatient  and  outpatient  care 
(around  44.5%  and  32.8%  of 
total  health 
expenditure,  respectively).  Public  spending  as  a 
total  healthcare  expenditure 
proportion  of 
increased  from  around  55%  in  2019  to  80.9%  in 
2022, close to the EU average of 81.3%. However, 
Cyprus’ health infrastructure is lagging behind. For 
example,  Cyprus  has  a  low  number  of  hospital 
beds  (295  per  100 000  population  in  2022,  well 
below  the  EU  average  of  444).  Out-of-pocket 
payments,  which  went  down 
considerably 
following  the  2019  reform,  currently  account  for 
14.6%  of  health  spending  in  Cyprus  (vs  an  EU 
average  of  14.3%).  Around  40%  of  all  out-of-
pocket  payments  are  for  outpatient  services, 
followed  by  dental  services  (176).  Comparatively 
high  unmet  needs  for  medical  examination  are 
reported  in  rural  areas  (177).  Spending  on  primary 
care  health  services  as  a  share  of  current  health 
expenditure  is  close  to  the  EU  average  for  dental 
and general outpatient care, but it is far below the 
EU  average  for  prevention  in  outpatient  settings 
(e.g. cancer screening, etc.) (178).  Capital formation 
in  health,  measured  by  capital  expenditure  on 
health  as  a  percentage  of  GDP,  is  among  the 
lowest  in  the  EU,  and  far  below  the  EU  average. 
Under  its  recovery  and  resilience  plan  (RRP), 
Cyprus  plans  to  spend  EUR  69.6  million  on 
modernising state hospitals, purchasing equipment 

(176) OECD/European Commission (2024), Health at a Glance: 

Europe 2024 - State of Health in the EU Cycle, pp. 186-187. 

(177) For further details, see Annex 11. 
(178) Health at a Glance: Europe 2024, pp. 151. 

82 

82.382.481.381.682.981.380.480.180.681.420192020202120222023CyprusEU78.977.170.878.470.991.389.291.793.389.720182019202020212022per 100 000 populationCyprusEU 
 
        
 
        
 
 
 
Table A14.1:Key health indicators 

*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 based on 2022 (or latest 2021) data except for Luxembourg (2017). Doctors’ density data refer to practising 
doctors in all countries except Greece, Portugal (licensed to practise) and Slovakia (professionally active). Density of nurses: data 
refer to practising nurses (EU recognised qualification) in most countries except France and Slovakia (professionally active) and 
Greece (hospital only). **‘Available hospital beds’ covers somatic care, not psychiatric care. ***The EU median is used for patents. 
Source:  Eurostat database; European Patent Office; ****European Centre for Disease Prevention and Control (ECDC) for 2023. 

and  rolling  out  digital  and  interoperable  e-health 
services. 

The situation with disease prevention leaves 
room  for  improvement.  In  2022,  the  share  of 
spending on prevention in Cyprus dropped to 2.5% 
of  total  public  spending  on  health,  far  below  the 
EU  average  of  5.5%.  In  response  to  COVID-19, 
between  2019  and  2021,  Cyprus  reported  a 
remarkable  proportional  increase  in  spending  on 
early  disease  detection  programmes.  A  particular 
public health concern is the country’s high smoking 
and  adult  vaping  rates  (179). Another  public  health 
challenge is the high consumption of antibacterials 
in  Cyprus,  which  could  accelerate  antimicrobial 
resistance. Cyprus’ RRP includes a measure to set 
up  an  electronic  platform 
for  monitoring 
nosocomial  antibiotic  consumption.  The  existing 
Antimicrobial  Resistance  plan,  first  approved  in 
2018,  will  be  revised  in  2025.  Recent  measures 
and  the  AMR  action  plan  have  contributed  to  a 
steady  decline  in  both  antimicrobial  sales  and 
usage in recent years. The process of creating and 
establishing  an  electronic  prescription  system  for 
the  Veterinary  Medicinal  Products 
is  under 
progress  and  envisaged  to  be  established  and 
used.  

Cyprus  has  more  doctors  but  fewer  nurses 
than  the  EU  average.  In  2022,  there  were  5.3 
practising nurses per 1 000 inhabitants, well below 
the  EU  average  of  7.6.  Doctor  density  in  Cyprus 
(around  5.2  per  1 000 inhabitants  in  2022)  is 
above the EU average of 4.2. However, doctors are 
concentrated  in  the  capital  region  and  in  other 

(179) Health at a Glance: Europe 2024, Chapter 4. 

major cities, with shortfalls in remote and sparsely 
populated  regions.  Studying  medicine  in  Cyprus 
has only been possible since 2013. Previously, the 
system  relied  on  medical  graduates  who  studied 
abroad  and  then  returned  to  practise  in  Cyprus. 
The  number  of  entries  to  study  nursing  and 
nursing  graduates  has  decreased  substantially  in 
recent  years.  Upskilling  opportunities  for  health 
workers  are  also  envisaged  in  the  RRP.  Given  the 
human 
the 
challenges 
healthcare  and  long-term  care  systems,  longer-
term strategic planning is necessary. 

faced  by 

resource 

foster 

innovation  and 

The  potential  of  Cyprus’  health  system  to 
industrial 
drive 
development  in  the  EU  medical  sector  is  not 
being fully exploited  (180). Cyprus is among the 
EU  countries  that  report  low  public  spending  on 
health research and development. This is reflected 
in  the  low  number  of  European  patents  granted: 
four 
the  combined  areas  of 
pharmaceuticals and medical technologies (181), far 
below  the  EU-level  median  of  29.  Clinical  trial 
activity is also low (182). 

in  2023 

in 

Cyprus aims to scale up the digitalisation of 
its  health  system,  with  support  from  EU 
programmes.  The  share  of  people  who  access 
their  personal  health  records  online  in  Cyprus  is 
above  the  EU  average,  but  there  is  still  room  for 
improvement  on  the  overall  technical  deployment 
of electronic health records (183). The use of online 

(180) For further details, see Annex 3. 
(181) European Patent Office, Data to download | epo.org. 
(182) EMA (2024), Monitoring the European clinical trials 

environment, p. 9. 

(183) For further details, see Annex 6.  

