COMMISSION STAFF WORKING DOCUMENT 2026 Country Report - Cyprus Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Cyprus
Date: 2026-06-03
Institutions: European Commission, Reform and Investment Task Force
Subjects: Cyprus, budget policy, economic policy, economic recovery, economic reform, employment policy, energy transition, research and development, social policy, stability pact

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 3.6.2026  SWD(2026) 213 final  COMMISSION STAFF WORKING DOCUMENT 2026 Country Report - Cyprus Accompanying the document Recommendation for a COUNCIL RECOMMENDATION  on the economic, social, employment, structural and budgetary policies of Cyprus {COM(2026) 213 final}  
 
 
 
 
 
 
 
 
 
 
 
ECONOMIC DEVELOPMENTS AND KEY POLICY 
CHALLENGES 

‘haven  of  stability’ 

proximity  to  the  war  zone  has  called  its 
reputation  as  a 
into 
question. Cyprus’s tourism sector is exposed to 
potential  travellers’  concerns  about  security. 
The  energy  system  remains  dependent  on 
imported  oil,  making  Cyprus  vulnerable  to  oil 
price  increases  and  supply  disruptions.  In  this 
context, the scale of the impact on the Cypriot 
economy will depend on how long the conflict 
lasts and how intense it becomes.  

Despite  the  shock  generated  by  the 
conflict in the Middle East, it is estimated 
that  growth  will  remain  above  the  EU 
average.  According  to  the  Commission’s 
Spring 2026 Forecast, real GDP is expected to 
expand by 2.3% and 2.7%  in 2026 and  2027 
respectively.  This  reflects  the  positive  pre-
existing  conditions  before  the  conflict  started 
and  a  potential  easing  of  uncertainty  in  the 
course  of  2026.  Private  consumption  will 
remain  the  main  contributor  to  growth  but  is 
lose  considerable  momentum  as 
set 
to 
incomes  are  undermined  by 
disposable 
imported  inflation  and  the  inflow  of  foreign 
workers  moderates.  The  already  easing 
investment outlook will remain feeble, despite 
the  boost  from  the  final  year  of  the  RRP’s 
implementation.  The  net  trade  balance  will 
remain  in  surplus  thanks  to  exports  of  ICT, 
financial  and  business  services,  but  tourism 
receipts  will  take  a  hit.  Headline  inflation  is 
projected to  increase  to  3.6% in 2026, before 
easing  to  2.2%  in  2027,  reflecting  first  the 
spike  and  then  the  gradual  normalisation  of 
international  energy  prices.  Labour  market 
conditions  will 
robust,  with 
remain 
employment  expected  to  grow  by  1.3%  in 
2026 and 1.1% in 2027.  

The Cypriot economy is in a strong 
position as it confronts the latest 
external shock  

Economic  activity  has  been  strong  in 
recent  years.  The  COVID-19  pandemic  and 
successive  geopolitical  crises  in  the  region 
have not had any lasting effects. In 2025, real 
GDP  was  almost  a  third  above  its  pre-
level.  The  expansion  has  been 
pandemic 
broad-based,  driven  by  private  consumption 
and, until 2023, strong investment, which grew 
by 55% between 2019 and 2023 (the second 
highest increase in the euro area). This trend in 
investment outlook reflects the peak in capital 
reallocation  towards  new  sectors,  driven  by 
diversification  efforts  (see  the  section  below). 
Moreover, 
increasingly  diversified  service 
exports  have  supported  a  growing  net  trade 
surplus.  Potential  output  has  been  reinforced 
by  strong  labour  and  total  factor  productivity 
contributions,  that  are  partly  linked  to  an 
inflow  of  foreign  workers  and  businesses  in 
high value added activities (see Graph 1.1).  

Graph 1.1: Cyprus – contributions to potential 
output growth. 

Source: AMECO.  

The  conflict  in  the  Middle  East  has 
clouded  the  outlook.  Cyprus  is  not  a  direct 
target  of  Iran’s  retaliatory  attacks,  but  its 

2 

-1.00.01.02.03.04.05.06.020152016201720182019202020212022202320242025LabourCapitalTFPPot. Output growthpercent 
 
   
Healthy public finances provide 
space for government measures  

Solid  public 
finances  have  brought 
government  debt  below  the  60%  of  GDP 
threshold.  Cyprus  maintains  robust  public 
finances  that  are  characterised  by  continuous 
budget  surpluses  and  rapidly  decreasing  debt 
levels.  In  2025,  the  government’s  headline 
balance  stood  at  a  surplus  of  3.4%  of  GDP. 
The  Commission's  Spring  2026  Forecast 
projects  that  it  will  reach  2.1%  and  2.5%  of 
GDP in 2026 and 2027 respectively. The debt-
to-GDP ratio fell to 55.0% in 2025, below the 
60%  reference  value  under  the  Stability  and 
Growth Pact, from an all-time high of 113.6% 
in  2020.  The  Commission  forecasts  that  the 
government 
continue 
decreasing,  to  50.4%  of  GDP  at  the  end  of 
2026 and 45.5% of GDP at the end of 2027.  

ratio  will 

debt 

Graph 1.2: Headline government balance and 
debt. 

Source: AMECO 

Cyprus’s  surplus  together  with  moderate 
and  falling  debt  give  it  the  fiscal  space 
for  government  measures  to  deal  with 
challenges.  Cyprus  adopted  the  first  major 
tax  reform  in  20 years  at  the  beginning  of 
2026 (see the next paragraph). This is likely to 
reduce  government  revenues  as  a  share  of 
GDP by around 0.75 pps in coming years, given 
the  personal 
income  tax  relief  and  the 
reduction  of  the  Special  Defence  Contribution 
for  companies.  Cyprus  intends  to  increase  its 
investment  in  defence  in  order  to  address 
security  challenges.  It  is  not  a  member  of 
trend  of 
NATO  but  follows 

recent 

the 

for  Europe) 

increasing  military  spending  and  has  applied 
for  specialised  loans  under  the  EU  SAFE 
(Security  Action 
instrument. 
Following  an  assessment  by  the  Commission 
of  Cyprus’s  national  defence  investment  plan, 
the  Council  adopted  a  decision  to  make 
financial  assistance  available  of  up 
to 
EUR 1.2 billion 
(3.1%  of  GDP).  However, 
Cyprus’s good fiscal position means that it has 
not  requested  the  activation  of  the  national 
escape  clause  under  the  Stability  and  Growth 
Pact.  Public 
in  Cyprus  has 
benefited  from  the  Recovery  and  Resilience 
Facility, but this will come to an end in 2026. 
Given  its  fiscal  space,  public  investment  in 
Cyprus  is  not  limited  by  available  funding  or 
financing possibilities.  

investment 

Cyprus’s  tax  system  relies  heavily  on 
corporate  taxation  and  this  allows  a 
tax  reform 
moderate  tax  wedge.  The 
adopted  at  the  beginning  of  2026  increased 
Cyprus’s  corporate  tax  rate  from  12.5%  to 
15%,  while  providing  personal  income  tax  tax 
reliefs  with  increasing  tax  brackets  and  tax 
allowances.  This  reinforces  corporate  tax 
collection, which – at 20% of total tax revenue 
–  is  more  than  double  the  EU  average  of  8% 
and  could  leave  overall  government  revenue 
vulnerable 
in  the  event  of  an  economic 
downturn.  Moderate  personal  income  taxation 
results  in  a  comparatively  low  tax  wedge  (of 
26.4% at average wage, below the EU average 
of  40.0%).  This  is  a  competitive  advantage 
and  makes  it  easier  to  attract  skilled  foreign 
labour. Cyprus currently has budget surpluses, 
so  there  is  no  pressure  to  increase  taxes. 
However,  low  recurrent  property  taxes  (0.4% 
of  total  tax  revenue  compared  with  the  1.7% 
EU  average)  and  low  taxes  on  transport  fuels 
leave room for reforms (see also Section 3 as 
well as Annexes 2 and 3).  

has 

fragmented 
a 
long-term  care 

and 
Cyprus 
underdeveloped 
(LTC) 
system.  Cyprus  has  a  rapidly  ageing  society, 
but  the  system  for  providing  LTC  is  still 
developing.  Access  to  state-provided  LTC 
services  has  been  improving  slowly  so  far. 
Cyprus’s ratio of  public expenditure  on LTC  of 
0.2%  of  GDP  is  one  of  the  lowest  in  the  EU 
(the EU average is 1.7%) and this results in a 
high  level  of  out-of-pocket  payments.  Cyprus 

3 

COVID-19 pandemic-20-15-10-5051015200204060801001209597990103050709111315171921232527(f)% of GDP% of GDPGov't debtGov't balance (rhs) 
   
has the fiscal space to address underspending 
on LTC.  

Graph 1.3: Cyprus – ICT-sector forward 
linkages. 

finances. 

Commission 

Climate  change  is  increasingly  impacting 
scenario 
public 
analyses  show  that  the  long-term  costs  of 
climate  inaction  significantly  exceed  those  of 
climate  action (1).  Cyprus’s  climate  insurance 
protection  gap,  estimated  at  98%,  highlights 
potential fiscal risks (see EEA data (2)). Meeting 
Cyprus’s  mitigation  and  adaptation  priorities 
will 
(see 
Section 3).  

additional 

resources 

require 

Diversification is becoming evident 
and deeper integration is the next 
frontier  

The transformation of the business model 
has  redirected  production  towards  new 
sectors. To diversify output in export-oriented 
activities and reduce vulnerabilities to external 
shocks,  the  authorities  have  since  2021 
introduced tax and administrative incentives to 
attract foreign companies and their personnel. 
This  has  led  a  significant  number  of  foreign 
ICT  companies  to  establish  operations 
in 
Cyprus,  boosting  economy-wide  productivity 
and  expanding  the  labour  stock  with  highly 
skilled workers.  

(1)  See  European  Commission,  2026,  Debt  Sustainability 
No 332, 

Institutional 

Paper 

Monitor 
12 February 2026.  

2025, 

(2)  European  Environment  Agency,  Economic  losses  from 
weather-  and  climate-related  extremes  in  Europe  | 
Indicators | European Environment Agency (EEA).  

4 

Source: Eurostat – input-output tables (2022).  

ICT  companies  are  driving  up  production 
but  remain  poorly  integrated  into  the 
domestic  economy.  Evidence  on  forward 
linkages (3)  (see Graph 1.3) indicates that only 
ICT  output  serves  as 
4.2%  of  domestic 
intermediate  consumption  for  other  sectors in 
the  Cypriot  economy.  Turning  to  backward 
linkages (4),  intermediate  inputs  account  for 
78%  of  the  sector’s  supply (5)  (about  half  of 
this  is  imported).  This  indicates  a  heavy 
dependence  on  imported  goods  and  services, 
which  in  turn  contributes  to  the  low  indirect 
multiplier  (EUR 1  of  final  demand  generates 
about EUR 0.2 through domestic supply chains, 
versus  EUR 0.4  for  the  entire  economy) (6). 
Wages  account  for  only  10%  of  the  sector’s 
supply,  suggesting  that  the  induced  multiplier 
– capturing the spillovers from an expansion in 
ICT  through  the  circulation  of  its  workers’ 
incomes  –  is  relatively  limited  (Graph 1.4).  If 
the sector were to integrate more deeply with 
the 
could 
economy, 
increasingly  benefit  from  the  high  innovation 
ICT 
content 
companies  through  stronger  linkages  with 

foreign-owned) 

domestic 

Cyprus 

(often 

of 

(3)  In  supply-chain literature,  forward  linkages (also called 
the  ‘push  effect’)  refer  to  how  an  industry’s  output  is 
supplied as an input to other, downstream sectors.  
(4)  Backward  linkages  refer  to  the  dependence  of  an 

industry on others for inputs.  

(5)  The  domestic  sector  supply  comprises  intermediate 
consumption  and  gross  value  added.  The  latter  is 
further  decomposed  into  wages,  taxes  on  production 
and gross operating surplus.  

(6)  The  indirect  multiplier  measures  supply-chain  effects 
(e.g. increased  demand  for  suppliers)  that  have  been 
generated  by  an initial change  in  final  demand  for  the 
product.  

domestic use1.6%exports83.0%other4.2%same sector11.2%intermediate consumption15.5%ofwhich...(sectors supplied) 
 
   
 
Box 1 

UN Sustainable Development Goals (SDGs)  

Cyprus is improving in competitiveness (notably SDGs 8 – decent work and economic growth, and 
9  –  industry,  innovation  and  infrastructure),  while  falling  back  on  SDG 4  (quality  education),  and 
still needing to catch up with the EU average, particularly for SDG 9.  

Regarding  sustainability,  Cyprus  is  making  progress  on  some  indicators  but  falling  back  on 
SDG 11 (sustainable cities and communities) and SDG 13 (climate action). It needs to catch up with 
the EU average on SDG 2 (zero hunger), SDG 6 (clean water and sanitation), SDG 7 (affordable and 
clean  energy),  SDG 9,  SDG 11  (sustainable  cities  and  communities),  SDG 12  (responsible 
consumption and production) and SDG 13 (climate action).  

Regarding  social  fairness,  Cyprus  is  improving  on  almost  all  relevant  SDGs,  except  for  SDGs 3 
(good health and well-being), 4 and 5 (gender equality). It is falling back compared with the EU on 
SDGs related to macroeconomic stability (SDGs 8, 16 – peace, justice and strong institutions, and 
17 – partnerships for the goals).  

other  Cypriot  businesses  and/or  researchers 
(see  also  Section 2).  Improving  digital  skills 
and  enrolment  in  STEM  fields  in  Cyprus  is 
integration  (see 
instrumental  to  such  an 
Section 4). 

Graph 1.4: Cyprus – indirect and induced multipliers.  

Source: European Commission calculations.  
Notes:  Each  dot  represents  products  classified  by 

economic activity (CPA classification).  

Rising  exports  have  been  backed  by 
competitiveness and productivity gains in 
the tradable sector. Price competitiveness in 
the  tradable  sector  has  improved  steadily,  as 
unit labour costs have increased only modestly 
(3.1% per year on average between 2019 and 
2024)  when  compared  with  those  of Cyprus’s 
main  trade  partners.  Productivity  gains  (3.2% 
on  average  over  the  same  period)  have 
exceeded  real  compensation  per  employee 
growth  (2.0%  increase  on  average  over  the 

5 

same  period)  which  also  remained  within 
benchmark levels. Export prices have increased 
faster  than  import  prices,  implying  terms-of-
trade  gains  of  around  2.9%  between  2020-
2025 and service export gains of 3.1%. A large 
share  of  these  gains  has  been  driven  by  ICT 
exports.  

The  non-tradable  sector  has  benefited 
from  demand-side  effects  from  an 
expanding 
services 
export-oriented 
sector.  Research  suggests  that  a  permanent 
productivity  shock  in  the  tradable  sector  (as 
seen above) is  raising demand for non-traded 
goods,  pushing  up  their  relative  price  and 
wages (7).  Consistently  with  these  dynamics, 
the non-tradable sector’s real output expanded 
on  average  by  4.8%  in  2019-2024  (0.5  pps 
above the economy-wide average).  