83 

20192020202120222023EU average* (latest year) Cancer mortality per 100 000 population195.4205.5213.2188.8n.a.234.7 (2022)Mortality due to circulatory diseases per 100 000 population 271.2 287.7 280.8 257.8n.a.336.4 (2022)Current expenditure on health, purchasing power standards, per capita1 9782 3122 7982 854n.a.3 684.6 (2022)Public share of health expenditure, % of current health expenditure 54.2 71.6 81.6 80.9n.a.81.3 (2022)Spending on prevention, % of current health expenditure 1.21.63.12.5n.a.5.5 (2022)Available hospital beds per 100 000 population** 296 300 293 294n.a.444 (2022)Doctors per 1 000 population*4.34.74.95.2n.a.4.2 (2022)*Nurses per 1 000 population* 5.3 5.2 5.2 5.3n.a.7.6 (2022)*Mortality at working age (20-64 years), % of total mortality14.415.315.213.513.914.3 (2023)Number of patents (pharma / biotech / medical technology)9966429 (2023)***Total consumption of antibacterials for systemic use,                    daily defined dose per 1 000 inhabitants****30.128.925.033.5n.a.20.0 (2023) 
 
 
 
        
 
 
 
health  services  (excluding  phone)  instead  of  in-
person  consultations  is  among  the  lowest  in  the 
EU.  However,  Cyprus’  RRP  includes  measures  to 
strengthen  digital  solutions  in  the  healthcare 
sector.  Additionally,  the  country  is  planning  to 
invest in e-health services and applications to step 
up  the  digital  transition  of  healthcare,  under  the 
2021-2027 cohesion policy funds.  

84 

 
 
HORIZONTAL 
ANNEX 15: SUSTAINABLE DEVELOPMENT GOALS 

dimensions 

This Annex assesses Cyprus’ progress on the 
Sustainable Development Goals (SDGs) along 
competitiveness, 
of 
the 
and 
fairness 
social 
sustainability, 
macroeconomic stability. 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 
inequalities  and  tackle  climate 
poverty,  fight 
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 
the EU. 

Cyprus  is  improving  on  some  elements  in 
competitiveness  (SDGs  8  and  9)  and  moving 
away from SDG 4, but it still needs to catch 
up  with  all  of  them  compared  to  the  EU, 
particularly  for  SDG  9.  Regarding  education 

Graph A15.1: Progress towards the SDGs in Cyprus 

low-achievers 

larger  percentage  of 

(SDG 4), compared to the EU average, Cyprus has 
higher  attainment  in  tertiary  education,  but  a 
much 
in 
mathematics,  a  lower  percentage  of  participation 
in  early  education,  a  higher  percentage  of  early-
school  leavers  and  lower  share  of  basic  digital 
skills for adults below the EU average. The country 
is  making  progress  on  SDG 8  (Decent  work  and 
economic growth), on the back of strong economic 
growth and improved labour market performance. 
However,  fatal  accidents  at  work  increased  to 
levels  above  the  EU  average,  investments,  as 
share of GDP, are still below the EU average, and 
material  footprint  is  above  the  EU  average.  On 
SDG 9 (Industry, innovation and infrastructure), the 
country  needs  to  catch  up  on  R&D  expenditure, 
which remains low at 0.68% of GDP in 2023 – one 
of  the  lowest  in  the  EU  (where  the  average  is 
infrastructure, 
2.24%).  Regarding  sustainable 
Cyprus  is  slightly  lagging  behind  the  EU  average, 
both on the share of households with a high-speed 
internet  connection  and  the  share  of  buses  in 
passenger  transport.  The  recovery  and  resilience 
plan  (RRP)  is  targeting  bottlenecks,  especially  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 
five 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 28 April 2025. Data refer mainly to the period 2018-2023 or 2019-2024. Data on SDGs may 
vary across the report and its annexes due to different cut-off dates. 

85 

 
 
 
 
 
 
the diversification of the economy, and investing in 
R&D,  as  well  as  in  sustainable  infrastructure,  to 
facilitate further progress on these SDGs. 

(Responsible 

consumption 

Innovation  and 

Cyprus  is  improving  on  most  SDG  indicators 
related to  sustainability and it is well above 
the EU average for SDGs 6, 14 and 15 (Clean 
water  and  sanitation,  Life  under  water  and 
Life  on  Land).  However,  it  needs  to  catch  up 
with the EU average on SDG 2 (Zero hunger), 
SDG 7  (Affordable  and  clean  energy),  SDG  9 
(Industry, 
Infrastructure), 
SDG 11 (Sustainable cities and communities), 
SDG 12 
and 
production)  and  SDG 13  (Climate  action).  Per 
capita energy consumption in Cyprus is at par with 
the  EU  average,  and  the  country  has  made 
progress  on  energy  consumption  indicators.  There 
was  improvement  in  the  share  of  renewable 
energy in gross final energy consumption, up from 
13.9% in 2018 to 20.2% in 2023. However, Cyprus 
remains  below  the  EU  average  of  24.6%.  On 
affordable  energy,  the  percentage  of  the  Cypriot 
population unable to keep their homes adequately 
warm was higher than the EU average in 2023, at 
16.9%  (EU  10.6%).  While  the  concentration  of 
in  groundwater  significantly  dropped 
nitrates 
in  2022), 
(7.8 mg/litre  vs  EU  20.7 mg/litre 
ammonia  emissions  from  agriculture  are  high 
(61.3 Kg/ha vs EU 18.3 Kg/ha). This, combined with 
a low recycling rate of municipal waste (16.0% vs 
EU  48.2%  in  2023)  and  a  high  material  footprint 
(in  2023,  20.7 tonnes  per 
vs 
14.2 tonnes  for  the  EU)  are  challenges  to  the 
environment.  The  average  CO2  emissions  per  km 
from  new  passenger  cars  were  126.3 g  CO2  per 
km,  above  the  EU  average  of  107.6.  Measures  in 
the  recovery  and  resilience  plan  (RRP  (Policy  Axis 
2) such as energy efficiency renovations of public 
in 
and  private  buildings  and 
sustainable water management and transport will 
help  achieve  further  progress  on  these  SDGs. 
Coastal  water  bathing  sites  with  excellent  water 
quality amount to 97.6% (vs 88.8% in the EU) and 
the share of terrestrial protected area is at 37.8% 
(vs 26.1 in the EU). 

investments 

inhabitant, 

While Cyprus is improving on almost all SDGs 
(except for SDG 3, 4 and 5) related to social 
fairness, it still needs to catch up on SDGs 4, 

in  mathematics 

5,  7,  8 (184).  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  basic  education.  The  EU/non-EU 
citizenship  gap  for  early  leavers  from  education 
and  training  was  31.5  percentage  points (pps),  vs 
the  EU  average  of  15.4 pps  in  2024.  By  contrast, 
the  EU/non-EU  citizenship  gap  for  young  people 
not  in  employment,  education  or  training  was  at 
par  with  the  EU  average  (SDG  10).  Furthermore, 
the high share of low achievement of 15-year-old 
(see  Annex  on 
students 
Educational Skills) poses challenges in the field of 
opportunities for young people. This is also shown 
in  the  higher  numbers  of  young  people  aged  15-
29  not  in  education,  employment  or  training 
(12.9% vs EU 11.0% in 2024). On gender equality, 
while  the  gender  employment  gap  is  at  par  with 
the  EU  average  (10.0 pps  in  2024),  the  share  of 
senior management positions held by women was 
much lower than in the EU (11.4% vs EU 32.6% in 
2024),  despite  its  increasing  path.  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  arrangements.  This  will  provide  equal 
opportunities for all children and make it easier for 
women to participate in the labour market. 