The  second  pillar  of  the  pension  system 
has 
the  potential  of  becoming  a 
significant  source  of  long-term  financing 
for  businesses.  However,  the  contribution  of 
occupational  pensions  to  both  retirement 
income  and  capital  market  development 
remains limited,  because the  system  is  highly 
fragmented  (with  many  small,  firm-specific 
schemes  that  hinder  the  exploitation  of  the 
potential economies of scale) (see Section 3). 

(7)  See  OECD,  2010,  A  simple  model  of  the  relationship 
between  productivity,  saving  and  the  current  account, 
Fournier, J-M. and Koske, I., ECO/WKP(2010)72.  

 
 
 
 
 
 
Legacy  macroeconomic  vulnerabilities  have 
receded, but the external deficit remains large  

Rising economic security risks  

Nominal growth has so far helped to ease 
private and public sector debts. As already 
noted,  general  government  debt  fell  below 
60% of GDP in 2025. This was due not only to 
sustained  surpluses  but  also  a  strong 
denominator  effect  from  GDP  growth.  Private 
debt  remains  above  the  MIP  Scoreboard 
thresholds (8) but has fallen fast. This was also 
due  in  part  to  nominal  GDP  growth,  but  has 
been  further  helped  by  active  deleveraging 
thanks  to  a  foreclosure  framework introduced 
legislative 
in  2023.  Nevertheless, 
initiatives  by  Parliament  concerning 
the 
foreclosure framework present downside risks, 
as  their  entry  into  force  could  materially 
weaken  the  effectiveness  of  the  current 
framework.  Households’  and  non-financial 
corporations’  debt  was  54.2%  and  107.3%  of 
GDP respectively at the end of 2025.  

recent 

trade 

sizeable 

The  current  account  remains  in  deficit, 
despite  a 
surplus. 
Expanding  service  exports  has  generated  a 
sizeable trade surplus (5.7% of GDP in 2025), 
but the large primary income deficit (11.1% of 
GDP)  has  pushed  the  current  account  into 
negative  territory  (-6.4%  of  GDP).  This  deficit 
reflects  the  profits  of  foreign-owned  firms, 
which  are  recorded  on  the  primary  income 
balance (even when retained in balance sheets 
as  reinvested  earnings).  This  countercyclical 
behaviour  nevertheless 
the 
primary  income  deficit  would  narrow  in  the 
event of a downturn in corporate profits, thus 
improving the current account deficit. However, 
higher  energy  prices  –  along  with  Cyprus’s 
dependence  on  energy  imports  as  well  as 
weaker tourism receipts – are likely to worsen 
the trade balance.  

implies 

that 

Cyprus’s  geographic  proximity  to  the 
recent and ongoing conflict in the Middle 
East  has 
raised  economic  security 
questions.  In  previous  episodes  of  regional 
tension,  Cyprus  was  perceived  as  a  ‘safe 
haven’  for  corporations,  their  employees  and 
affected civilians. Tourism also benefited, with 
Israel  becoming  the  second-largest  source 
market  in  2025.  The  Republic  of  Cyprus  has 
not been a direct target (a UK sovereign base 
on  Cyprus  has  been  attacked  once),  but  the 
conflict may jeopardise Cyprus’s reputation as 
a  ‘haven  of  stability’  and  have  economic 
security implications. These include a potential 
reversal  of 
inflows  of  corporations  and 
workers,  and  a  potential  reduction  in  tourist 
inflows from neighbouring countries.  

Economic  security  challenges  persist  in 
the  area  of  energy.  Cyprus  has  one  of  the 
highest energy import dependencies in the EU 
(see Annex 9 and Section 3). The electricity mix 
also  lacks  diversification,  because  it  depends 
entirely  on  imported  oil  and  does  not  use 
natural  gas.  Efforts  to  strengthen  energy 
security  are  currently  underway,  including  the 
construction of an LNG import terminal facility 
to support electricity production, as well as an 
interconnection  project  to  connect  Cyprus’s 
electricity grid with those of Greece and Israel. 
Both  projects  are  nevertheless  experiencing 
significant delays (see Section 3).  

Foreign 

implications. 

The  financing  structure  of  the  current 
account  deficit  also  has  economic 
direct 
security 
investment (FDI) has been the main source of 
financing for Cyprus’s current account deficits 
since  2016.  Trade  deficits  have  therefore 
long-term  foreign  ownership. 
resulted 
Cyprus  has  increased  its  engagement  with 
other  EU  Member  States 
in  response  to 
Russia’s war of aggression against Ukraine (9), 
but  a  significant  share  of  this  FDI  stock 
remains  in  the  hands  of  non-EU  citizens 
(although  it  is  well  spread  across  different 

in 

(8)  The  MIP  Scoreboard 

for  consolidated 
household  and  non-financial  corporates’  debt  are  55% 
and 85% of GDP respectively.  

thresholds 

(9)  See  European  Commission,  2024,  In-Depth  Review  – 

Cyprus.  

6 

 
 
 
Box 2 

Key achievements of the Recovery and Resilience Plan (RRP) 

Cyprus’s RRP has a total investment envelope of EUR 1.02 billion, corresponding to 3.3% of 2023 
GDP.  It  aims  to  support  the  green  and  digital  transitions;  strengthen  economic  resilience;  and 
address long-standing structural challenges identified in the European Semester.  

As of 4 May, EUR 563 million (approximately 55% of the total allocation) have been disbursed, 
following  the  satisfactory  fulfilment  of  109 milestones  and  targets.  Implementation  has 
progressed  steadily  with  a  growing  number  of  reforms  and  investments  already  fulfilled  and 
delivering  tangible  results  on  the  ground.  Continuing  strong  efforts  will  be  needed  in  order  to 
complete the remaining measures. 

Highlights and impact of the RRP. 

•  Renewable energy and energy  efficiency measures. Following this reform,  digital 
one-stop shops now streamline the permitting procedure for renewable energy projects 
and facilitate energy renovation in buildings. Investments in public buildings (particularly 
for  thermal  insulation  in  schools)  have  cut  primary  energy  demand  by  at  least  30%. 
Photovoltaic systems total 4 800 kW in schools and 943 kW at Nicosia General Hospital. 
650 kW is planned for the fire service.  

•  Expansion  of  high-capacity  and  gigabit-ready  internet  connections.  The 
deployment  of  very  high-capacity  networks  has  been  facilitated  by  a  reform  that  has 
brought  into  force  the  administrative  acts  needed  to  simplify  the  procedures  for  their 
roll-out.  An  investment  is  expected  to  support  an  upgrade  to  ‘gigabit-ready’  internet 
connections that will provide gigabit connectivity to at least 82 000 households.  

•  Healthcare  improvement.  Central  blood  establishment  facilities  are  being  expanded 

• 

with the construction of facilities and purchase of equipment.  
Tackling  aggressive  tax  planning.  Legal  acts  have  entered  into  force  to  tackle 
aggressive tax planning. This reform has  introduced a  withholding tax on payments to 
jurisdictions  listed  in  Annex  I  of  the  EU  list  of  non-cooperative  tax  jurisdictions  and  to 
low tax jurisdictions.  

•  Gradual  extension  of  free  pre-primary  education from  the age of four. A new 
law  has entered  into  force  (as  part  of  a  reform)  and  is  now  gradually  extending  free, 
compulsory pre-primary education from the age of four, alongside the adoption of aid 
schemes.  

non-EU  countries).  The  authorities  have 
responded  by  introducing  a  mandatory  FDI 
screening mechanism to monitor activities that 
may  affect  security  or  public  order (10)  in  the 
context of an EU regulation (11).  

funding 

instruments 

EU 
provide 
considerable  resources  to  Cyprus.  They 
support investments and structural reforms to 
environmental 
increase 
sustainability,  skills,  social 
fairness  and 
security,  while  helping  to  address  challenges 

competitiveness, 

identified in the CSRs. Key instruments include 
the  Recovery  and  Resilience  Facility  (see  Box 
2)  and  Cohesion  policy  funds  (see  Box  3).  In 
addition, the Common Agricultural Policy (CAP) 
provides  Cyprus  with  an  EU  contribution  of 
EUR  374  million  under  the  CAP  strategic  plan 
for  2023-2027  (12).  A  further  EUR  196.3 
the  Asylum, 
million  are  available  under 
Migration  and 
(AMIF), 
together  with  the  Border  Management  and 
Visa 
Internal 
Security Fund (ISF). Other EU programmes also 

Integration  Fund 

(BMVI)  and  the 

Instrument 

(12)  An  overview  of  Cyprus’  formally  approved  strategy  to 
the  EU’s  common  agricultural  policy 
at 

implement 
nationally 
https://agriculture.ec.europa.eu/cap-my-country/cap-
strategic-plans/cyprus_en  

found 

can 

be 

(10)  See  Cyprus  –  Ministry  of  Finance  –  Foreign  Direct 

Investment Screening.  

(11)  Regulation  (EU)  2019/452  of  the  European  Parliament 
and  of  the  Council  of  19 March 2019  establishing  a 
framework 
foreign  direct 
the  screening  of 
for 
investments into the Union.  

7 

 
 
 
 
 
Box 3 

Contribution of cohesion policy funds 

EU  cohesion  policy  funding  is  supporting  Cyprus’s  efforts  to  boost  competitiveness, 
environmental  sustainability,  skills  and  social  fairness.  In  the  2021-2027  programming 
period,  EU  cohesion  policy  funds (13)  are  providing  EUR 968.6 million 
to 
EUR 1.48 billion  when  paired  with  national  co-financing (14)),  or  2.8%  of  2024  GDP,  to  Cyprus. 
This  makes  cohesion  policy  one  of  the  main  sources  of  public  investment  in  the  country.  The 
value of selected projects corresponded to 71.8% of the total allocation as of March 2026, with 
additional calls for projects in the pipeline. 

(amounting 

• 

Innovation,  business  environment  and  productivity.  EUR 147 million  have  been 
allocated to research and innovation, SME competitiveness and reaping the benefits of 
digitisation.  Investments  have  already  resulted  in  more  than  1 000  jobs  created  in 
supported  SMEs;  more  than  200 research  jobs  created  in  supported  research  centres; 
and  the  mobilisation  of  EUR 47.6 million  in  private  investment.  450 enterprises  have 
been supported by grants. Selected projects will serve 133 000 users annually through 
improved public digital services. 

•  Decarbonisation,  energy  affordability  and  sustainability.  EUR 357 million  have 
been allocated to the green transition. Results so far include the improvement of energy 
performance in 2 369 dwellings and annual primary energy consumption savings close 
to 60 000 MWh per year; as well as a reduction of more than 1.5 million cubic metres 
per year in water losses and the installation of 88 km of new or upgraded wastewater 
collection pipes. 

•  Skills,  quality  jobs  and  social  fairness.  EUR 80 million  have  been  allocated  to 
human  resource  development  and  labour  market  integration.  The  aim  is  to  support 
actions  to  reduce  early  school  leaving,  improve  learning  outcomes  and  tackle 
delinquency  among  disadvantaged  students.  More  than  170 school  units  and  30 000 
students participate annually. Further allocations include EUR 28 million to tackle youth 
unemployment,  EUR 17 million  to  address  material  deprivation,  EUR 13.5 million  to 
reduce  child  poverty,  EUR 77.2 million  to  deal  with  social  inclusion  and  EUR 10 million 
for  innovative  social  measures,  such  as  family  interventions  and  a  support  centre  for 
autism. 

The  mid-term  review (15)  reinforced  the  cohesion  policy’s  contribution  to  emerging  strategic 
priorities,  reallocating  EUR 64 million  (the  EU  contribution)  to  scale  up  investment  in  water 
resilience  infrastructure  (including  improved  water  efficiency  and  wastewater  treatment)  and 
compliance  with  the  Urban  Wastewater  Treatment  Directive.  In  addition  to  cohesion  policy 
funding and in order to mitigate the social impact of climate change, Cyprus will allocate up to 
EUR 131 million  under  the  Social  Climate  Fund  over  2026-2032  to  help  mitigate  the  social 
impact  of  the  new  emissions  trading  system  (ETS2)  by  supporting  vulnerable  households  and 
small businesses.  

competitiveness 

support 
for 
instance  through  open  calls  under  Horizon 
Europe and the Connecting Europe Facility.  

in  Cyprus, 

(13) ERDF, ESF+, CF and JTF.  

(14) Cohesion Open Data Platform.  

(15) The  mid-term  review  was  undertaken  halfway 
through  the  2021-2027  programming  period.  It  is  a 
formal assessment process required under Article 18 
of the  Common  Provisions  Regulation,  to  assess  the 
implementation  of  a  programme;  and,  where 
necessary,  to  propose  adjustments  to  improve  its 
performance,  ensure  relevance  in  the  light  of  new 
and  emerging  needs  and  maintain  consistency  with 
other EU policies.  

8 

 
 
 
 
 
INNOVATION, BUSINESS ENVIRONMENT AND 
PRODUCTIVITY 

to 

(CSR) 

alternative 

recommendation 

In  2025,  Cyprus  received  a  country-
specific 
to 
strengthen  the  research,  development 
and  innovation  (RDI)  system;  increase 
financing 
access 
instruments;  and  improve  the  business 
environment as well as the governance of 
State-owned enterprises. Several measures 
have been implemented  to support innovative 
activities; improve access to non-bank finance; 
reduce  red  tape;  and  align  the  governance  of 
international 
State-owned  enterprises  with 
standards.  However,  there  is  still  room  for 
improvement 
these  policy  areas. 
Additional  measures  are  in  the  pipeline  to 
address  these  challenges;  their  impact  will 
depend on effective implementation.  

in  all 

for 

business 

potential 

Additional  challenges  are  constraining 
further 
Cyprus’s 
diversification,  competitiveness  and  a 
supportive 
environment. 
Increasing the efficiency of the justice system 
the 
(particularly 
enforcement  of  court  judgments  and  the 
digitalisation  of 
judicial  procedures)  could 
improve  Cyprus’s  business  environment. 
Developing  the  second  pillar  of  the  pension 
system  could  spur  growth  in  capital  markets 
and increase available funding for businesses. 

specialisation, 

courts’ 

A more integrated RDI ecosystem 
could support further economic 
diversification 

to 

facilitating 

service-based 

large  enterprises  and 

ideas,  are  steps 
“STEP” 

Annex 5). This is partly attributable to Cyprus’s 
structural  features  (particularly  the  limited 
number  of 
the 
economy’s 
nature).  Some 
progress has been observed since the CSR was 
issued  last  year.  Initiatives  such  as  the  proof 
of  concept  programmes  and  RESTART  under 
the  Research  and  Innovation  Foundation  (RIF), 
which  provide  early-stage  funding  to  validate 
in  the  right 
innovative 
direction. 
the 
is 
establishment of facilities and production lines 
for  the  manufacturing  of  new  innovative 
products and services. Moreover, other funding 
programmes were launched by RIF such as the 
new  blended-finance 
funding  programme 
“BOOST”,  which  aims  to  provide  stronger 
support 
innovative  Cypriot  companies. 
Moreover, cohesion policy funds are supporting 
the  upgrading  and  development  of  research 
new 
infrastructures; 
researchers;  the  promotion  of  cooperation 
between  enterprises  and  research  institutions; 
participation  in  European  partnerships  and 
transnational  cooperation;  and  support  for 
  The 
innovative  and  start-up  enterprises. 
forthcoming 
strategy, 
currently  under  preparation,  has  the  potential 
to  strengthen  the  governance  of  the  RDI 
system.  By  introducing  clear  input-based  and 
output-based  performance 
indicators  and 
providing multiannual institutional funding, the 
strategy  should  enhance  monitoring,  improve 
policy  coordination  and  increase  predictability 
for research and innovation actors. In addition, 
to 
legislation  allowing  university 
participate  in  spin-offs  was  approved  by  the 
Parliament  in  March  2026  and  has  entered 
into force.  

programmes 

2027-2032 

staff 

RDI 

for 

Cyprus’s  research  and  innovation  system 
is  characterised  by  chronically  low  RDI 
investment,  weak  commercialisation  and 
research-business  synergies,  as  well  as 
the absence of a long-term RDI strategy. 
Both  public  and  private  RDI  expenditure 
remains  among  the  lowest  in  the  EU  (see 

The 
information  and  communications 
technology  (ICT)  sector  has  expanded 
rapidly,  but  its  integration  into  Cyprus’s 
RDI ecosystem remains limited. Foreign ICT 
to  shifting 
companies  have  contributed 
innovative, 
production 

towards  a  more 

9 

 
 
diversified  and  export-oriented  economic 
structure,  but  evidence  on  supply-chain 
interlinkages  points  to  weak  spillovers  to  the 
rest of the economy (see Section 1). The sector 
is not well connected to other industries, so its 
growth  does  not  generate  much  additional 
economic  activity.  The  weak  integration  of 
foreign ICT firms into the domestic innovation 
untapped 
ecosystem 
opportunity,  because  stronger  collaboration 
between  foreign 
ICT  firms  and  domestic 
research 
institutions,  start-ups  and  other 
companies  could  unlock  new  opportunities  for 
innovation-driven 
economic 
growth 
diversification.  

significant 

and 

is 

a 

Better access to non-bank 
financing could enhance innovative 
and high value added activities 

in 

sectors  and 

towards  high 
Further  diversification 
stronger 
value  added 
productivity  growth 
the  Cypriot 
economy could be supported by improved 
access to non-bank financing. Bank lending 
remains  the  main  source  of  financing  for 
businesses.  Strict  underwriting  standards  can 
make  it  harder  for  newly  established  firms 
that  lack  a  proven  credit  history  to  access 
financing.  Financing  through  capital  markets 
remains  underdeveloped  and  Cyprus  has  one 
of  the  lowest  market-based  funding  ratios  in 
the  EU  (see  Annex 6).  Several  initiatives  have 
been launched to improve access to non-bank 
financing  (as  highlighted  in  the  2025  CSRs), 
but  implementation  remains  only  partial.  The 
Cyprus Equity Fund (a measure under Cyprus’s 
recovery and resilience plan (RRP)) is investing 
in  early-stage,  Cyprus-linked 
technology 
companies. Cyprus also provides tax incentives 
for investments in innovative SMEs. Moreover, 
a  national  promotional  agency 
is  being 
established  under  the  RRP  to  address  market 
failures  in  SME  access  to  capital  and  to 
support  business  development  (see  Annex 5). 
Cohesion policy funds are supporting schemes 
to  strengthen  the  SME  ecosystem.  However, 
the  funding  that  has  been  mobilised  so  far 
remains small and predominantly grant-based. 
remains 
Access 

non-bank 

funding 

to 

constrained,  leaving  many  firms  reliant  on 
public funding or foreign investors – or unable 
to finance their new activities.  

The  second  pillar  of  the  pension  system 
could  become  an  important  source  of 
long-term funding for businesses. The role 
of  occupational  pensions  in  both  retirement 
provision  and  capital  market  development 
remains limited,  because the  system  is  highly 
fragmented  (with  numerous  small,  company-
specific  schemes  that  prevent  economies  of 
scale).  In  the  absence  of  a  well-established 
investment culture (coupled with relatively low 
financial  literacy  and  limited  availability  of 
diversified 
alternatives), 
their  savings 
households 
primarily in real estate or bank deposits rather 
than  more  productive  financial  instruments 
(see  Annexes 2  and  6).  Expanding  coverage 
(such  as  through  automatic  enrolment  into 
multiemployer 
employer-sponsored 
schemes)  and  enhancing  the  portability  of 
pension  rights  between  employers  would  help 
in  scaling  up  occupational  pension  funds, 
strengthening 
retirement 
income  and 
their  capacity  to 
provide long-term financing. 

supplementary 

investment 

increasing 

to  place 

tend 

or 

Regulatory bottlenecks and 
governance weaknesses in State-
owned enterprises are constraining 
the business environment 

Some  steps  have  been 
initiated  to 
address  the  2025  CSR  on  the  regulatory 
and  administrative 
framework,  but 
implementation  remains  partial.  Transport 
infrastructure  projects  are  often  delayed  due 
to  lengthy  land  acquisition  and  procurement 
processes; limited administrative capacity that 
leads to delays and late feedback from utility 
companies.  Customs  procedures 
remain 
relatively  burdensome  (Cyprus  ranks  25th  in 
the  EU-27  on  processing 
the 
clearance  of  extra-EU  imports).  The  share  of 
import  declarations  subject  to  documentary 
and  physical  controls  is  significantly  higher 
than  the  EU  average,  while  hit  rates  (the 
detecting 
proportion 

inspections 

time  for 

of 

10 

 
modernisation;  and  help  Cyprus  achieve  key 
policy 
green 
transition,  digitalisation  and  the  enhancement 
of value added in products and services). 

objectives 

(including 

the 

Better efficiency and quality of the 
justice system for an attractive 
business environment 

the 

judicial 

reform  of 

Cyprus’s justice system still suffers from 
slow  case  resolution,  low  digitalisation 
and  enforcement  delays,  which  are  all 
burdens on  its business  environment.  The 
disposition time in civil  and commercial cases 
remains among the highest in the EU and has 
even  increased  in  administrative  cases.  A 
system 
2023 
established  the  Commercial  Court  and  the 
Admiralty  Court,  with  special  jurisdiction  over 
high value commercial and admiralty disputes 
by  specialised  judges.  The  reform  aimed  to 
provide  for  a  faster  resolution  but  neither  of 
the  two  Courts  are  operational  yet.  The 
Admiralty  Court  is  expected  to  be  operational 
later  in  2026.  The  level  of  digitalisation  of 
justice  remains  low  and  its  benefits  are 
therefore  unexploited.  Cyprus  is  taking  some 
initial  steps  to  improve  the  existing  case 
management  system  under  the  RRP,  but  a 
fully  functional  and  integrated  electronic  case 
management  system  is  still  not  in  operation. 
Digital  audio  recording  technologies  are  still 
not  being  used  in  court  proceedings.  Delays 
and  difficulties  in  enforcing  final  judgments 
are  also  impeding  the  efficient  execution  of 
justice.  Efforts  to  accelerate  enforcement 
procedures  and  remove  existing  obstacles 
could  further  incentivise  investment  in  Cyprus 
and reinforce trust in justice (see Annex 7). 

Easing 

limited. 

–  without 

irregularities)  are  similar  to  the  EU  average. 
The  use  of  simplified  customs  procedures 
remains 
administrative 
requirements in the implementation of posting 
of  workers  rules  could  reduce  regulatory 
fragmentation  within 
the  single  market, 
facilitate  cross-border  mobility  and  foster 
competitiveness 
undermining 
workers’  protections.  The  authorities  have 
adopted  several  measures  to  reduce  red  tape 
and strengthen predictability for investors (see 
Annex 5).  In  May  2025,  Cyprus  established  a 
business  support  centre,  as  a  single  point  of 
contact  for  investors  (domestic  and  foreign) 
that  contributes 
the  streamlining  of 
administrative  procedures  and  the  reinforcing 
of  the  new  licensing  framework  for  strategic 
development projects.  

to 

still 

exhibit 

liberalised 

of 
is  essential 

effectiveness 
(SOEs) 

State-owned 
The 
for 
enterprises 
advancing  economic  development 
in 
strategic  sectors  and  enabling  economic 
transformation.  SOEs  play  a  significant  role 
in  the  economy  because  they  mainly  operate 
in sectors characterised by natural monopolies 
(e.g. electricity, 
telecommunications,  water, 
wastewater  management  and  infrastructure). 
its  electricity  and 
Cyprus  has 
telecommunications  markets, 
the 
but 
underlying  network  infrastructures  in  both 
natural  monopoly 
sectors 
characteristics.  SOEs  in  Cyprus  continue  to 
have  governance  weaknesses  that  prevent 
them  meeting 
international  and  OECD 
standards  (as  highlighted  by  the  2025  CSR). 
Key areas of concern include accountability for 
financial  performance;  the  appointment  of 
boards  on  a merit  basis; the  formulation  of  a 
clear  ownership  policy;  and  transparency  (as 
highlighted  in  a  2023  IMF  report) (16).  As  a 
preparatory  step  to  address  the  CSR,  Cyprus 
adopted  an  action  plan  in  December  2025  to 
implement  the  IMF’s  recommendations.  It  will 
also  receive  technical  assistance  through  the 
Commission’s Technical Support Instrument to 
support the effective implementation of these 
actions.  These  efforts  aim  to  strengthen  the 
their 
SOEs; 
governance 

facilitate 

of 

(16)IMF,  2023,  Cyprus:  Technical  Assistance  Report, 
Strengthening  the  Governance  and  Oversight  of  State-
Owned Enterprises. 

11 

 
 
DECARBONISATION, ENERGY AFFORDABILITY AND 
SUSTAINABILITY 

Advancing the renewable energy 
transition to improve energy 
security 

The  production  and  use  of  renewable 
energy  sources  has  been  on  an  upward 
trend  but  remains  heavily  dependent  on 
fossil  fuels.  In  2024,  oil  and  petroleum 
products accounted for 85.2% of gross inland 
energy  consumption.  This  suggests  that  the 
2025  CSR  on  reducing  reliance  on  fossil  fuel 
has  not  been  meaningfully  addressed  (see 
the  energy  supply 
Annex 9).  Diversifying 
similarly  remains a challenge. Cyprus has one 
of  the  largest  energy  import  dependencies  in 
the  EU  (87.7%  of  gross  available  energy  in 
security 
2024), 
vulnerabilities  (see  Section  1).  Cyprus  has  an 
objective of including natural gas in its energy 
mix,  but the  development  of  an  LNG  terminal 
at Vasilikos port is being significantly delayed. 
The  electricity  mix  is  also  undiversified  and 
remains reliant on imported fuels. Renewables 
accounted  for  27.4%  of  Cyprus’s  electricity 
mix  in  2025  (24%  in  2024).  Both  installed 
capacity  for  solar  and  wind  energy  grew  in 
2025 (by 14.6% and 7.6% respectively). 

underscoring 

energy 

permitting 

Some  steps  have  been  taken  to  improve 
the permitting process. A new law has been 
adopted  to  transpose  the  Revised  Energy 
into 
Directive’s 
national  legislation  and  further  expand  the 
digital permitting portal. However, work on full 
harmonisation  is  still  ongoing,  with  significant 
delays  in  the  permitting  process  for  storage 
projects (see Annex 9).  

requirements 

to 

(CSRs) 

energy 

supply; 

In 2025, Cyprus received country-specific 
recommendations 
reduce 
overall  dependency  on  fossil  fuels; 
diversify 
promote 
sustainable  transport;  and  upgrade  grid 
and  storage 
It  was  also 
facilities. 
recommended  that  Cyprus  should  increase 
investment  in  water,  wastewater  and  waste 
management infrastructure and practices; and 
improve 
implementation  of  climate 
adaptation  measures  by  focusing  on  the 
framework.  Only 
underlying 
limited  progress  has  been  observed  in  these 
areas  overall.  Several  measures  have  been 
taken  to  increase  the  share  of  renewable 
energy in Cyprus’s energy mix and to promote 
sustainable  transport,  but  their  scope  and 
impact remain limited.  

institutional 

the 

with 

Cyprus  remains  vulnerable  to  significant 
environmental  and  climate  risks,  but 
some preparatory  steps  have  been  taken 
to  expand  the  grid, 
increase  energy 
storage  options  and  develop  energy 
interconnections 
neighbouring 
countries.  On  sustainable  transport,  the  lack 
incentives  for  electrifying  the 
of  market 
vehicle  fleet  has  become  a  new  challenge 
within  this  policy  area.  Cyprus  still  faces 
significant  challenges  in  the  areas  of  water 
and  wastewater  management,  with  limited 
progress  observed  in  sustainable  water-use 
and  wastewater  treatment.  Its  slow  transition 
to the circular economy highlights the need for 
further  efforts to improve  resource  efficiency, 
waste  reduction  and  sustainable  practices. 
Only preparatory steps have been taken in the 
area  of  climate  adaptation.  A  new  adaptation 
strategy  (including  a  governance  system)  is 
still  awaiting  approval  by  Cyprus’s  Council  of 
Ministers at the time of writing.  

12 

 
 
Graph 3.1: Change in installed capacity for 
renewables overtime (in MW) 

Source: IRENA (2026), Renewable capacity statistics 
2026, International Renewable Energy Agency 

CSR 

2025 

recommended 

A 
the 
development  of  energy  interconnections 
with  neighbouring  countries,  but  no 
progress  has  been  made  with  this.  The 
Great  Sea  Interconnector  project  (one  of  the 
eight  Energy  Highways  included  in  the  Grids 
Package)  is  still  subject  to  delays,  despite  a 
grant of EUR 658 million under the Connecting 
Europe  Facility  (see  Annex 9).  The  aim  is  to 
end  Cyprus’s  current  energy 
isolation  by 
connecting  the  Greek  and  Cypriot  power  grids 
via a submarine power cable.  

the  electricity  grid,  expected  to  facilitate  the 
integration  of  renewable  sources  into  the 
energy system and improve system efficiency, 
are advancing. Furthermore, the approved Ten-
Year  Transmission  System  Development  Plan 
(2025-2034) includes investment for EUR 286 
million  across  more  than  thirty  projects, 
although  only  preparatory  steps  have  been 
taken so far. 