Cyprus  is  moving  away  compared  to  the  EU 
on  SDGs  related  to  macroeconomic  stability 
(SDGs 8, 16, 17). Even if Cyprus is improving on 
SDG 8 (Decent work and economic growth), its real 
GDP  per  capita  remains  below  the  EU  average  in 
2024. Cyprus is also improving on SDG 16 (Peace, 
justice and strong institutions), with a lower share 
of people reporting crime, violence or vandalism in 
2023,  compared  to  the  EU  average.  Moreover, 
numbers of victims of human trafficking are lower 
than 
the  EU  average.  Also,  government 
expenditure on the law courts is well below the EU 
average. The perceived independence of the justice 
system (very good and fairly good) is close to the 
EU average, while the Corruption Perceptions Index 
scores worse in Cyprus than in the EU (56 in CY vs 
62  in  the  EU).  The  RRP  includes  reforms  and 
investments  under  Component  3.4  (Modernising 

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

86 

 
 
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. 

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

87 

 
 
ANNEX 16: CSR PROGRESS AND EU FUNDS IMPLEMENTATION 

recommendations 

Cyprus  faces  structural  challenges in a  wide 
range  of  policy  areas,  as  identified  in  the 
country-specific 
(CSRs) 
addressed  to  the  country  as  part  of  the 
European  Semester.    They  refer,  among  other 
things,  to  the  budgetary  framework  and  fiscal 
governance, state-owned enterprises, the business 
environment  (including  policies  on  small  and 
renewable 
medium-sized  enterprises 
(SMEs)), 
infrastructures  and  networks, 
energy,  energy 
energy  efficiency, 
transport,  education,  skills, 
vocational education, training and adult learning. 

The Commission has assessed the 2019-2024 
CSRs  considering  the  policy  action  taken  by 
Cyprus  to  date  and  the  commitments  in  its 
recovery  and  resilience  plan  (RRP).  At  this 
stage,  Cyprus  has  made  at  least  ‘some  progress’ 
on XX% of the CSRs (185), and ‘limited progress’ on 
XX% (Table A16.2). 

to 

by 

competitiveness, 

EU funding instruments provide considerable 
resources 
supporting 
Cyprus 
investments  and  structural  reforms  to 
increase 
environmental 
sustainability  and  social  fairness,  while 
helping  to  address  challenges  identified  in 
the  CSRs.  In  addition  to  the  EUR 1.2  billion 
funding  from  the  Recovery  and  Resilience  Facility 
(RRF) in 2021-2026, EU cohesion policy funds (186) 
are  providing  nearly  EUR 1  billion  to  Cyprus 
(amounting  to  EUR 1.5  billion  with  national  co-
financing) 
to  boost 
competitiveness  and  growth.  Support  from  these 
instruments  combined  represents  around  7%  of 
these 
2024  GDP 
instruments  to  different  policy  objectives 
is 
in  Graphs  A16.1  and  A16.2.  This 
outlined 

(188).  The  contribution  of 

for  2021-2027 

(187) 

to  Cyprus  under 

substantial  support  comes  on  top  of  financing 
the  2014-2020 
provided 
multiannual  financial  framework,  which  financed 
projects  until  2023  and  has  had  significant 
benefits  for  the  economy  and  Cypriot  society. 
Project  selection  under  the  2021-2027  cohesion 
policy programme has accelerated.  

The Cypriot RRP contains 75 investments and 
61  reforms  to  stimulate  sustainable  growth 
and enhance the digital transition, as well as 
to increase productivity. A year before the end 
of the RRF timespan, 31% of the funds disbursed 
(189).  Efforts  are  needed  to  ensure  completion  of 
all RRP measures by 31 August 2026. [placeholder 
for state of play + challenges for implementation– 
underpinning messages in Chapter 1 – to be added 
later]. 

Cyprus  also  receives  funding  from  several 
other  EU  instruments,  including  those  listed  in 
table A16.1. [For each MS please mention 1 or 2 of 
the  most  relevant  other  funds  e.g.  CAP  and/or 
AMIF,  depending  on  their  relative  importance:] 
Most notably, the common agricultural policy (CAP) 
provides Cyprus with an EU  contribution of nearly 
EUR 0.4  billion  under  the  CAP  strategic  plan  for 
2023-2027  (190).  A  further  EUR XX million  are 
the  Asylum,  Migration  and 
available  under 
Integration  Fund  (AMIF),  together  with  the  border 
management  and  visa  instrument  (BMVI)  and 
internal  security  funds.  Furthermore,  operations 
amounting  to  EUR  89  million  (191)  have  been 
signed  under  the  InvestEU  instrument  backed  by 
the  EU  guarantee,  improving  access  to  financing 
for riskier operations in Cyprus. 

(185) 9% of the 2019-2024 CSRs have been fully implemented, 
15% substantially implemented, and some progress has 
been made on 43%. 

(186) In 2021-2027, cohesion policy funds include the European 
Regional Development Fund, the Cohesion Fund, the 
European Social Fund Plus and the Just Transition Fund. The 
information on cohesion policy included in this annex is 
based on adopted programmes with the cut-off date of 5 
May 2025. 

(187) European territorial cooperation (ETC) programmes are 

excluded from the figure. 

(188) 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 2024. 

(189) As of mid-May 2025, Cyprus has submitted 4 out of 9 

payment requests, the fourth one being under assessment. 

(190) An overview of Cyprus’s formally approved strategy to 

implement the EU’s common agricultural policy nationally 
can be found at: https://agriculture.ec.europa.eu/cap-my-
country/cap-strategic-plans/cyprus_en  

(191) Data reflect the situation on 31.12.2024. 

88 

 
 
 
 
 
 
Graph A16.1: Distribution of RRF funding in Cyprus 
by policy field 

(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 circle 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. 
Source: European Commission 

Graph A16.2: Distribution of cohesion policy 
funding across policy objectives in Cyprus 

Source: European Commission 

and 

reinforcing 

Cohesion  policy  funds  aim  to  increase  the 
productivity and competitiveness of Cyprus’s 
firms and improve the business environment. 
More  specifically,  they  contribute  to  expanding 
research  and  innovation  capabilities,  delivering 
new  digital  services  for  citizens  and  businesses, 
and 
industrial 
business 
the  European  Regional 
ecosystems.  Through 
investment  of 
Development  Fund  (ERDF),  an 
these  efforts. 
EUR 147  million  will  support 
Implementation  of  the  Thalia  Programme 
is 
expected to create 885 research jobs in supported 
entities, provide 133 000 users with access to new 
and upgraded public digital services, products and 
processes,  and  generate  1 775  additional  jobs. 
With the European Social Fund Plus (ESF+), Cyprus 
has  taken  several  measures  and  initiatives  aimed 
at fostering skills and improving participation rates 
in  vocational  education  and  training  and  adult 

for 

plan, 

action 

‘Modern 

learning,  while  enhancing  competitiveness  and 
productivity.  It  has  developed  a  European  Year  of 
Skills 
Professional 
Development 
the  Green  and  Digital 
Transitions’,  with  several  initiatives,  also  financed 
under  the  ESF+.  This  is  expected  to  reduce  skills 
mismatches  and  contribute  to  upskilling  and 
training  for  100 000  people.  Cyprus  has  also 
included  a  pilot  project  for  individual  learning 
accounts  in  the  ESF+,  to  be  launched  in  2025. 
Under ESF+, there are also training programmes to 
help  at 
in 
least  2 500  young  NEETs 
employment, education or training), to integrate in 
the labour market. 