Decarbonisation remains a 
challenge in buildings, transport 
and manufacturing 

(GHG)  emissions 

Cyprus is not on track to meet its effort- 
sharing  target  of  a  32%  reduction  in 
in 
greenhouse  gas 
effort-sharing 
2030 
(compared  with  2005).  Implementation  of 
planned  measures  and  infrastructure  projects 
remains 
(alongside  additional  measures) 
essential in order to meet this target. 

sectors 

by 

to 

to 

energy 

facilities 

increasing 

fossil-free  electricity 

The  need  to  upgrade  the  electricity  grid 
to 
storage 
and 
accommodate  the  increasing  share  of 
renewables  remains  a  key  challenge.  In 
2025,  energy  curtailment  remained  very  high 
(increasing  by  83%  on  2024)  and  there  have 
been  delays  in  connecting  new  renewable 
energy  plants 
the  grid.  Developing 
renewable  energy  storage  systems  is  also 
critical 
renewable  energy 
capacity  in  the  transmission  network  and 
ensuring grid stability. However, Cyprus has no 
storage 
operational 
capacity.  While  three  utility-scale  battery 
storage  projects  are  advancing  at 
the 
procurement phase and other applications are 
being registered with the Transmission System 
Operator, implementation remains  at  an  early 
stage.  One  positive  development  was  the 
deployment of smart  electricity meters, which 
new 
can 
photovoltaics  into  the  electricity  system.  A 
further  positive  step 
in  Cyprus’s  energy 
transition  was  the  launch  of  its  competitive 
electricity  market  in  October  2025.  Ongoing 
investments 
Just 
(supported  under 
Transition  Fund)  to  modernise  and  digitalise 

integration 

support 

the 

the 

of 

of 

efficiency 

renovation 

Greater  energy  efficiency  in  buildings  is 
to  decarbonisation.  Faster 
also  key 
implementation 
efficiency 
energy 
investments in Cyprus is needed, even if there 
has  been  some  progress  in  implementing 
schemes 
energy 
promoted  by  the  recovery  and  resilience  plan 
(RRP)  and  cohesion  policy.  The  submission  of 
Cyprus’s  draft  national  building  renovation 
Energy 
plan 
Performance of Buildings Directive (EPBD) will 
play  a  crucial  role  in  setting  out  a  clear  and 
predictable pathway to an energy-efficient and 
decarbonised building stock. 

pursuant 

recast 

the 

to 

Sustainable transport remains a pressing 
limited 
challenge.  There  has  been  only 
progress  on  the  2025  CSR.  Cyprus  does  not 
have  a  railway  network,  so  road  transport  is 
the  main  means  of  transport  and  the  lead 
contributor  to  its  effort-sharing  emissions, 
accounting for 48% of emissions in 2024 (see 
Annex 8). The electrification of Cyprus’s vehicle 
fleet  is  still  at  an  early  stage.  Grant  schemes 
for the purchase of low-emission vehicles and 
deployment  of  charging  infrastructure  (both 
supported by the RRP) have had only a limited 

13 

4004855957529201042020040060080010001200202020212022202320242025Megawatt (MW)Year 
   
transport 

impact.  The  adoption  of  a  carbon  tax  under 
Cyprus’s  RRP  has  been  delayed,  despite  its 
potential to provide incentives for greening the 
vehicle fleet. However, investments to enhance 
remain 
public 
insufficient,  despite  a  measure  promoting 
sustainable  mobility  projects  in  the  RRP  and 
investments  under  cohesion  policy.  Further 
efforts  are  needed  to  make  public  transport 
more  affordable  and  accessible,  and  to  use 
digital tools to strengthen user-friendliness. 

infrastructure 

intensity. 

Cyprus’s manufacturing sector (especially 
the cement industry) is still characterised 
by  high  emission 
In  2024, 
industry generated 19% of Cyprus’s total GHG 
emissions  –  the  third  highest  share  after 
energy  (29%)  and  transport  (20%).  Only  29% 
of industrial emissions stem from energy use. 
The 
remaining  71%  are  generated  by 
industrial  processes  and  product  use.  The 
deployment  of  carbon  capture,  utilisation  and 
storage  (CCUS)  solutions  can  help  in  tackling 
the 
non-energy  emissions 
in 
cement 
further 
In 
electrification could boost decarbonisation, if it 
in  hand  with  a  ramp-up  of 
goes  hand 
(see 
in  electricity  generation 
renewables 
Annex 8). 

(especially 
parallel, 

sector). 

Cyprus is particularly exposed to 
climate and environmental risks 

reforming 

Cyprus  has  made  limited  progress  in 
climate  adaptation  governance  and 
remains vulnerable to significant  climate 
and  environmental  risks.  The  2025  CSR 
called  for  stronger  implementation  of  climate 
adaptation  measures  by 
the 
institutional  governance 
framework.  The 
revised  national  adaptation  strategy  (NAS) 
2025-2050  was  finalised  in  February  2025, 
but its ministerial adoption is still pending, and 
this is delaying its implementation. Significant 
climate 
(e.g. wildfires,  floods,  water 
scarcity  and  coastal  erosion)  are  harming 
Cyprus’s  biodiversity,  agriculture,  aquaculture 
and  fisheries  sector,  thus  underscoring  the 
urgent  need  for  improved  prevention.  The 
the 
Ministry  of  Finance  has 

initiated 

risks 

and 

between  ministries 

integration  of  climate  risk  into  fiscal  planning 
in response to the 2025 CSR. The RRP supports 
governance  improvements  and  responsibility-
sharing 
local 
authorities.  In  addition,  cohesion  policy  funds 
are  supporting  investments  to  protect  and 
improve  coastal  regions  against  erosion;  the 
development  of  anti-flood  infrastructure;  and 
fire  and  disaster  risk  management  actions. 
Challenges  nevertheless  persist,  including  a 
need  to 
in  climate 
invest  EUR 3.4 billion 
adaptation measures by 2050 (less than 30% 
of  this  has  been  allocated  so  far),  and  a  lack 
of  systematic  climate-proofing  across  sectors 
(see Annex 10). 

Cyprus  faces  severe,  chronic  water 
scarcity  and  its  water  exploitation  index 
indicates  the  highest  pressure  in  the  EU 
as a whole. Low progress has been observed 
in acting on the CSR that called for investment 
in  water  and  wastewater  infrastructure.  The 
national  water  exploitation 
index,  which 
measures  the  sustainability  of  freshwater 
usage,  far  exceeds  the  threshold  for  severe 
water  scarcity.  Agriculture  accounted  for 
69.5% of total water abstraction in 2023 and 
water  productivity  (i.e. the  efficiency  of  water 
use  in  agricultural  and  economic  activities) 
was  well  below  the  EU  average.  The  RRP  and 
cohesion policy are both funding water-related 
upgrades, 
(e.g. infrastructure 
measures 
digitalisation of water networks and improved 
wastewater 
treatment).  Water  fees  were 
increased  as  part  of  the  RRP’s  green  taxation 
reform. However, 14.1% of wastewater is still 
neither  collected  nor  treated  by  individual 
systems, and Cyprus needs to make significant 
investments  to  ensure  compliance  with  the 
Urban Waste Treatment Directive. The number 
of  surface  water  bodies  achieving  good 
ecological status has increased slightly across 
three  river  basin  management  plans,  but 
pressures from water scarcity, climate change 
impacts, and agricultural pollution persist. The 
Joint Research Centre’s European Drought Risk 
Atlas  indicates  that  Cyprus  is  particularly 
exposed  to  wheat  yield  losses  due to  drought 
and  this  threat  will  intensify  without  deeper 
structural  reforms  in  water  governance  (see 
Annex 10).  The  recent  local  administration 
reform  transferred  significant  responsibilities 
to  district  authorities,  enabling  district-level 

14 

 
coordination and investment planning in other 
areas (e.g. water and waste management), but 
administrative  capacity  has  not  yet  increased 
sufficiently 
these 
carry 
to 
responsibilities (see Annex 18). 

fully 

out 

in 

is 

to 

to 

the 

waste 

recycling. 

transition 

improve  waste-sorting 
Furthermore, 

Cyprus’s 
circular 
economy  is  continuing  slowly  and  waste 
lagging 
management  performance 
behind  EU  targets.  Only  preparatory  steps 
have been taken on the 2025 CSR to increase 
investment 
management 
infrastructure. Cyprus has the EU’s highest per 
capita  food  waste.  The  2021-27  circular 
economy  action  plan  (reinforced  by  the  RRP) 
targets  key  sectors  like  agriculture,  food, 
manufacturing and hospitality. Cohesion policy 
reduce  waste 
funds  support  actions 
and 
generation, 
the 
increase 
preparation of local waste management plans 
for  establishing  the  Pay  As  You  Throw  (PAYT) 
is  under  development,  although 
scheme 
It  nevertheless 
progress  has  been  slow. 
remains  uncertain  whether  these  measures 
will  enable  Cyprus  to  meet  its  municipal  and 
packaging waste targets. Agriculture and food 
for  circular 
manufacturing  are  priorities 
integration.  In  Cyprus,  agricultural  pollution 
from  nitrates  and  pesticides  remains  at 
problematic  levels.  Beyond  waste,  the  sector 
faces  water  scarcity  and  heat  stress, 
threatening crop  yields and food security (see 
Annex 10).  Supporting  the  circular  use  of 
materials  (including  critical  raw  materials) 
could  also  reduce  Cyprus’s  dependency  on 
imports (see Annex 4). 

15 

 
SKILLS, QUALITY JOBS AND SOCIAL FAIRNESS 

received 

in  2025 

a 
(CSR) 

country-specific 
Cyprus 
to 
recommendation 
address 
labour  shortages  and  skill 
mismatches  by  strengthening  young 
people’s 
labour  market  participation, 
increasing  the  capacity  and 
further 
attractiveness  of  vocational  education 
and  training  (VET)  as  well  as  promoting 
adult learning. The CSR also called on Cyprus 
to  step  up  its  policy  efforts  to  strengthen 
green  and  digital  skills;  further 
increase 
participation  in  early  childhood  education  and 
increase 
care; 
students’  participation  in  science,  technology, 
engineering and mathematics (STEM) fields. It 
further  called  on  Cyprus  to  improve  the 
availability  of  and  access  to  long-term  care 
services  by  introducing  a  modern,  adequately 
funded  and  integrated  long-term  care  model, 
as  well  as  to  address  energy  poverty.  Cyprus 
has  responded  to  the  CSR  with  measures 
under  the  recovery  and  resilience  plan  (RRP), 
but  progress  has  been  limited  in  most  areas. 
Notable  steps  have  been  taken  on  early 
but 
childhood 
implementation remains partial (see Annex 1). 

improve  basic  skills;  and 

education 

care, 

and 

are 

challenges 

the  employment 

The  labour  market  is  strong  overall,  but 
skills 
impeding 
competitiveness  and  the  labour  market 
integration  of  underrepresented,  and  the 
social  situation  of  vulnerable  groups 
could  be  improved.  On  the  back  of  robust 
economic  growth, 
rate 
increased  further  to  81.3%  in  2025,  thus 
surpassing  the  national  2030  target  of  80%. 
The  unemployment  and  long-term  component 
rates  fell  to  4.4%  and  0.9%  respectively. 
However,  labour  market  integration  of  young 
people  and  persons  with  disabilities  is  weak 
and  women 
to 
securing quality employment. Social outcomes 
are  good  overall,  but  the effectiveness  of  the 
social protection system (including pensions) in 
reducing  poverty  risks 
is  weak,  affecting 
persons  with  disabilities  and  older  people  in 

face  persistent  barriers 

particular.  Better  developed  and  used  care 
systems  – both  for  children  and  for  people in 
need  of  long-term  care  –  could  improve  the 
quality of life for both givers and recipients of 
care. 

Activation and removing barriers 
for young people and women 
remains essential for an even 
stronger labour market  

the 

Young  people  are  integrating  better  now 
into 
labour  market  but  need 
sustained  support.  Cyprus  has  made  some 
progress in addressing a CSR to strengthen the 
labour  market  participation  of  young  people. 
Targeted  activation  measures  nevertheless 
remain limited, despite ongoing improvements 
in the employment of young people. The share 
of young people neither in employment nor in 
education  and  training  (NEET)  has  decreased 
in  recent  years  and  is  now  slightly  below  the 
EU average, but the share of those out of the 
labour  force  has  increased  (see  Annex 11). 
labour  market 
Further  strengthening 
participation  of  young  people  in  Cyprus  could 
benefit  from  targeted  outreach  programmes 
to  address  NEETS’  diverse  profiles,  creating 
Public 
greater 
Employment  Service  (PES)  and  employers  as 
well as trade unions. 

synergies 

between 

the 

the 

Cyprus’s  active  labour  market  policies 
(ALMPs)  and  the  operation  of  the  Public 
Employment  Service  are  insufficient  to 
respond  to  challenges.  Cyprus’s  ALMPs 
remain inadequate  to  address  structural  skills 
mismatches  and  only  7.7%  of  jobseekers 
participate (one of the lowest rates in the EU). 
Significant gaps remain in reaching vulnerable 
groups.  Cyprus  has  developed  a  new  ALMP 
strategy  that  includes  hiring  incentives  for 
unemployed  persons  aged  50  and  over, 

16 

 
 
unemployed  and  inactive  women  and  persons 
with  disabilities  offering  some  support  and 
promoting flexible work. However, the strategy 
could  be  more  directly  connected  to  the 
national  disability  action  plan,  focusing  more 
on non-EU nationals, strengthening monitoring 
and  the  engagement  of  social  partners.  The 
PES’s  Performance  Management  System  has 
been recently introduced under the RRP, but its 
impact on the quality of PES services remains 
to be seen. 

Graph 4.1: Key indicators of women’s job 
quality in Cyprus 

Source: Eurostat [lfsa_etgar], [earn_ses_pub1s], 
[lfsa_qoe_3a2], [lfst_hheredch], [lfsa_egais]. 

high-quality 

face  persistent  barriers 

in  rural  areas  (see  Annex 18). 

to 
Women 
securing 
employment. 
Cyprus’s  gender  employment  gap  is  close  to 
the  EU  average,  but  women  are  often 
employed in lower quality jobs and the gap is 
higher 
In 
particular,  the  13.8%  (vs  EU  6.4%)  risk  of 
being  involuntarily  in  temporary  employment, 
among the largest in the EU, and the impact of 
parenthood  on  their  employment  rates (17)  (-
6.8 pps  vs  EU:  -6.5 pps)  hinder  women 
progressing  in  their  careers.  Cyprus’s  6.9% 
share  of  women  in  jobs  with  long  working 
hours,  one  of  the  largest  in  the  EU,  are  a 
source  of  concern  and  preventing  women 
progressing  in  their  careers.  Only  26.9%  of 

(17)  This  is  defined  as  the  difference  in  percentage  points 
between  employment  rates  (age  group  20-49)  for  women 
without any children and for women with a child aged 0-6. 
It is part of the Joint Assessment Framework developed by 
the  Commission,  the  Employment  Committee  (EMCO)  and 
the Social Protection Committee (SPC). 

17 

women  work  in  high-demand  sectors  (e.g. ICT 
and managerial positions) – one of the lowest 
rates in the EU – and this is limiting access to 
higher-paying  jobs.  The  share  of  low-wage 
earners  among  Cypriot  women  is  therefore 
one of the highest in the EU. This is also due to 
low  collective  bargaining  coverage,  which  is 
estimated at only 32.1% of workers and is on 
a  downward  trend.  All  these  elements  are 
hindering  the  closing  of  gender  pay  and 
pension  gaps,  thereby  placing  women  in  a 
financially  vulnerable  position.  To  strengthen 
labour  market  participation  and  improve  the 
quality  of  women’s 
jobs,  the  new  ALMP 
strategy  has  introduced  new  hiring  incentive 
schemes for women. Schemes that help career 
planning  and  progression  as  well  as  the 
introduction  of  flexible  working  arrangements 
(as  included  in  the  RRP)  are  also  steps  in  the 
right direction and implementing them (as part 
of  a  holistic  approach  that  also  includes 
fostering  participation  in  training  for  high-
demand  jobs  and  providing  complementary 
care  services  for  children  and  older  people) 
would improve women’s job quality.  

Strengthening human capital 
development and aligning it with 
labour market needs is key 

labour 

shortages  and 

Labour  shortages  and  skills  mismatches 
persist.  Cyprus  has  received  a  CSR  on 
skills 
addressing 
mismatches, but progress remains limited. The 
combination  of  low-quality  jobs  and  skills 
mismatches  reinforces  structural  challenges. 
In  response,  revised  curricula  have  been 
introduced  in  schools  and  universities  as  well 
as  training  providers  to  better  meet  labour 
demand. 

Low participation in vocational education 
and  training  (VET)  is  still  contributing  to 
skills  mismatches  and  shortages.  Cyprus 
has  received  a  CSR  to  increase  the  capacity 
and attractiveness of VET as well as to step up 
policy  efforts  to  strengthen  green  and  digital 
skills,  but  only  preparatory  steps  have  been 
taken  so  far.  Enrolment in  secondary  VET  has 
increased,  but  capacity  constraints  remain  – 

051015202530Involuntarytemporaryemployment (%,2025)Low wage earners (%,2022)Long working hours(%, 2025)Employment impactof parenthood forwomen (pps, 2025)Share amongmanagers (%, 2025)%, ppsCYEU 
     
 
the  RRP, 

infrastructure  via 

despite  efforts  to  build  new  schools  and 
improve 
the 
European Social Fund Plus (ESF+) and the Just 
Transition  Fund.  Both  the  Cyprus  Productivity 
Centre and the Human Resource Development 
Authority of Cyprus are carrying out upskilling 
and reskilling measures, and efforts are being 
made  to  attract  talent  from  abroad.  Over-
shortages 
qualification 
nevertheless  persist  in  occupations  that  need 
VET  skills  (especially  ICT,  construction  and 
technical  trades)  and  these  are  forecast  to 
increase  further.  Finalising  and  implementing 
the new national VET strategy would be a step 
towards addressing these challenges. 

labour 

and 

Enrolment in STEM fields remains low and 
is  dragging  down  innovation  capacity. 
Cyprus has received a CSR to increase student 
participation  in  STEM  fields,  but  progress 
remains  limited.  A  reform  is  currently  being 
implemented  with  support  from  the  Recovery 
and  Resilience  Facility  (RRF)  on  the  digital 
transformation  of  school  units,  expanding  the 
number of graduates in these fields. However, 
despite 
tertiary 
high 
educational  attainment,  enrolment  in  STEM 
in 
programmes 
sectors 
linked  to  the  digital  and  green 
transitions (see Annex 13). 

low,  particularly 

Cyprus’s 

remains 

overall 

Early  childhood  education  and  care 
(ECEC)  participation  remains  below  the 
EU  target.  Cyprus  has  received  a  CSR  to 
further  increase  participation  in  ECEC.  This 
would  also  help  alleviate  the  negative  impact 
of  parenthood  on  job  quality  for  women  (see 
above)  and  enhance  their 
labour  market 
participation. Some steps have been taken, but 
remains  partial.  The  RRP 
implementation 
supports  the  ECEC  reform,  which  is  being 
implemented  and  is  intended  to  increase 
participation  and  expand  capacities.  The 
compulsory  entry  age  will  gradually  be 
lowered  to  four  years  by  the  school  year 
2031/2032 
(see  Annex 13).  The  current 
participation  rate  is  still  below  the  45%  EU 
target  and 
limiting  early  skills 
development and the reduction of inequalities 
in  educational  outcomes.  Further  expanding 
access  to  high-quality  and  affordable  ECEC 
could  help  address 
In 
parallel, the first National Strategy and Action 

these  challenges. 

this 

is 

Plan on ECEC, dated 10 December 2025, aims 
to  address  structural  challenges  and  improve 
access, affordability and quality. 

is 

low 

that 

in  a 

labour  market 

top-performing  students 

Insufficient  basic  skills  outcomes  are 
limiting  lifelong  skills  acquisition.  Cyprus 
has received a CSR to improve basic skills, but 
only  limited  progress  is  visible  so  far.  A  large 
share  of  students  do  not  achieve  minimum 
proficiency levels in basic skills and the share 
of 
(see 
Annex 13). This could impair employability and 
is 
productivity 
increasingly  being  shaped  by  technological 
change. Strengthening the acquisition of basic 
skills  and 
teachers’  preparedness  could 
support  the  expansion  of  a  skilled  workforce. 
Different  reforms  are  being 
implemented 
(notably  under  the  RRF)  on,  for  example,  the 
evaluation  of  teachers  and  school  units  and 
transformation  of 
regarding 
education,  but  they  are  too  recent  for  their 
impact  to  be  visible  in  the  data  that  is 
currently  available.  The  share  of  18–24-year-
olds  leaving  education  and  training  early 
decreased between 2024 and 2025 by 1.5 pps 
to 9.8% (EU: 9.1%). 

the  digital 

challenge. 

Inclusive  education  has  become  a 
significant 
Students  with 
disabilities  and/or  special  educational  needs 
still  face  barriers  to  effective  participation  in 
mainstream  education.  In  2023,  young  adults 
with disabilities (aged 18-24) were more likely 
to  leave  school  early  (36.8%  vs  EU  19.1%)  – 
one  of  the  widest  gaps  in  the  EU.  Improving 
through 
inclusive 
tailored 
assessment 
methods and training of mainstream teachers 
is  crucial  in  order  to  ensure  that  all  learners 
have 
to  develop  strong 
foundational skills and reduce inequality.  

learning 
learning  materials, 

the  opportunity 

environments 

Gaps in social protection and long-
term care are contributing to 
persistent social vulnerabilities 

Poverty has been  declining due to  strong 
economic  growth  and  a  buoyant  labour 
market,  but  social  transfers  have  only  a 

18 

 
rules  against  grid 
adopting  protective 
disconnections,  special  electricity  prices  for 
energy-poor  consumers  and  energy  efficiency 
investments  targeted  mainly  at  vulnerable 
households  in  order  to  reduce  cooling  and 
heating  costs.  However,  the  coverage  of 
related programmes is limited and continuous 
monitoring  and  evaluation  to  reduce  energy 
poverty and promote environmental equality is 
not yet in place. 

Cyprus  has  limited  social  and  affordable 
housing  and  lacks  dedicated  monitoring. 
Social  rental  housing  is  largely  non-existent, 
and  far  below  the  EU  average  of  8% (18). 
Cyprus is also one of the worst performers in 
the EU in terms of households, with arrears on 
mortgage,  rent  and  utility  bills  (12.0%  vs 
EU: 9.2%).  The  Statistical  Service  of  Cyprus 
does  not  publish  a  breakdown  of  the  total 
housing  stock  that is  social  housing  (rental  or 
ownership)  or  the  number  of  units  managed 
by  the Cyprus  Land Development  Corporation. 
The  government  has  introduced  measures  to 
support  housing  affordability.  These  include 
rental subsidies for vulnerable groups through 
the  older  people  housing  subsidy  scheme 
(funded  by  the  RRF);  the  housing  subsidy 
scheme  for  young  couples  and  individuals  up 
to  41 years  of  age;  and  rental  allowances 
under 
income 
the  guaranteed  minimum 
scheme. In parallel, the government also aims 
to  expand  housing  supply.  Over  1 900  new 
units 
around 
700 affordable  units)  in  the  major  cities  (see 
Annex 16). 

(including 

planned 

are 

income 

pension 

impact  on  poverty  reduction 
limited 
(particularly for older people and persons 
with disabilities). Rising poverty risks among 
older  people  (331.7%  vs  EU  18.8%)  and 
persons with disabilities (33.8% vs EU 28.8%) 
reflect 
income. 
inadequate 
Guaranteed  minimum 
levels  have 
eroded due to lack of inflation adjustment and 
structural  weaknesses  in  the  long-term  care 
system.  People  living  in  rural  areas  are  more 
affected  by  social  exclusion  and  face  higher 
risk  of  poverty  (see  Annex 18).  Women  are 
disproportionately  affected  due  to  cumulative 
disadvantages  over  the  course  of  their  lives. 
Disability-specific  benefits  are  both  low  in 
value  and  underrepresented  in  overall  social 
protection  spending,  leaving  many  recipients 
financially  vulnerable.  On  a  positive  note, 
planned  reforms  (including  a  draft  law  to 
improve  social  services  and  an  increase  in 
disability  allowances)  aim  to  improve  these 
arrangements.  Similarly,  while  low  pension 
levels  do  impair  the  social  situation  of  older 
persons,  the  adoption  and  implementation  of 
the  ongoing  reform  of  the  pension  system 
could help alleviate old-age poverty. 

An integrated long-term care (LTC) model 
has  not  been  developed.  Cyprus  has 
received  a  CSR  to  improve  the  availability  of, 
and  access  to,  LTC  by  introducing  a  modern, 
adequately  funded  and  integrated  LTC  model. 
However,  implementation  remains  at  an  early 
stage.  Despite  efforts  to  promote  active 
ageing,  public  spending  is  one  the  lowest  in 
the  EU  and  the  non-integration  of  most 
services  into  the  national  health  system  is 
prompting 
(OOP) 
expenditure  and  non-accessible  services.  The 
LTC sector is also affected by the situation of 
nursing staff in the general healthcare system. 
Staff  shortages  for  nurses  and  carers,  the 
insufficient  availability  of  home-based  and 
limited  home-
community-based  LTC  and 
based 
hampering 
are 
deinstitutionalisation.  Cyprus  has  not  yet 
established a comprehensive, coordinated and 
sustainable  LTC  strategy  with  an  independent 
oversight body to monitor implementation. 

out-of-pocket 

solutions 

high 

Energy poverty remains a concern. Cyprus 
has received a CSR to address energy poverty, 
but  implementation  remains  partial.  Cyprus  is 

(18) See Pittini, A., 2026, Cyprus. In Social and public housing 
in  the  EU  and  UK.  Dublin:  Ministry  for  Housing,  Local 
Government and Heritage). 

19 

 
 
adaptation  measures  through  an  effective 
improving  the 
governance  system  and 
administrative  and  planning  capacity  of 
district and local authorities; 

technology, 

engineering 

•  promoting  human  capital  development 
and  addressing 
labour  and  skills 
shortages  by  increasing  participation  in 
vocational education and training (VET) and 
and 
science, 
mathematics  (STEM);  improving  basic  and 
digital  skills  (paying  particular  attention  to 
learners  with  disabilities  and  special 
educational needs); adapting adult learning 
to  employment  needs;  strengthening  the 
capacities  of 
the  Public  Employment 
Service; using active labour market policies 
(particularly  to  support  women’s  transition 
jobs);  and  better 
into  higher-quality 
integrating  vulnerable  groups 
into  the 
labour market; 

• 

social 

protection 

improving 
for 
vulnerable groups and reducing energy 
poverty  by  strengthening  access  to  high-
quality  long-term  care,  ensuring  adequate 
minimum 
the 
availability  of  social  housing  and  providing 
targeted support to vulnerable households. 

increasing 

pensions, 

In other areas, Cyprus would benefit from: 

•  making 

the 

justice  system  more 
efficient  by  introducing  well-functioning 
digital 
tools  and  procedures,  and  by 
ensuring the prompt resolution of cases. 

KEY FINDINGS 

In  areas  covered  by  existing  CSRs,  Cyprus 
would benefit from: 

the 

funding 

•  boosting  research  and  innovation  by 
improving 
the 
commercialisation  of  research,  and  by 
strengthening 
the 
domestic ecosystem of companies engaged 
in RDI-intensive activities; 

integration 

into 

and 

the 

• 

improving the business environment by 
reducing  single  market  and  administrative 
barriers,  enhancing  the  transparency  and 
enterprise 
efficiency 
of  State-owned 
governance,  and 
the 
regulatory framework;  

refining 

further 

•  enhancing  access 

by 

finance 

to 
enabling 

for 
businesses 
alternative 
financing  opportunities  (including  venture 
investment 
capital,  private  equity  and 
funds) and by strengthening household and 
institutional 
private 
participation 
investment  through  financial  literacy  and 
the  occupational 
the  development  of 
pension system; 

in 

energy 

•  strengthening  economic  and  energy 
security  by  upgrading  the  electricity  grid 
and 
to 
storage 
facilities 
accommodate  an 
increasing  share  of 
renewables in the energy mix, as well as by 
developing  energy  interconnections  with 
neighbouring  countries  to  end  Cyprus’s 
energy isolation;  

increasing 

•  decarbonising  building  and  transport 
by 
in  energy 
efficiency  and  the  availability  of  public 
transport,  and  by  introducing  a  carbon  tax 
on transport fuels; 

investment 

•  addressing  climate  and  environmental 
risks  by  investing  in  water,  wastewater 
and  waste  management 
infrastructure, 
ensuring  the  implementation  of  climate 

20 

 
 
ANNEXES 

 
 
 
 
LIST OF ANNEXES 

A1.  CSR implementation 

Fiscal 

A2.  Fiscal developments and debt sustainability 

A3.  Taxation 

Productivity 

A4. 

Innovation to business 

A5.  Single market and industry 

A6.  Savings, investment and access to finance 

A7.  Effective institutional framework 

Sustainability 

A8. 

Industry decarbonisation, circularity and climate mitigation 

A9.  Affordable energy transition 

A10.  Climate adaptation, preparedness and environment 

Fairness 

A11.  Labour market 

A12.  Social policies 

A13.  Education and skills 

A14.  Social scoreboard 

A15.  Health and health systems 

A16.  Housing 

Horizontal 

A17.  Sustainable development goals 

A18.  Competitive regions 

A19.  Transport 

LIST OF TABLES 

A1.1. 
A2.1. 
A2.2. 
A2.3. 
A3.1. 
A4.1. 