(not 

are 

references 

contributing 

focused  on 
infrastructure. 

in  Cyprus,  for 
[Insert 

to 
Other 
funds 
instance 
competitiveness 
through  open  calls. 
to 
investments  covered  by  CEF,  Horizon  and  TSI 
support.]  During  the  2021-2027  period,  CEF-T 
(Connecting  Europe  Facility  for  Transport)  funding 
road 
in  Cyprus  has  primarily 
infrastructure,  maritime 
And 
modernisation of air transport infrastructure.  The 
CEF-E  (CEF  for  Energy)  supports  energy  market 
integration,  decarbonisation  of  the  energy  system 
and security of energy supply. Horizon Europe has 
supported research and innovation, from scientific 
breakthroughs  to  scaling  up  innovations  with 
Digital,  Industry  and  Space  as  well  as  Climate, 
Energy and Mobility as top priorities.  In 2024, TSI 
supported  Cyprus  in  designing  and  implementing 
growth-enhancing  reforms,  including  enhancing 
the  coordination  and  monitoring  of  policies, 
strengthening  the  civil  protection  system,  and 
establishing an asset management office 

to 

the 

Cyprus’s  RRP  also  contains  ambitious 
measures 
business 
improve 
environment  and  competitiveness.  As  part  of 
the  measures  covered  by  the  third  and  fourth 
payment  requests  submitted  over  the  past  year, 
Cyprus  has 
implemented  several  reforms  to 
enhance the productivity and effectiveness of the 
public  administration,  including  a  strategy  for 
addressing 
property 
transaction  system  (title  deeds),  reforms to  make 
the banking sector more resilient, several research 
and  development  investments,  modernisation  of 
the  customs  and  electronic  payment  system  and 
innovation  funding  programmes  for  start-ups, 
innovative companies and SMEs. 

inadequacies 

the 

in 

EU  funds  are  playing  a  significant  role  in 
promoting  environmental  sustainability  and 

89 

Green transitionDigital transformationSmart, sustainable andinclusive growthSocial & territorial cohesionHealth & resilienceNext generationSmarter EuropeGreener EuropeConnected EuropeSocial EuropeEurope closer to citizensJTF specific objective 
   
 
   
green transition in Cyprus during the current 
seven-year  EU  budget  (multiannual  financial 
framework).  Cohesion  policy  funds  contribute 
significantly  to  increasing  the  share  of  renewable 
energy  sources  in  energy  production,  support 
sustainable  water  and  wastewater  management 
to  ensure  an  adequate  water  supply  for  all  uses, 
and  improve  the  separate  collection  of  waste  to 
facilitate the transition to a circular economy. As a 
result,  the  share  of  renewable  energy  sources  in 
Cyprus’s  energy  mix  is  expected  to  rise  from 
11.7%  to  30%,  representing  an  18.3%  increase. 
Additionally,  8 500 people will be  connected to at 
least  secondary  public  wastewater  treatment, 
while  additional  300 000  tonnes  of  waste  will  be 
collected  separately  each  year.  As  for  the  CAP 
strategic plan, Cyprus allocates EUR 66 million for 
environmental  and  climate  objectives,  such  as 
organic  farming,  alternative  methods  of  plant 
protection  with  a  view  to  reducing  pesticides, 
nature-
protecting 
protected areas, contributing to water savings and 
improving  irrigation  infrastructure.  In  order  to 
double  the  total  agricultural  land  under  organic 
farming,  Cyprus  allocates  EUR 21  million  to 
converting  to  and  maintaining  organic  farming 
methods. 

biodiversity, 

reinforcing 

including  the  REPowerEU 
Cyprus’s  RRP, 
chapter, has a comprehensive set of reforms 
and  investments  for  the  green  transition.  As 
part  of  the  measures  covered  by  the  third  and 
fourth  payment  requests  submitted  over  the  past 
year,  Cyprus  has  improved  the  monitoring  of 
greenhouse  gas  emissions  from  the  agricultural 
sector  and,  a  part  of  the  REPowerEU  chapter, 
Cyprus  has  promoted  renewables  and  individual 
energy  efficiency  measures 
in  dwellings  and 
tackled  energy  poverty 
in  households  with 
vulnerable electricity consumers. 

Promoting  fairness,  social  cohesion  and 
improving  access  to  basic  services  are 
among  the  key  priorities  of  EU  funding  in 
Cyprus.  Cyprus  dedicates  47%  of  the  ESF+ 
allocation  (EUR 104.2  million)  to  social  inclusion 
and  18%  (EUR 40.5  million)  to  combating  child 
poverty  and  providing  support  to  the  most 
deprived.  The  ESF+  fosters  social  cohesion  in 
Cyprus  via  various  actions  and  initiatives  such  as 
the  employment  of 
subsidy 
vulnerable  groups  (at  least  500  people  will  be 
supported  into  employment),  the  restructuring  of 
the  social  welfare  services  (10  new  institutional 
services to be  set up), the provision of affordable 

schemes 

for 

early  childhood  education  and  care  services  for 
children  aged  up  to  four  years  old,  home  care 
services for at least 70 people with a disability, a 
new  family  intervention  and  support  centre  for 
autism and more. 

Cyprus’s  RRP  contains  several  reforms  and 
investments  related  to  fairness  and  social 
policies. As part of the measures covered by the 
third and fourth payment requests submitted over 
the past year, Cyprus has deployed generic cross-
border  e-health  services  and  purchased  or 
replaced  medical  equipment  in  hospitals.  Cyprus 
has also implemented flexible work arrangements 
in the form of telework, a new teacher and school 
evaluation system and a gradual extension of free 
compulsory pre-primary education from the age of 
four. 