CSRs implementation and Commission assessment 
Projected change in age-related expenditure in 2025-2040 and 2025-2070 
Supplementary pension schemes - Scope for expansion 
Fiscal governance database indicators and public accounting maturity 
Taxation Indicators 
Key innovation indicators 

23 

25 

30 

30 

34 

38 

38 

44 

53 

60 

65 

65 

72 

77 

84 

84 

87 

90 

94 

95 

99 

104 

104 

107 

111 

25 
32 
32 
33 
35 
43 

 
 
 
52 
53 
59 
61 
62 
70 
82 
94 
97 
108 
110 

30 
31 
34 
35 
36 
40 
50 
54 
54 
55 
60 
61 
66 
72 
74 
85 
87 
90 
93 
95 
96 
99 
100 
103 
104 
113 

107 
112 
113 

Single Market and Industry 
Savings and Investments Union summary diagnostic 
Financial sector indicators 
Cyprus. Selected indicators on better regulation practices for primary legislation 
Digital Decade key performance indicators: availability of digital public services 
Key clean industry and climate mitigation indicators: Cyprus 

A5.1. 
A6.1. 
A6.2. 
A7.1. 
A7.2. 
A8.1. 
A10.1.  Key Adaptation Indicators 
A14.1.  Social Scoreboard for Cyprus 
A15.1.  Key health indicators 
A18.1.  Main development trends, challenges and the concentration of resources 
A18.2.  Key regional indicators (at NUTS2 level) for Cyprus 

LIST OF GRAPHS 

Composition of non-financial corporations funding 
Capital markets and financial intermediaries 
Composition of households' financial assets 
Trust in the justice system, regional / local authorities and in government 

Contributions to the change in the general government budget balance. 
Primary spending evolution and composition 
Tax revenue by economic function in 2024, CY (outer ring) and EU-27 (inner ring) 
Tax wedge for single and second earners as a % of total labour costs, 2025 
VAT gap indicators 
Business R&D intensity (BERD) as % of GDP, CY vs EU, 2010-2024 

A2.1. 
A2.2. 
A3.1. 
A3.2. 
A3.3. 
A4.1. 
A5.1.  Manufacturing industry production: total and selected sector, index (2021=100), 2015-2024 
A6.1. 
A6.2. 
A6.3. 
A7.1. 
A7.2.  Most time-consuming aspects of service delivery 
A8.1. 
A9.1. 
A9.2. 
A11.1.  Labour shortages (%) and the job vacancy rate (%) 
A12.1.  At-risk-of-poverty or social exclusion rate, by old age and disability status (%) 
A13.1.  Low achievement and top performance in mathematics of 15-year-olds in Cyprus, 2012, 2018 and 2022 (%) 
A13.2. 
A15.1.  Life expectancy at birth, in years 
A15.2.  Healthcare infrastructure investment by year 
A16.1.  House prices, rents and price-to-income evolution in CY and EU27 
A16.2.  House supply indicators in CY 
A16.3.  Housing affordability selected indicators 
A17.1.  Progress towards the SDGs in Cyprus 
A19.1.  Cyprus' road fatalities per million, 2024 

Greenhouse gas emissions in the effort sharing sectors, 2005, 2023, and 2024 
Electricity and gas prices for household and non-household consumers, first half of 2025 
Cyprus’s installed renewable capacity vs electricity generation mix 

Individuals with basic or above basic overall digital skills by education (%) 

LIST OF MAPS 

A18.1.  GDP per head compared with the EU average 
A19.1.  TEN-T Cross-Border & National Priority Sections in Cyprus. 
A19.2.  Cyprus' road safety map 

24 

 
 
 
 
 
 
ANNEX 1: CSR IMPLEMENTATION  

Table A1.1:  CSRs implementation and Commission assessment 

(Continued on the next page) 

25 

Cyprus faces challenges in a wide range of policy areas, as identified in the country-specific recommendations (CSRs). Cyprus was recommended, among other things, to strengthen research and innovation, simplify regulation, improve the governance of state-owned enterprises, reduce overall reliance on fossil fuels, scaling-up funding for energy efficiency, promote sustainable transport, upgrade the electricity grid, address energy poverty, invest in water, improve the implementation of climate adaptation measures, address labour shortages and skill mismatches, improve education and basic skills and improve the availability of long-term care services. The Commission has assessed the degree of implementation of the 2025 CSRs considering the policy action taken by Cyprus to date*. To do so, the Commission has taken into account the information provided by Cyprus in its Annual Progress Report as well as other information sources. This annex provides summary information on the policy actions taken or planned by Cyprus for each CSR. More detailed information on these actions is included in the relevant chapters and other annexes of the report. *CSR 2 is not assessed in CeSaR. 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. Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps / credibly announced measures By 30 April 2026 Assessment of progress 1.1 Reinforce overall defence and security spending and readiness while ensuring debt sustainability in line with the European Council conclusions of 6 March 2025. Total general government defence expenditure in 2026 is projected at 1.8% of GDP, similar to the level in 2024. Total general government defence expenditure in 2027 is projected at 2.4% of GDP, corresponding to an increase of 0.6 pps. compared to 2024. Substantial progress 1.2 Ensure that net expenditure respects the path recommended by the Council on 21 January 2025. A budget surplus of 3.4% of GDP and 2.1% of GDP is recorded in 2025 and projected for 2026, respectively.  Annual and cumulated deviations in 2025 amounted to 1.3% of GDP and 1.0% of GDP, respectively.  Annual and cumulated deviations in 2026 are projected at 0.9% of GDP and 1.8% of GDP, respectively. Substantial progress 3.1 Strengthen research and innovation and the commercialization of research results by fostering public and private R&D investment, enhancing research-business synergies, and adopting a continuous long-term research and innovation strategy with input-output indicators and multiannual funding.    A Central Knowledge Transfer Office has been established to improve commercialisation and reported on the provision of knowledge transfer support services, alongside various grant schemes for R&I related activities.  The adoption of the amendment of the existing legal framework governing the creation of and participation by public universities in spin-off companies. The new RDI Strategy (2027–2032) is expected by the end-2026, followed by an update of the smart specialisation strategy  Law. Some progress 3.2 Facilitate the diversification of the economy and further productive investment by enabling alternative saving and investment instruments, increasing financial literacy, facilitating the participation in capital markets and improving access to non-The Cyprus Equity Fund’s investment activity commenced in January 2025. So far, the Fund has invested in 6 companies. A National Promotional Agency will be established to address market failures in SMEs’ access to capital and to support businesses by providing financial instruments.  Some progress  
 
 
 
     
 
Table (continued) 

(Continued on the next page) 

26 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps / credibly announced measures By 30 April 2026 Assessment of progress bank financing opportunities for businesses.     3.3 Simplify regulation, improve regulatory tools and reduce administrative burden, especially focusing on improving licensing and permitting procedures for investment and setting up new businesses.   A Business Support Centre has been established to provide a single point of contact to streamline licensing, including dedicated support for strategic investments.   A “Cyprus Startup Visa” programme allows non-EU entrepreneurs to establish startups in Cyprus, fostering innovation, e.g. in fintech and digital services. Company Law reform is still under preparation and will not be completed before mid-2026. Some progress 3.4 Improve the governance of state-owned enterprises by aligning it with international best practices, including merit-based nomination of boards, ownership policy and performance-based management. Ν/Α In the area of State-Owned Enterprises governance, the Council of Ministers adopted an action plan for implementing the IMF recommendations. The implementation of this action plan has also been [pre]selected for a TSI project. Limited progress 4.1 Reduce overall reliance on fossil fuels and further diversify energy supply, notably by developing energy interconnections with neighbouring countries N/A. Ν/Α Limited progress 4.2 scaling-up funding for energy efficiency  Introduced, or continued to implement, various measures to support energy efficiency investments for different categories of consumers, including vulnerable households, large-scale users, and public sector buildings. Introduced incentive for increased building coefficient for new and renovated buildings achieving high energy efficiency. Ν/Α Some progress 4.3 promoting sustainable transport  Continued implementation of subsidy scheme for the scrapping of old polluting vehicles and the purchase of zero-emission vehicles. Around 4,350 payment claims for subsidies have been submitted, while approximately 320 further applications for payment are still pending and expected. Under the grant scheme “Electrokinisis with 1000”, 515 charging points have been approved for subsidy, with an expected 315 to Cyprus plans to support the deployment of charging infrastructure on public land, including 10 charging pools for light-duty vehicles and 3 for heavy-duty vehicles. Limited progress  
 
 
     
 
Table (continued) 

(Continued on the next page) 

27 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps / credibly announced measures By 30 April 2026 Assessment of progress be completed and already operational. In addition, 11 publicly accessible fast chargers have been installed. 4.4 and upgrading the electricity grid and energy storage facilities, to accommodate an increasing share of renewables.  Continued implementation of RRP measures on RES and smart grids testing infrastructure at Cyprus University and on defining a new regulatory framework for storage. Licensed new RES project for a total of 2,500 MW. Published guidelines for the funding of energy storage systems of RES, but no project is planned yet. Ν/Α Limited progress 4.5 Address energy poverty Continued implementation of RRP measures on supporting energy renovations for energy-poor households. Implementation of similar measures under cohesion policy is also underway.  Implemented protective rules against grid disconnections and applied special electricity tariffs for vulnerable consumers during critical periods. Ν/Α Some progress 4.6 Step up investments in water, wastewater, and waste management infrastructure, promote sustainable water use practices, and strengthen efforts to prevent waste and improve the separate collection of municipal and packaging waste. Adopted new water levy as part of RRP measure on green taxation. Continued implementation of wastewater directive requirements through a Ministerial committee led by the Minister of Interior. Continued implementation of waste management reform “pay as you throw”. Water Resilience Plan is under preparation. Actions to promote water reuse and desalination are included under the revised National Adaptation Strategy, pending Council of Ministers approval. Limited progress 4.7 Improve the implementation of climate adaptation measures, by focusing on improving the institutional framework governing climate adaptation. Capacity-building and awareness raising activities on climate adaptation were organised for local authorities. Council of Ministers adopted the National Investment Plan for Water Projects. The revised National Climate Adaptation Strategy 2025-2050 and Action Plan are pending approval by the Council of Ministers.  The National Climate Law is under preparation.  Limited progress 5.1 Address labour shortages and skills mismatches by strengthening labour market participation of young people, An project funded by Cohesion Policy Programme “THALIA 2021-2027”  has been implemented to incentivise the recruitment of young people aged 15 to 29 who are not in employment, education or training. According to the ALMPs Strategy period 2026-2028, Cyprus is expected to implement the following Subsidy Schemes: Incentive Scheme for the recruitment of young people aged 15-29 who are not in employment, education, or training (NEETs) with flexible employment arrangements.  The outreach support for NEETs (mobile units) was not renewed because of the decrease in youth unemployment and NEETs, and Some progress  
 
 
     
 
Table (continued) 

(Continued on the next page) 

28 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps / credibly announced measures By 30 April 2026 Assessment of progress because results were below expectations.  5.2 further increasing the capacity and attractiveness of vocational education and training as well as promoting adult learning. Projects supported under the RRP and the European Social Fund Plus (ESF+) have been developed to improve participation in VET “Development of Technical Vocational Education and Training” (TVET). Two new VET schools (RRF and JTF) have been constructed. N/A Some progress 5.3 Step up policy efforts to strengthen green and digital skills. Implementation of an e-Skills action plan, focusing exclusively on digital skills.  The Action Plan has been extended until 2026. A new Digital Strategy for 2027–2032 is currently under development, providing the framework for a new National Action Plan on Digital Skills, and related initiatives.  Training programmes for the acquisition of digital skills.   Training programmes for the acquisition of knowledge and skills related to the green economy. Ν/Α Limited progress 5.4 Further increase participation in early childhood education and care, and improve quality Gradual 8 months extension of the entry age into ECEC under the RRP and State budget. Development of new and/or the expansion of existing infrastructure to create new positions that can absorb more children in public kindergartens.  Abolition of tuition fees in public kindergartens for younger children of non-compulsory age.  Adoption (December 2025) of the first National Strategy and Action Plan on ECEC- 2025-2030    Some progress 5.5 improve basic skills, Investments in the digital transformation of school units to support digital and STEM-related skills.  The teachers’ evaluation reform, as part of a broader framework including school evaluation, was adopted in December 2025 under the RRP and will enter into force in the school year 2026. 40 educational curricula in secondary schools are amended to Ν/Α Limited progress  
 
 
     
 
Table (continued) 

Source: Cyprus’ reporting and Commission assessment 

29 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps / credibly announced measures By 30 April 2026 Assessment of progress support skills’ development. .  5.6 and increase students' participation in science, technology, engineering and mathematics (STEM) fields The Ministry of Education has been running a STEM programme in primary schools, where 6th-grade students engage in project-based learning combining science, technology, engineering and mathematics to solve real-world problems. Construction of a Model Technical School in Limassol Limited progress 5.7 Improve the availability of and access to long-term care services by introducing a modern, adequately funded, integrated long-term care model. Under the RRP four long-term care homes have been constructed and a new Elderly Housing Subsidy Scheme (2025) increased funding to EUR 1,300 per person, expanded eligibility, and strengthened quality criteria and income support for the elderly.     The National Strategy for Active Ageing (2025–2030) addresses LTC only in a fragmented manner, as it lacks a dedicated action plan for LTC with clear governance, milestones, and targets.  A new disability law has been adopted in April 2026. For its implementation, additional financial provisions have been included in the State Budget. In addition, the new law provides for new social services in kind.   Revised National Strategy and Action Plan for Disability 2024-2028.   Limited progress   
 
 
   
 
 
FISCAL 
ANNEX 2: FISCAL DEVELOPMENTS AND DEBT SUSTAINABILITY 

Graph A2.1: Contributions to the change in the 
general government budget balance. 

Source: AMECO. 

While  expenditure  with  a  higher  impact  on 
GDP had remained broadly stable over three 
decades, it has slightly increased since 2019. 
This  may  be  related  to  the  impact  of  the  RRF, 
facilitating  a  more  quality-based  fiscal  strategy. 
Zooming in on the composition of spending, social 
protection  accounts  for  the  largest  share  of  total 
expenditure  (above  30%),  followed  by  health, 
general public services, and education, each above 
10% of total spending. With the introduction of the 
comprehensive  General  Healthcare  System 
in 
2019,  public  expenditure  on  health  has  increased 
strongly  (See  Graph  A2.2b).  Spending  on  housing, 
transport, environment, education and defence has 
risen  more  modestly,  with  the  rise  in  defence 
spending  reflecting  recent  security  developments. 
In  the  case  of  education,  the  slight  increase  is 
particularly 
sharp 
deterioration  in  basic  skills,  among  the  most 
pronounced  in  the  EU.  Students  also  lag  behind 
their  European  peers  in  digital  and  civic  skills, 
pointing  to  broader  quality  challenges  in  the 
education  system  that  may  undermine  future 
competitiveness  (see  Annex 13  for  more  details). 
By contrast, spending on communication and R&D 
has remained broadly stable.  

important, 

given 

the 

in 

This annex discusses selected topics in public 
finances  and  developments 
fiscal-
structural  country-specific  recommendations 
(CSRs)  addressed  to  Cyprus  in  July  2025. 
These 
reinforce  defence 
spending and readiness, while also implementing a 
the  Council 
in 
fiscal 
Recommendation of 21 January 2025. 

include  a  call 

line  with 

strategy 

to 

On  21  January  2025,  the  Council  adopted  a 
Cyprus’s 
Recommendation 
medium-term  fiscal  structural  plan  (19).  The 
plan  includes  a  fiscal  adjustment  over  four  years 
(20).  

endorsing 

Developments in government balance, 
debt and public expenditure (21) 

In  2025  Cyprus  recorded  a  government 
surplus of 3.4% of GDP, and the government 
debt-to-GDP  ratio  fell  below  the  60% 
threshold  for  the  first  time  since  2009  to 
55.0%.  The  surplus  remains  sizeable  although 
lower  than  its  recent  peak  of  4.1%  of  GDP  in 
2024, reflecting the overall good growth situation 
of  the  economy  and  strong  tax  revenues  from 
corporations.  As  can  be  seen  in  Graph  A2.1,  the 
improvement of the government balance since the 
pandemic  in  2020  has  been  mainly  driven  by 
strongly  increasing  government  revenue,  which 
enabled Cyprus to absorb increases in government 
spending.  Based  on  the  Commission  Spring  2026 
Forecast,  Cyprus’s 
is  projected  to  achieve  a 
government  headline  surplus  of  2.1%  of  GDP  in 
2026 and 2.5% of GDP in 2027. Government debt 
is set to continue its downward trajectory falling to 
50.4% of GDP in 2026 and 45.5% of GDP in 2027. 

(19)  OJ C, C/2025/639, ELI: https://eur-
lex.europa.eu/eli/C/2025/639/oj. 

(20)  Cyprus’s compliance with the maximum growth rates of net 
expenditure recommended by the Council is assessed in 
[COM(2026)200]. 

(21)  Figures underpinning fiscal surveillance (net expenditure 
growth) are provided in the Fiscal Statistical Tables 
[COM(2026)200] providing background data relevant for the 
assessment of the budgetary policies of the Member States. 

30 

-8.0-6.0-4.0-2.00.02.04.06.08.010.0% of GDPChange in revenueChange in expenditureBudget balance 
 
 
 
 
  
 
 
Graph A2.2: Primary spending evolution and 
composition 

revenues  from  taxes  less  detrimental  to  growth 
low.  For  example,  property  taxation, 
remain 
including  recurrent  and  transaction  taxes,  account 
for 1.7% of total tax revenues, well below the EU 
average  (4.6%).  Equally,  climate-relevant  taxation 
like  taxes  on  fuels  or  CO2  consumption  provide 
room  for  increasing  government  revenues,  while 
also  having  positive  behavioural  effects.  For 
further details on taxation see also Annex 3. 

Cost of ageing 

in  Cyprus 

Total  age-related  spending 
is 
projected  to rise by about  2 pps by  2040, to 
around  23%  of  GDP,  with  a  further  1.5 pps 
increase by 2070 (see Table A2.1). The overall 
increase is mainly the result of a projected rise in 
pension  and  healthcare  expenditure.  Total 
spending  on  age-related  items  would  remain 
below the EU average. 

Source: Source: Based on the Classification of the Functions 
of Government (COFOG data).  
Note: Based on economic literature, the categories considered 
to have the higher growth impact include education, R&D, 
health, transport and communication (See Barbiero and 
Cournede (2013), Gemmel et al. (2016), Lupu et al (2018), 
Cepparulo and Mourre (2020) and OECD (2025)).   

Public pension spending as a share of GDP is 
projected  to  increase  by  about  1.5 pps  over 
the  next  decades  and  by  around  3 pps  by 
2070.  At  around  12%  of  GDP  in  2070,  gross 
spending  on  public  pension  benefits  would  be 
similar to the projected EU average. 

total 

social 

social 

income 

tax  burden 
security 

Cyprus  relies  heavily  on  corporate  income 
taxation as a share of revenues and of GDP. 
While  this  enables  it  to  keep  the  tax  wedge 
on  labour  below  the  EU  average,  more 
growth-friendly  taxes  remain  underused.  In 
(including 
2025  Cyprus’s 
compulsory 
contributions) 
amounted to 36.7% of GDP, below the EU average 
of  39.9%.  Similarly,  the  tax  wedge  comprising 
personal 
security 
tax  and 
contributions for an average wage earner stood at 
26.4%  in  2025,  below  the  EU  average  of  40.0%, 
reflecting a moderate burden on the factor labour. 
In contrast, corporate income taxes represent 20% 
of taxes collected, more than twice as much as the 
EU  average  of  8%.  With  the  increase  in  the 
corporate  tax  rate  from  12.5%  to  15%  at  the 
beginning  of  2026  this  situation  is  projected  to 
continue. This heavy reliance on corporate income 
taxation,  related  to  the  country’s  “headquartering 
policy” to attract foreign-owned companies, poses 
risks  for  the  tax  base  in  the  medium-term,  as 
corporate  taxes  generally  tend  to  be  volatile  and 
are  subject  to  cross-border  competition.  However, 

Supplementary pension schemes can enhance 
the  resilience  of  the  pension  system  by 
diversifying  retirement  income  sources.  In 
Cyprus, however, their uptake remains limited. This 
coincides  with  rising  medium-term  public  pension 
spending pressures and a projected increase in the 
replacement  rate  by  0.5 pps  between  2025  and 
2040 (Table A2.2) (22). 

Public healthcare expenditure is projected at 
7.5% of GDP in 2025 (above the EU average 
of  6.6%)  and  is  expected  to  increase  by  0.3 
pps  by  2040  and  by  a  further  0.4  pps  by 
2070 (see Table A2.1) (23). Public expenditure on 
long-term  care is  projected  to  be  0.2%  of  GDP  in 
2025 (well below the EU average of 1.7%) and is 
expected  to  increase  by  0.1  pp  of  GDP  by  2040 

(22)  The (gross) replacement rate refers, where the required data 
is available, to both public and private pensions. It is based 
on projections from the 2024 Ageing Report.  
recent 

reforms  and 
investments of the Cypriot healthcare system are discussed 
in Annex 15 ‘Health and health systems’. 

(23)  Key  performance  characteristics, 

31 

048121620303438424650a) Evolution (% of GDP)Primary expenditureSpending with higher impact on GDP (rhs)-6.0-4.0-2.00.02.04.06.08.0Other economicInterest spendingGeneral servicesSocial protectionCultureR&DCommunicationEnvironmentEducationPublic orderDefenceTransportHousingHealthb) Compositional change 2023-2019 (% of total spending) 
  
 
Table A2.1:  Projected change in age-related expenditure in 2025-2040 and 2025-2070 

Source: 2024 Ageing Report (EC/EPC) 

Table A2.2:  Supplementary pension schemes - Scope for expansion 

Source: European Commission 

and  by  a  further  0.1  pp  of  GDP  by  2070.  The 
projected increase is due to population ageing but 
is relatively low due to underdeveloped long-term 
care services (24).  

difficult to process. The FCC reports having a fairly 
high  visibility  in  the  media,  despite  not  having 
specialised  communication  staff  nor  a  formal 
leadership communication role. 

National fiscal framework  

The  relatively  small  Fiscal Council of  Cyprus 
(FCC)  has  several  tasks  but  struggles  with 
attracting  adequate  staff.  Its  tasks  relate  to 
monitoring the compliance with fiscal rules as well 
as  assessing/endorsing  macroeconomic  and 
budgetary  forecasts,  but  is  not  involved  in  long-
term  fiscal  sustainability  assessments.  The  FCC 
reports  having  problems  attracting  staff  of  a 
suitable  profile,  due  to  insufficiently  attractive 
employment  conditions  (e.g.  pay).  Moreover,  the 
secretariat  staff  number  is  capped  by  law  at  a 
maximum of 6 persons, which puts a further limit 
on  the  potential  capacity  of  the  FCC.  The 
nomination  and  appointment  procedures  are 
dominated by the government, which appoints the 
Board  after  consulting  the  relevant  Parliamentary 
Committee.  The  FCC  reports  issues  of  access  to 
information,  mostly  due  to  the  information  being 
non-standardised  and  in  a  format  that  makes  it 

(24)  The  adequacy  and  quality  of  the  Cypriot  long-term  care 

system are covered in Annex 12 ‘Social policies’. 

The institutional setting for spending reviews 
in Cyprus is recent. Cyprus has benefitted from 
the  Commission’s  Technical  Support  Instrument, 
although  the  limited  administrative  size  leaves 
only a small scope for building analytical capacity 
and  methodologies 
reviews.  
for 
Spending  reviews  have  so  far  been  ad  hoc,  and 
findings  do  not  consistently  feed  into  the  budget 
making process. 

spending 

Accrual  accounting  improves  transparency 
over  a  public  body’s  financial  position  and 
performance  and  can  support  sustainability 
and 
(14) 
intergenerational  equity.  Most 
Member  States  have 
implemented  accrual 
accounting  across  the  general  government  sector 
and a further five, including Cyprus, are set to do 
so  by  2030  (25).    However,  currently  Cyprus  still 
lags behind the EU average (see Table  A2.3) as it 
has  not  yet  implemented  accrual  accounting  at 

(25)  Report on public accounting in the EU (COM(2025)746 and 
accompanying Staff Working Document SWD(2025)396). 
Countries with an accounting maturity of 70% or more in 
relation to International Public Accounting Standards are 
deemed to apply accrual accounting. 

32 

BE27.11.30.30.7-0.61.628.7BEEU24.30.50.30.4-0.30.925.2EUBE27.13.10.61.7-0.74.731.9BEEU24.30.20.60.8-0.31.325.6EUageing-related expenditure change in 2025-2040 (pps GDP) due to:ageing-related expenditure pensionshealthcarelong-term careeducationtotalageing-related expenditure change in 2025-2070 (pps GDP) due to:ageing-related expenditure pensionshealthcarelong-term careeducationtotalAssets in 2024 (% GDP)Participation in 2024 (% working-age population)CYn.a.0.5n.a.CYEU32.4-2.855.9EUGross replacement rate at retirement: (pps change 2025-2040)  
 
 
 
 
     
 
 
   
 
resulted 

received 

July  2025 
in  additional  costs  for 
government  firefighting  and  support  measures  of 
around  EUR  100  million 
(0.3%  of  GDP), 
highlighting  the  fiscal  relevance  of  these  risks. 
country-specific 
Cyprus 
its 
improving 
recommendation 
institutional 
for 
framework  and  governance 
climate  adaptation  measures.  Progress  has  been 
limited  so  far,  as  corresponding  legislation  still 
needs to be adopted and put into action (for more 
details see Annex 10). 

in  2025  for 

a 

central  government  level  nor  with  social  security 
funds (26).  

The  Cypriot  Ministry  of  Finance  has  started 
assessing  climate-related  macro-fiscal  risks 
and  reporting  results  in  its  budgetary  plans.  
These  assessments  build  on  modelling  analysis 
conducted  as  part  of  a  three-year  project  on 
Climate  Change  and  its  Effects  on  the  Cypriot 
Economy initiated in 2023 between the Ministry of 
Finance and the Economics 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.  The 
2025  Draft  Budgetary  Plan  and  the  2025–2028 
medium-term  fiscal-structural  plan  present  initial 
results  focusing  on  the  macro-fiscal  impacts  of 
the energy transition, highlighting that the cost of 
the  net-zero  transition  depends  heavily  on  the 
chosen policy mix. The 2026 Draft Budgetary Plan 
includes  a  broader  analysis  of  the  macro-fiscal 
impacts  of  both  climate  change  chronic  physical 
effects  and  transition  risks.  It  highlights  that  the 
physical  impacts  of  climate  change  can  entail 
significant  macro-fiscal  costs  in  the  near  to  long 
term,  while  timely  and  ambitious  transition  can 
reduce 
long-term  macroeconomic  costs  and 
preserve fiscal space. The modelling analysis does 
not  yet  cover  acute  climate  shocks  or  integrate 
adaptation  policies  in  the  modelling  framework. 
However,  the  2026  Draft  Budgetary  Plan  reports 
that  the  wildfires  around  the  area  of  Limassol  in 

Table A2.3:  Fiscal governance database indicators and public accounting maturity 

(1) "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. 
The score for public accounting reflects the degree of maturity in relation to the International Public Sector Accounting Standards 
(IPSAS). Countries with an accounting maturity of 70% or more in relation to IPSAS are deemed to apply accrual accounting. For 
more information, see the report on public accounting in the EU (COM(2025)746 and accompanying Staff Working Document 
SWD(2025)396)." 
Source: Fiscal Governance Database, European Commission 

(26)  Annexes 3.1 and 3.4 of SWD(2025)396. 

33 

2024CyprusEU AverageCountry Fiscal Rule Strength Index (C-FRSI)12.3814.81Medium-Term Budgetary Framework Index (MTBFI)0.820.722025 Public accounting maturity of general government32%65% 
 
 
 
  
 
ANNEX 3: TAXATION 

This  annex  provides  an 
indicator-based 
overview  of  Cyprus’  tax  system.  It  includes 
information  on  the  tax  mix,  on  competitiveness 
and fairness aspects of the tax system, and on tax 
collection  and  compliance,  and  on  aggressive  tax 
planning (ATP). Cyprus did not receive a tax-related 
country-specific recommendation in 2025. 

Compared with the EU average, tax revenues 
are skewed towards consumption and capital. 
Table A3.1 shows that Cyprus’s tax revenues as a 
share  of  GDP  were  still  below  the  EU  average  in 
2024,  staying  at  the  same  level  as  in  2023.  The 
difference  with  the  EU  average  increased  from 
2.8 percentage points of GDP in 2023 to 3.1 pps in 
2024. Labour taxes, expressed as a share of both 
GDP  and  total  tax  revenues,  were  below  the  EU 
average  in  2024.  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  2024.  Recurrent 
property  tax,  which  is  one  of  the  taxes  least 
detrimental to growth, was abolished in Cyprus in 
2017 (27).  Tax 
therefore  be 
revenues  could 
increased  by  making  greater  use  of  currently 
underused  taxes,  such  as  the  recurrent  property 
tax. 

Cyprus’s  recovery  and  resilience  plan  (RRP) 
includes  measures  to  make  Cyprus’s  tax 
system  greener.  Cyprus  has  made  progress 
towards  proposing  a  green  taxation  reform  to 
address  environmental  challenges 
to 
climate  change,  air  pollution,  waste  management, 
water pollution and water management. It has not 
been adopted yet, but consists of: the introduction 
of a carbon tax on transport fuels; a levy on water 
consumption; and a charge on landfill of municipal 

related 

(27)  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.  

It 

to 

is  also  expected 

waste. 
introduce 
compensatory measures to alleviate the impact of 
the new taxes on affected sectors. As of 2027, the 
new  emissions  trading  system  will  be  fully 
implemented in Cyprus, extending the scope of the 
emissions  trading  system  to  heating  fuels  in  the 
building  sector.  Cyprus  is  developing  the  Social 
Climate  Fund  programme  to  alleviate  the  effects 
of the new system for vulnerable users. 

Graph A3.1: Tax revenue by economic function in 
2024, CY (outer ring) and EU-27 (inner ring) 

Source: Taxation Trends Data, DG TAXUD 

Corporate taxation plays a major role in the 
Cyprus’  tax  mix.  Cyprus  collects  one  of  the 
highest corporate income tax revenues as a share 
of  GDP  in  the  EU  (6.9%)  due  to  the  significant 
presence  of  foreign  companies  in  the  country.  At 
the same time, corporate tax rates are among the 
lowest  in  the  EU.  In  2026,  Cyprus  increased  the 
corporate  income  tax  rate  from  12.5%  to  15% 
(still one of the lowest in the EU) and reduced the 
rate of its general special defence contribution on 
dividends from 17% to 5%. 

The  tax  benefit  system  appears  to  reduce 
income  inequality  less  than  in  most  EU 
countries.  Graph  A3.2  shows  that  the  labour  tax 
wedge for Cyprus in 2025 is below the EU average 
for single and second earners at different earnings 
levels (28). Cyprus has no wealth, inheritance or gift 

(28)  The  tax  wedge  is  an  indicator  of  the  tax  burden  on  labour 
that  can  be  assessed  at  various  levels  of  earnings.  It  is 
defined as the sum of personal income taxes, employee and 
employer  social-security  contributions  and  other  mandatory 
contributions,  expressed  as  a  percentage  of  total  labour 
costs  (composed  of  the  net  wage,  personal  income  tax, 
social 
contributions,  and  other  mandatory 
contributions).  Tax  wedge  data  in  the  2026  country  reports 
are calculated by the Joint Research Centre of the European 
Commission and based on the EUROMOD model, while in the 
past  country  reports  they  were  based  on  the  OECD  tax  and 
benefit  model.  While  the  underlying  methodology  is  very 

security 

34 

51.526.821.641.732.425.9Taxes on labourTaxes on consumptionTaxes on capital 
 
 
     
 
 
 
 
Table A3.1:  Taxation Indicators 

(1) Forward-looking effective tax rate (KPMG). 
(2) A higher value indicates a stronger redistributive impact of taxation. 
(*) EU-27 simple average. 
(**) Forecast value for 2024. EU-27 refers to the median value. For more data on tax revenues as well as the methodology 
applied, see the Data on Taxation Trends webpage. 
Source: European Commission, OECD, ISORA. 

tax,  and  several  preferential  tax  regimes  for  PIT. 
Capital gains are in principle also untaxed. There is 
no  recurrent  tax  on immovable  property.  In  2024, 
taxes  and  transfers  reduced  income  inequality, 
measured  by 
the  Gini  coefficient,  by  only 
4.6 points, compared with an EU average reduction 
of 7.8 points (Table A3.1) (29). 

progressivity  of  the  tax  system  is  expected  to  be 
negligible (30). 