90 

 
Table A16.1:Selected EU funds with adopted allocations - summary data (million EUR) 

(1) The cut-off date for data on disbursements under the RRF is 5 May 2025 
(2) Cohesion policy 2014-2020 allocations include REACT-EU appropriations committed in 2021-2022. 
(3) These amounts relate only to disbursements made from 2021 onwards and do not include payments made to the Member 
State before 2021.  Hence the figures do not comprise the totality of payments corresponding to the 2014-2020 allocation. The 
cut-off date for data on disbursements under EMFAF and EMFF is 29 April 2025.  The cut off date for data on disbursements 
under cohesion policy funds, AMIF, BMVI and ISF is 5 May 2025. 
(4) AMIF - Asylum, Migration and Integration Fund; BMVI- Border Management and Visa Instrument; ISF - Internal Security Fund. 
(5) Expenditure outside the CAP strategic plan is not included. 
(6) The cut-off date for data on EARDF disbursements is 5 May 2025. The information on EAGF disbursements is based on the 
Member State declarations until March 2025.  Disbursements for the Direct Payments (EAGF) started in 2024. 
Source: European Commission 

91 

Instrument/policyDisbursed since 2021   (1)             RRF grants (including the RepowerEU allocation)RRF loansInstrument/policyAllocation 2014-2020 (2)Allocation 2021-2027 Disbursed since 2021 (3)    (covering total payments to the Member State on commitments originating from both 2014-2020 and 2021-2027 programming periods) Cohesion policy (total) 877.7 968.6 595.4European Regional Development Fund (ERDF) 367.2 466.9 261.3Cohesion Fund (CF) 258.9 178.3 126.1European Social Fund (ESF, ESF+) and the Youth Employment Initiative (YEI) 251.6 222.2 176.7Just Transition Fund (JTF) 101.1 31.3European Maritime, Fisheries and Aquaculture Fund (EMFAF) and the European Maritime and Fisheries Fund (EMFF) 39.7 38.326.3Migration, border management and internal security - AMIF, BMVI and ISF (4) 106.9 188.372.4The common agricultural policy under the CAP strategic plan (5)Disbursements under the CAP Strategic Plan (6)Total under the CAP strategic plan121.0European Agricultural Guarantee Fund (EAGF)95.5European Fund for Agricultural Development (EAFRD)25.5Allocation 2023-2027374.3255.5118.9Allocation 2021-2026 1 020.2200.3FisheriesMigration and home affairs 
 
 
  
 
Table A16.2:Summary table on 2019-2024 CSRs 

(Continued on the next page) 

92 

CyprusAssessment in May 2025*Relevant SDGs2019 CSR 1Some progressAdopt key legislative reforms to improve efficiency in the public sector, in particular as regards the functioning of the public administrationSome progressSDG 16 and the governance of State-owned entities Limited progressSDG 9and local governments.Substantial progressSDG 16Addressfeaturesofthetaxsystemthatmayfacilitateaggressivetaxplanningbyindividualsandmultinationals,inparticularbymeansofoutbound payments by multinationals.Substantial progressSDG 8, 162019 CSR 2Substantial progressFacilitate the reduction of non-performing loans including by setting up an effective governance structure for the State-owned asset management company, Substantial progressSDG 8taking steps to improve payment discipline Substantial progressSDG 8and strengthening the supervision of credit-acquiring companies.Full implementationSDG 8Strengthen supervision capacities in the non-bank financial sector, including by fully integrating the insurance and pension-fund supervisors.Limited progressSDG 82019 CSR 3Some progressComplete reforms aimed at increasing the effectiveness of the public employment services and reinforce outreach and activation support for young peopleSome progressSDG 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 progressSDG 4and affordable childhood education and care.Some progressSDG 4, 5Take measures to ensure that the National Health System becomes operational in 2020, as planned, while preserving its long-term sustainability.Substantial progressSDG 32019 CSR 4Some progressFocus investment-related economic policy on sustainable transport,Limited progressSDG 10, 11environment, in particular waste and water management, Limited progressSDG 6, 10, 11, 12, 15energy efficiency and renewable energy, Some progressSDG 7, 9, 10, 11, 13digitalisation, including digital skills, Some progressSDG 4, 9, 10, 11andresearchandinnovation,takingintoaccountterritorialdisparities within Cyprus.Limited progressSDG 9, 10, 11Adoptlegislationtosimplifytheproceduresforstrategicinvestorstoobtain necessary permits and licences.Substantial progressSDG 8, 9Improve access to finance for SMEs,Some progressSDG 8, 9and resume the implementation of privatisation projects.Limited progressSDG 92019 CSR 5Some progressStepupeffortstoimprovetheefficiencyofthejudicialsystem,includingthefunctioningofadministrativejusticeandrevisingcivilprocedures,increasingthespecialisationofcourtsandsettingupanoperationale-justicesystem.Takemeasurestostrengthenthelegalenforcement of claimsSome progressSDG 9, 16andensurereliableandswiftsystemsfortheissuanceandtransferof title deeds and immovable property rights.Limited progressSDG 8, 9Accelerateanti-corruptionreforms,safeguardtheindependenceofthe prosecution and strengthen the capacity of law enforcement.Some progressSDG 16 
 
 
  
 
Table (continued) 

(Continued on the next page) 

93 

2020 CSR 1Substantial progressInlinewiththegeneralescapeclause,takeallnecessarymeasurestoeffectivelyaddressthepandemic,sustaintheeconomyandsupporttheensuingrecovery.Wheneconomicconditionsallow,pursuefiscalpoliciesaimedatachievingprudentmedium-termfiscalpositionsandensuringdebtsustainability,whileenhancinginvestment. Not relevant anymoreSDG 8, 16Strengthentheresilienceandcapacityofthehealthsystemtoensurequalityandaffordableservices,includingbyimprovinghealthworkers’ working conditions.Substantial progressSDG 32020 CSR 2Some progressProvide adequate income replacement and access to social protection for all. Some progressSDG 1, 2, 8, 10Strengthen public employment services, Some progressSDG 8promote flexible working arrangements andSome progressSDG 8improve labour market relevance of education and training.Some progressSDG 42020 CSR 3Some progressSecure adequate access to finance and liquidity, especially for small and medium-sized enterprises. Some progressSDG 8, 9Front-load mature public investment projects Some progressSDG 8, 16and promote private investment to foster the economic recovery. Some progressSDG 8, 9Focusinvestmentonthegreenanddigitaltransition,inparticularonclean and efficient production and use of energy, Some progressSDG 7, 9, 13waste and water management,Limited progressSDG 6, 12, 15 sustainable transport, Limited progressSDG 11digitalisation, Some progressSDG 9research and innovation.Limited progressSDG 92020 CSR 4Limited progressStepupactiontoaddressfeaturesofthetaxsystemthatfacilitateaggressive tax planning by individuals and multinationals. Limited progressSDG 8, 16Improve the efficiency and digitalisation of the judicial systemSome progressSDG 9, 16and the public sector.Some progressSDG 9, 162021 CSR 1Not relevant anymoreIn2022,maintainasupportivefiscalstance,includingtheimpulseprovidedbytheRecoveryandResilienceFacility,andpreservenationally financed investment.Not relevant anymoreSDG 8, 16Wheneconomicconditionsallow,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositionsandensuringfiscalsustainability in the medium term.Not relevant anymoreSDG 8, 16Atthesametime,enhanceinvestmenttoboostgrowthpotential.Payparticularattentiontothecompositionofpublicfinances,onboththerevenueandexpendituresidesofthenationalbudget,andtothequalityofbudgetarymeasuresinordertoensureasustainableandinclusiverecovery.Prioritisesustainableandgrowth-enhancinginvestment,inparticularinvestmentsupportingthegreenand digital transition. Not relevant anymoreSDG 8, 16Giveprioritytofiscalstructuralreformsthatwillhelpprovidefinancingforpublicpolicyprioritiesandcontributetothelong-termsustainabilityofpublicfinances,including,whererelevant,bystrengtheningthecoverage,adequacyandsustainabilityofhealthand social protection systems for all.Not relevant anymoreSDG 8, 162022 CSR 1Full implementationIn2023,ensurethatthegrowthofnationallyfinancedprimarycurrentexpenditureisinlinewithanoverallneutralpolicystance,takingintoaccountcontinuedtemporaryandtargetedsupporttohouseholdsandfirmsmostvulnerabletoenergypricehikesandtopeoplefleeingUkraine.Standreadytoadjustcurrentspendingtothe evolving situation.Full implementationSDG 8, 16Expandpublicinvestmentforthegreenanddigitaltransitions,andforenergysecuritytakingintoaccounttheREPowerEUinitiative,includingbymakinguseoftheRecoveryandResilienceFacilityandother Union funds.Full implementationSDG 8, 16Fortheperiodbeyond2023,pursueafiscalpolicyaimedatachieving prudent medium-term fiscal positions.Full implementationSDG 8, 16 
 
 
  
 
Table (continued) 

94 

2022 CSR 2Proceedwiththeimplementationofitsrecoveryandresilienceplan,inlinewiththemilestonesandtargetsincludedintheCouncilImplementing Decision of 28 July 2021.SwiftlyfinalisethenegotiationswiththeCommissionofthe2021-2027cohesionpolicyprogrammingdocumentswithaviewtostarting their implementation.2022 CSR 3Limited progressTakemeasurestoimprovethegovernanceofState-ownedentitiesin line with international standards.Limited progressSDG 8, 92022 CSR 4Some progressReduceoverallrelianceonfossilfuelsandfurtherdiversifyenergysupply.Limited progressSDG 7, 9, 13Acceleratethedeploymentofrenewables,inparticularbyfurtherstreamlining permitting proceduresSome progressSDG 7, 8, 9, 13and expanding photovoltaics.Some progressSDG 7, 9, 13Develop energy interconnections with neighbouring countries,Limited progressSDG 7, 9, 13while extending and accelerating energy efficiency measures,Some progressSDG 7including in the transport sector.Limited progressSDG 112023 CSR 1Full implementationWinddowntheemergencyenergysupportmeasuresinforce,assoonaspossiblein2023and2024.Shouldrenewedenergypriceincreasesnecessitateneworcontinuedsupportmeasures,ensurethatthesearetargetedatprotectingvulnerablehouseholdsandfirms, fiscally affordable, and preserve incentives for energy savings.Full implementationSDG 8, 16While maintaining a sound fiscal position in 2024,Full implementationSDG 8, 16preservenationallyfinancedpublicinvestmentandensuretheeffectiveabsorptionofRRFgrantsandotherEUfunds,inparticularto foster the green and digital transitions.Substantial progressSDG 8, 16Facilitatethereductionofprivatedebt,includingbyimplementinganeffective foreclosure framework.Substantial progressSDG 8, 16Fortheperiodbeyond2024,continuetopursueinvestmentandreformsconducivetohighersustainablegrowthandpreserveaprudent medium-term fiscal position.Full implementationSDG 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.Limited progressSDG 7, 9, 13Tobetterexploitalluntappedpotentialforrenewableenergygeneration,acceleraterenewablesdeploymentbyusingsuitableeconomicinstrumentsandmakingfurtherinvestmentstoupgradeand modernise the electricity grid, including energy storage facilities.Some progressSDG 7, 8, 9, 13Speed up the development of electricity interconnections.Limited progressSDG 7, 9, 13Extend and accelerate energy efficiency measures,Some progressSDG 7, 9, 13also to address energy poverty,Some progressSDG 7as well as the shift towards sustainable transport.Limited progressSDG 11Stepuppolicyeffortsaimedattheprovisionandacquisitionoftheskills needed for the green transition.Some progressSDG 7RRP 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.RRP 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. 
 
  
 
 
 
 
 
 
 
 
95 

2024 CSR 1Some progressSubmit the medium-term fiscal-structural plan in a timely manner.Full implementationSDG 8, 16InlinewiththerequirementsofthereformedStabilityandGrowthPact,limitthegrowthinnetexpenditurein2025toarateconsistentwith,interalia,puttingthegeneralgovernmentdebtonaplausiblydownwardtrajectoryoverthemediumtermandrespectingthe3%ofGDP deficit Treaty reference value.No progressSDG 8, 162024 CSR 2Strengthenadministrativecapacitytomanagetherecoveryandresilienceplan,accelerateinvestmentsandmaintainmomentumintheimplementationofreforms.Addressemergingdelaystoallowforcontinued,swiftandeffectiveimplementationoftherecoveryandresilienceplan,includingtheREPowerEUchapter,ensuringcompletionofreformsandinvestmentsbyAugust2026.Acceleratetheimplementationofthecohesionpolicyprogramme.Inthecontextofitsmid-termreview,continuefocusingontheagreedpriorities,takingactiontobetteraddresstheneedsintheareaofpreventionandpreparednessagainstclimatechange-relatedrisks,whileconsideringtheopportunitiesprovidedbytheStrategicTechnologiesfor Europe Platform initiative to improve competitiveness.2024 CSR 3Some progressStrengthenthecompetitivenessoftheeconomybyacceleratingeffortstoimprovethegovernanceofstate-ownedenterprisesinlinewith international standardsLimited progressSDG 9 andfurtherimprovingskilllevelsandeducationaloutcomes.StrengthencontinuousteachertrainingandaddresstheimbalancesbetweenlaboursupplyanddemandbyfurtherincreasingthecapacityandattractivenessofVocationalEducationandTrainingprogrammes as well as fostering adult learning.Some progressSDGs 4, 82024 CSR 4Some progressUpgradeandexpandthegridandstoragetoaccommodateanincreasing share of renewables.Some progressSDGs 7, 9, 13Improvetheimplementationofclimateadaptationmeasures,byfocusingonfosteringtheinstitutionalframeworkgoverningclimateadaptationandimplementingsustainablewatermanagementpractices in agriculture.Limited progressSDGs 1, 7, 8, 11, 13RRP 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. Progress with the cohesion policy is monitored in the context of the Cohesion Policy of the European Union. 
ANNEX 17: COMPETITIVE REGIONS 

Cyprus  continues 
its  path  towards  EU 
convergence  but  the  benefits  of  sustained 
economic  growth  are  not  equally  spread 
across  its  territory.  Opportunities  to  boost 
competitiveness  in  the  main  urban  centres  and 
rural  areas  can  be  leveraged  with  the  help  of 
increased  transport  mobility  and  access  to  basic 
services throughout the country. 

However, the level of connectivity appears to be in 
line with EU averages. Access to the internet is at 
91%, and 89% in rural areas. 

Competitiveness 

per 

4.3% 

average 

the  population.  Cyprus’s 

Between 2014 and 2023, Cyprus’s GDP grew 
on 
year  with 
unemployment  rates  that  did  not  differ  by 
much  between  rural  and  urban  areas  (5.5% 
and 4.6%, respectively). During this period, GDP 
per  head  increased  by  slightly  less  than  the  total 
GDP (3.2% per year) given the substantial growth 
relative  position 
in 
compared  to  the  EU  average  has  therefore 
improved, with GDP per capita in purchasing power 
standard  (PPS)  climbing  from  84%  in  2013  to 
97% in 2023. Labour productivity per hour growth 
has  followed  a  similar  path:  between  2013  and 
2022, it increased on average by 1.2% per year – 
compared  to  0.9%  for  the  EU  while  remaining 
below the EU average, (at 77% of the EU average 
and 93% of transition regions’ average). 

to 

the 

according 

is  a  strong 

innovator  with 

its 
Cyprus 
performance  in  2024  at  106.3%  of  the  EU 
average 
European 
Innovation Scoreboard 2024, which continues 
increase  more  than  the  EU  (+10%). 
to 
However,  financing  R&D  remains  a  significant 
challenge in Cyprus as the country was below the 
EU  average  in  2024  for  R&D  expenditure  in  the 
public  sector  (39.3%  of  the  EU  average),  private 
(18.7%  of 
sector  R&D  expenditure 
the  EU 
average),  venture  capital 
(59.8%  of  the  EU 
average),  and  direct  government  funding  and  tax 
support  for  business  R&D  (15.8%  of  the  EU 
average).  Cyprus  has  a  higher  rate  of  enterprise 
births  and  total  entrepreneurial  activity  than  the 
EU, and this has concentrated economic activity in 
the two main urban centres: Nicosia and Limassol. 

in 

The  start-ups  ecosystem 
is  particularly 
ICT  sector  and  digital 
the 
active 
technologies,  and is  concentrated in  the  two 
main urban centres: Nicosia and Limassol. The 
fintech  sector 
in  Cyprus  has  shown  steady 
development  in  recent  years,  supported  by  a 
growing  ecosystem  and  favourable  regulatory 
initiatives.  Nicosia  and  Limassol  are  the  primary 
hubs  for  fintech  companies,  with  Nicosia  leading 
as the key location and Limassol closely following. 
The  pharmaceutical  sector  in  Cyprus  has  also 
grown  in  recent  years,  supported  by  increased 
local 
export  activity  and 
manufacturing  capabilities.  Key  operations  are 
concentrated  in  Nicosia  and  Limassol,  which  host 
major  manufacturing 
research 
centres.  Larnaca  is  also  emerging  as  a  hub  for 
pharmaceutical  logistics  and  exports,  benefiting 
from  its  proximity  to  the  country's  main  airport. 
These  cities  play  a  central  role  in  the  sector’s 
contribution  to  the  national  economy  and  its 
integration into global markets. 

the  expansion  of 

facilities  and 

Graph A17.1: The evolution of labour productivity 
per hour in Cyprus 

Unit: Real GDP per hour worked (EUR, 2015 prices) 
Source: Eurostat 

Economic  growth  is  largely  driven  by  the 
services  sector  which  is  concentrated  in  the 
main  urban  areas  of  the  island.  In  2023, 
individual  levels  of  digital  skills,  which  are  key 
within  the  sector, measured  by  the percentage  of 
people with basic or above basic skills, were below 
the  EU  average  (49.5%  compared  to  55.6%),  and 
are  lowest  in  Cypriot  cities  with  a  drop  of  5 
percentage  points  (pps)  from  2021  (to  47.5%). 

96 

202530354045201220132014201520162017201820192020202120222015 EUR per hour workedCyprusEU27 
 
   
 
 
redtape  as  a  major  obstacle  above  the  EU 
average  and  increasing  over  time.  Challenges 
persist  in  enforcing  the  rule  of  law,  addressing 
pending  court  cases,  and improving  the efficiency 
of  the  public  procurement  system,  particularly  in 
strategic 
encouraging 
procurement. 

competition 

and 

small 

The  structure  of  the  Cypriot  economy  is 
dominated  by 
to  medium-sized 
enterprises,  which  account  for  99.9%  of 
firms, including 92.8% micro businesses that 
the  workforce  but 
employ  39.8%  of 
contribute only 24.5% of value added. The low 
share of employment in larger companies (16%) is 
significant  compared  to  both  the  EU  average  and 
similar economies like Malta and Estonia. This lack 
of  larger  firms  limits  Cyprus’s  capacity  to  shape 
economic specialisation, boost its export potential, 
and strengthen value chain integration. 

Access  to  finance  remains  a  challenge  for 
Cypriot  businesses,  with  9.5%  of  firms 
reporting  financial  constraints,  well  above 
the  EU  average  of  6%.  The  economy  remains 
heavily  reliant  on  bank  loans,  which  restricts 
flexibility  and  diversification  in  financing  options. 
Investment  in  intangible  assets  (such  as  R&D, 
software, 
training,  and  business  processes) 
accounted  for  33%  of total  investment in Cyprus, 
slightly  below  the  EU  average  of  37%.  While 
Cyprus  leads  the  EU  in  investment  in  employee 
training,  this  comes  at  the  expense  of  other 
productivity-boosting 
R&D, 
machinery  and  equipment.  As  a  result,  overall 
investment  levels  remain  low,  with  limited  focus 
on  activities 
long-term 
productivity and innovation. 

could  drive 

activities 

that 

like 

The availability of highly educated workers is 
higher  than  the  EU  average,  with  variations 
across the territory. In 2024, the percentage of 
people  aged  25-64  with  a  tertiary  degree  was 
51.4% on average (36.1% in the EU), and higher in 
cities (57.0%) than in towns and suburbs (46.2%) 
and  rural  areas  (37.6%),  with  a  positive  trend  in 
the last years. The percentage of people aged 30-
34  with  a  tertiary  degree  was  64.4%  on  average 
(44.8% in the EU). 

Table A17.1:Socio-economic indicators by degree 
of urbanisation, 2024 

Social fairness 

The  labour  market  is  generally  performing 
well  with  some  differences  between  the 
urban  and  rural  parts  of  the  country.  The 
employment rate (for people aged 20-64) in 2024 
was  above  the  EU  average  (79.8%  compared  to 
75.8%), and it was slightly higher in cities (80.3%) 
and towns and suburbs (80.0%) than in rural areas 
(77.9%).  Employment  rates  are  higher  for  EU 
migrants  (85.5%  in  cities,  86.7%  in  towns  and 
suburbs),  while  it  is  lower  for  non-EU  migrants 
(74.3%,  73.1%)  but  still  above  the  respective  EU 
averages.  The  gender  employment  gap  is  10  pps 
on  average,  and  higher  in  rural  areas  (where  the 
employment rate is 72% for women compared to 
84.2%  for  men)  especially  for  people  whose 
educational  attainment  is  below  tertiary  level. 
Employment  rates  (for  people  aged  25-64)  are 
high but slightly below the EU average for people 
with a tertiary (87.8%, with little variation between 
urban and rural areas), suggesting that there is an 
opportunity  to  further  integrate  highly  educated 
people  into  the  labour  market.  The  working-age 
population  (aged  20-64)  increased  in  the  last  10 
years  (+0.5%  per  year),  compared  to  a  slight 
decline both in the EU and in transition regions on 
average.  Net migration  was  also  positive,  with  an 
average  annual  change  of  8  per  1 000  residents 
between  2014  and  2023,  compared  to  3.2  in  the 
EU. 

faces 

challenges 

Cyprus 
in 
structural 
boosting  its  competitiveness,  particularly  as 
regards  workforce  skills,  energy  costs, 
regulatory  burdens,  and  access  to  finance. 
According  to  the  European 
Investment  Bank 
Investment Survey 2024, the availability of skilled 
staff  remains  the  most  significant  obstacle  to 
investment  (91%),  followed  by  high  energy  costs 
(86%),  burdensome  business  regulations  (69%), 
(64%).  Skills 
and 
mismatches, exacerbated by an education system 
misaligned  with  market  needs,  constrain  private 
sector  growth  and  are  a  critical  competitiveness 
non-household 
concern. 
customers in Cyprus remain among the highest in 
the EU. This is largely due to the small size of the 
electricity  market  and  reliance  on  fossil  fuel 
imports for power generation. 

limited  access  to  finance 

Energy 

costs 

for 

Administrative  burdens  also  act  as  a  break 
on investment, with the share of firms citing 

97 

 
 
 
 
needs for medical examination are better than EU 
averages, also in rural areas. 

Sustainability 

faces 

notable 

Cyprus 
sustainability 
challenges  due  to  its  high  vulnerability  to 
climate  change,  with  the  high  water  stress 
levels  driven  by 
low  rainfall  and  high 
temperatures.  This  puts  significant  pressure  on 
water  resources,  particularly  in  agriculture  and 
tourism-dependent  areas.  Anthropic  pressures  in 
coastal  zones,  including  urban  development  and 
tourism,  risk  impacting  habitats  and  ecosystems. 
Addressing  these  pressures  through  targeted 
conservation  and  sustainable  land  use  policies  is 
increasingly  important.  While  adaptation  policies 
strengthen 
exist, 
implementation  and  address  gaps,  particularly  in 
water  management  and  coastal  protection.  There 
is  potential  for  Cyprus  to  explore  innovative 
support 
solutions 
sustainable  growth.  In  addition,  making  progress 
towards a circular economy in waste management 
is  critical  and  would  require 
in 
recycling  capacity  and  waste.  Improving  water 
management,  especially  wastewater  treatment,  is 
essential  to  comply  with  the  Urban  Wastewater 
Treatment Directive. 

resilience  and 

investment 

to  boost 

further 

efforts 

could 

Access to alternative fuel infrastructure (192) 
is  very  low  and  hampers  mobility  between 
urban centres and rural areas. The number of 
electric vehicles charging points with 10 km is only 
7.2,  well  below  the  average  for  transition  regions 
(89).  Addressing  these  environmental  challenges, 
in  achieving 
Cyprus  faces  significant  hurdles 
sustainable 
requires 
substantial  investment  in  public  transportation, 
electric  vehicle  infrastructure,  and  facilities  for 
pedestrians  and  cyclists  to  reduce  its  reliance  on 
traditional  fuel  sources.  Additionally,  accelerating 
transition  will  demand 
the  energy 
further 
investments 
in  renewable  energy  production, 
energy  storage  systems,  and  enhanced  energy 
efficiency to align with EU sustainability targets. 

transport.  The  country 

(192) Indicators of access to alternative fuel infrastructure are 

based on calculations by DG REGIO and the JRC, using data 
from the European Alternative Fuels Observatory (EAFO), 
Eurostat, TomTom and Eco-Movement. 

Source: Eurostat 

signs. 

some  worrying 

The  condition  of  young  people 
in  the 
education  system  and  labour  market  shows 
Youth 
however 
unemployment 
in  2024  went  below  the  EU 
average in all types of territories, and was similar 
all areas in cities (13.0% compared to 15.8%) and 
rural  areas  (13.0%  compared  to  14.3%).  On  the 
other  hand,  the  rate  of  early 
leavers  from 
education  and  training  was  higher  than  the  EU 
average  especially  in  towns  and  suburbs  (18.8% 
compared  to  10.2%)  and  also  in  rural  areas 
(12.0%  compared  to  10.2%).  The  rate  of  young 
people  (15-34)  neither  in  employment  nor  in 
education  and  training  was  also  higher  than  the 
EU  average,  and  especially  in  towns  and  suburbs 
(14.1%  compared  to  12.7%).  Access  to  primary 
schools – measured as the share of children within 
a  15-minute  walking  distance  from  the  nearest 
school  –  is  very  low  in  rural  areas  (18%)  and  in 
cities (56%). At the same time, challenges remain 
as 
the  quality  of  education  and 
educational outcomes (see Annex 12). Students in 
rural  areas  perform  considerably  worse  in  basic 
skills  than  their  peers  in  cities  with  a  gap  of  39 
PISA  score  points.  In  the  2022  OECD  Programme 
(PISA), 
for 
Cyprus 
severe 
the 
underachievement  rate,  with  over  40.3%  of 
students  underachieving  simultaneously 
in  all 
three  tested  subjects  all  over  the  country  (see 
Annex  12  on  education  and  skills).  There  is 
therefore  a  potential  to  improve  the  educational 
outcomes  and  the  labour  market  prospects  of 
young people, especially in rural areas. 

International  Student  Assessment 

recorded 

regards 

highest 

Access  to  health  is  worse  than  the  EU 
considering  only 
average,  also  when 
transition regions such as Cyprus. The share of 
population  within  10  minutes  by  car  from  the 
nearest  hospital  was  79.7%  in  urban  areas  and 
only 9.4% in rural areas, compared to EU averages 
for  transition  regions  of  97.5%  and  34.6%, 
respectively. Despite issues in access to hospitals, 
self-perceived  indicators  about  health  and  unmet 

98 

CitiesTowns and suburbsRural areasPopulation with high educational attainment % of population aged 25-6457.046.237.6Population with low educational attainment % of population aged 25-6411.116.321.1Early leavers from education and training % of population aged 18-248.618.812.0At-risk-of-poverty or social exclusion % of total population15.816.921.1 
   
 
 
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