Graph A3.2: Tax wedge for single and second 
earners as a % of total labour costs, 2025 

increase 

in  the  tax-free 

In 2026, Cyprus made several changes to the 
personal  income  tax  system.  These  changes 
income 
include  an 
threshold,  a  revision  of  the  tax  brackets  and  the 
introduction  of  targeted  deductions  for  housing 
costs,  families  with dependent  children  and  green 
investments.  The  reform  is  expected  to  have  a 
fiscal  cost  of  EUR 151 million  and  to  benefit 
mainly low to middle-income households, while its 
redistributive  capacity  and 
impact  on 

the 

similar, differences in the assumptions can lead to different 
results between both models. 

(29)  The Gini  coefficient measures  the  extent  to  which  the 
distribution  of  income  within  a  country  deviates  from  a 
perfectly  equal  distribution.  A  coefficient  of  0  expresses 
perfect equality where everyone has the same income, while 
a coefficient of 100 expresses full inequality where only one 
person has all the income. 

35 

Note: The second earner tax wedge shows a household’s tax 
wedge resulting from the wage that a second earner taking 
up a job at 67% of the average wage receives. It does not 
show the total tax wedge of the household. The household is 
assumed to have a first earner at 100% of the average wage 
and no children. For the methodology of the tax wedge for 
second earners, see OECD (2024), Taxing Wages 2024. 
Source: European Commission 

(30)  Andreou,  E.  et  al.  (2025),  Cyprus  Tax  Reform,  Project 
commissioned  by  the  Ministry  of  Finance  to  the  Economics 
Research Centre of the University of Cyprus, Nicosia. 

23.323.326.433.023.32025303540455050100150Tax wedge, % of total labour costsEarnings as % of the average wageSingle earner - CYSingle earner - EU averageSecond earner -  CYSecond earner -  EU average2019202220232024202520192022202320242025Tax structureTotal taxes (including compulsory actual social contributions) (% of GDP)34.134.336.236.339.939.739.039.4Taxes on labour (% of GDP)13.213.615.515.120.620.119.920.3of which, social security contributions (SSC, % of GDP)10.210.512.111.713.012.712.713.0Taxes on consumption (% of GDP)12.511.911.911.811.210.910.510.6of which, value added taxes (VAT, % of GDP)8.89.19.29.17.17.47.17.1Taxes on capital (% of GDP)8.48.98.99.48.18.78.58.5Personal income taxes (PIT, % of GDP)3.13.33.63.79.69.49.39.6Corporate income taxes (CIT, % of GDP)5.66.26.16.92.63.23.23.1Total property taxes (% of GDP)0.80.70.70.62.22.11.91.8Recurrent taxes on immovable property (% of GDP)0.30.20.20.11.21.00.90.9Environmental taxes (% of GDP)2.82.12.12.12.62.12.12.1Effective carbon rate in EUR per tonne of CO2 equivalentsnana76.5nanana84.8naTax wedge at 50% of average wage (single person) (*)20.522.522.523.323.332.431.631.531.531.6Tax wedge at 100% of average wage (single person) (*)20.523.424.926.026.440.139.739.939.940.0Corporate income tax - effective average tax rates (1) (*)11.911.810.410.420.019.219.019.3Difference in Gini coefficient before and after taxes and cash social transfers (pensions excluded from social transfers) (2) (*)6.35.54.54.67.88.07.97.8Outstanding tax arrears: total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)39.746.162.3na31.832.630.7naVAT gap (% of VAT total tax liability, VTTL) (**)11.06.33.31.710.57.38.2naProgressivity & fairnessTax administration & complianceBy tax baseSome tax typesEU-27Cyprus 
 
     
 
 
     
 
to 

Cyprus  reports  on  tax  expenditures  (TEs) (31) 
in  the  annex  of  its  budget,  but  with  limited 
coverage (32).  According 
the  Global  Tax 
Expenditures Database, TEs in Cyprus have a fiscal 
cost  of  about  EUR 930 million.  This  was  equal  to 
3.2% of GDP in 2022 and about 13.5% of all tax 
revenues (33). 
estimates 
suggest  that  the  use  of  TEs  is  limited  and  below 
the  EU  average.  Based  on  the  available  evidence, 
tax  relief  on  corporate  income  tax  (CIT)  has  the 
biggest  fiscal  impact  followed  by  VAT  relief. 
Microsimulation-based 
the 
EUROMOD  model  suggests  that  TEs  related  to 
personal  income  tax  (PIT)  have  hardly  any  fiscal 
impact (34). 

Currently 

available 

evidence 

with 

Available  tax  expenditure  reports  suggest 
that  the  system  is  characterised  by  limited 
transparency  and  comparability. 
It  is  not 
possible  to  assess  whether  Cyprus  is  actively 
evaluating  the  effectiveness  of  its  tax  relief 
provisions. 
fiscal 
transparency and accountability by providing more 
information on its tax expenditures. 

improve 

Cyprus 

could 

European 

Commission 

Cyprus  does  not  have  official  national  tax 
gap  estimates (35).  Cyprus  does  not  undertake 
any  CIT  and  PIT  compliance  gap  estimation 
activities. 
estimates 
suggest  a  moderate  CIT  tax  compliance  gap  in 
Cyprus  (around  7%  of  collected  CIT  revenues  in 
2017),  below  the  (unweighted)  EU  average (36).  In 
terms of VAT compliance, overall Cyprus performs 
strongly (see below). By contrast, Cyprus has high 
levels  of  outstanding  tax  arrears.  They  increased 
significantly  from  46.1%  of  total  net  revenue  in 

(31)  Tax expenditures (TEs) are tax benefits that lower the tax 
liability of eligible beneficiaries. Governments use TEs to 
pursue policy goals such as attracting investment, boosting 
innovation or fighting poverty.  

(32)  The TE report is Annex 9 of the 2024 budget.  

(33)  GTED country profile Cyprus. 

(34)  Turrini, A., Guigue, J., Kiss, Á., Leodolter, A., Van Herck, K., 

Neher, F., Leventi, C., Papini, A., Picos, F., Ricci, M., Lanterna F.; 
(2024). Tax Expenditures in the EU: Recent Trends & New 
Policy Challenges. Discussion Paper 212. 

(35)  European Commission, Directorate-General for Taxation and 

Customs Union, Mind the gap - 2025 report. 

(36)  3 European Commission: Directorate-General for Taxation 

and Customs Union (2025), The Corporate Income Tax Gap, A 
European approach to measuring losses in corporate tax 
revenues, Publications Office of the European Union.  

36 

2022 to 62.3% in 2023. This was roughly twice as 
big as the EU average of 30.7%. 

Graph A3.3: VAT gap indicators 

The rate gap and the national policy-driven exemption gap are 
measured as percentage of notional ideal revenues. 
Compliance gap is measured as a percentage of VAT total tax 
liability. EU refers to median values. 
Source: European Commission, Directorate-General for 
Taxation and Customs Union, VAT gap in the EU - 2025 report. 
https://data.europa.eu/doi/10.2778/7868422 

VAT  compliance  continues  to  improve.  The 
estimated  VAT  gap  (the  gap  between  revenues 
actually  collected  and  the  theoretical  tax  liability) 
decreased  from  6.3%  in  2022  to  3.3%  in  2023 
(see  Graph  A3.3).  This  is  among  the  highest 
improvements  in  VAT  compliance  observed  in  the 
EU.  With  an  EU  VAT  compliance  gap  of 
approximately 9.5%, Cyprus is ranked third among 
the  EU  countries.  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) was 23.6% in 2023. It 
consisted  of  a  VAT  rate  gap  of  14.8%,  a  national 
policy-driven  VAT  exemption  gap  of  4.9%,  and  an 
EU  policy-mandated  VAT  exemption  gap  of  3.9%. 
In  2023,  Cyprus  extended  zero-rating  to  selected 
goods while ending it for basic products. A reduced 
5%  VAT  rate  was  applied  to  primary  residences 
within  set  size  and  value  limits.  For  certain 
products and services previously taxed at 5%, VAT 
rates  were  reduced  to  0%  and  3%.  Additionally, 
essential  commodities  were  zero-rated  from  May 
2023 until September 2024. 

E-filing  rates  are  high.  In  2023,  Cyprus  had  a 
100% e-filing rate for VAT. It was also close to full 

0%2%4%6%8%10%12%14%16%Rate gapNational policy-driven exemptiongapCompliance gapCYEU 
 
   
uptake  for  e-filing  of  personal  income  taxes 
(99.9%),  while  the  e-filling  of  corporate  income 
taxes was in line with the EU average (97%). 

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 
held 
through  special  purpose  entities,  are 
significantly higher than the EU average. 

remains 

although 

is  taking  steps  to  tackle  ATP 
Cyprus 
strategies, 
a 
this 
challenge.  Both  large  flows  of  foreign  direct 
investment and the high level of dividend, interest 
and  royalty  payments  as  a  percentage  of  GDP 
suggest  that  Cyprus  could  be  being  used  by 
companies engaged in ATP. In 2023, in line with its 
RRP,  Cyprus  started  to  address  ATP  risks  by:  (a) 
imposing withholding tax on interest, dividend and 
royalty  payments  to 
in 
jurisdictions 
list  of  non-cooperative 
the  EU 
to 
Annex I 
jurisdictions  for  tax  purposes;  and  (b)  introducing 
an  extra  corporate-tax  residency  test  based  on 
incorporation.  In  2025,  Cyprus  also  enacted  new 
legislation to make payments of dividends, interest 
and  royalties  to  low-tax  jurisdictions  subject  to 
withholding taxes or non-deductibility. Cyprus also 
assessed  the  effectiveness  of  its  overall  set  of 
measures  related  to  ATP  via  an  independent 
evaluation and took further policy action as part of 
its 2026 tax reform. 

included 

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. 

37 

 
PRODUCTIVITY 
ANNEX 4: INNOVATION TO BUSINESS  

the 

and 

remains 

innovation 
under 

(R&I) 
Cyprus's  research  and 
performance 
sustained 
pressure.  Structural  reforms  are  needed  to 
country-specific 
2025 
implement 
recommendation(37)  to  strengthen  research 
and innovation and the commercialisation of 
research  results.  This  will  involve  fostering 
public 
investment, 
private  R&D 
enhancing  research-business  synergies  and 
adopting  a  continuous  long-term  research 
and  innovation  strategy  with  input-output 
indicators and multiannual funding.  According 
to  the  2025  European  Innovation  Scoreboard(38), 
Cyprus  is  a  ‘moderate  innovator’,  with  an  overall 
performance  at  84.1%  of  the  EU  average.  While 
the  country  displays  pockets  of  scientific  and 
entrepreneurial  excellence,  these  are  underpinned 
low  public  and  private  R&D 
by  chronically 
investment,  limited  research  human  capital  base, 
weak  scale-up 
investments 
reached  0.65%  of  GDP  in  2024,  a  decline  of 
21.7%  compared  with  its  peak  in  2020.  R&D 
intensity  remains  well  below  the  EU  average  of 
2.24% and far from the national target of 2.5-3% 
of  GDP  set  under  ‘A  long  term  strategy  for 
sustainable growth. Towards 2035 Vision (39). This 
performance  reflects  persistent  underinvestment 
in  both  public  and  private  R&D,  resulting  in  a 
narrow  excellence  base,  high  dependence  on 
external funding and collaboration, and insufficient 
national 
investment  to  sustain  research  and 
innovation capacity. 

financing.  R&D 

innovation  remains  particularly 
Business 
constrained by low private R&D expenditure, 
weak  technological  outputs  and 
limited 
scale-up  capacity.  Venture  capital  investment 
and patenting activity remain well below EU levels, 
and  despite  improved  digitalisation  and  increased 
start-up  visibility, 
innovation  outcomes  are 
fragmented  and  insufficiently  embedded  in  the 

(37)  2025 European Semester: Country Specific 

Recommendations / Commission Recommendations - 
European Commission. 

(38)  2025 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. 

(39)  https://ccci.org.cy/wp-content/uploads/2021/09/A-long-term-

national  research system. The proportion of small 
and medium-sized enterprises (SMEs) with at least 
a  basic  level  of  digital  intensity  in  Cyprus  is 
increasing.  Overall,  enterprises  are 
steadily 
progressively 
digital 
technologies, although AI implementation remains 
limited relative to the EU average. 

advanced 

adopting 

and 

show 

alleviate 

linkages 

investment 

Science–business 
recent 
improvements  but  remain  hampered  by 
limited 
inadequate 
commercialisation  capacity.  Although  public 
policy  measures 
these 
partially 
constraints,  their  scale  and  leverage  of  private 
talent 
investment 
attraction  instruments,  including  scientific  visa 
schemes,  are  underused.  Translating  Cyprus’s 
innovation 
entrepreneurial 
momentum  into  sustained  and  inclusive  growth 
will require addressing persistent gaps in scale-up 
financing,  business  research  employment,  skills 
development and research commercialisation. 

insufficient,  and 

potential 

remain 

and 

Excellent science 

external 

Despite  relatively  good  scientific  output 
indicators,  Cyprus’s  science  system 
is 
structurally  constrained  by  persistently  low 
public  investment  in  R&D,  one  of  the  lowest 
researcher  densities  in  the  EU,  and  strong 
dependence  on 
funding  and 
international collaboration. The science system 
is anchored in a well-established network of public 
research  institutions  and  supported  by  a single 
national R&I funding programme(40) buttressed by 
a combination of national and EU funds. However, 
these  strengths  have  not  compensated  for  the 
limited  national  research  base.  As  a  result,  the 
sustainability  and  depth  of  scientific  performance 
are under increasing pressure. 

Scientific  excellence 
indicators  highlight 
good output but fragile and externally driven 
performance. The share of scientific publications 
among the top 10% most-cited worldwide reached 
10.16% in 2022(41), slightly above the EU average 

(40)  RESTART programme: https://iris.research.org.cy/#!/calls.  

strategy-for-sustainable-growth-for-Cyprus1.pdf. 

(41)  Latest available data. 

38 

 
 
 
 
 
 
(9.44%)  but  down  11.3%  compared  with  2020, 
signalling  a  weakening  trend.  Moreover,  the  very 
international  co-publications(42) 
high  share  of 
starting from 2022, while reflecting openness, also 
indicates  limited  domestic  critical  mass.  This  is 
relying 
because 
disproportionately  on  foreign  partners  rather than 
on a strong national ecosystem. 

high-impact 

research 

is 

research 

research 

investment 

capacity  or 

infrastructure, 
support 

remains 
in 
Public 
structurally  insufficient.  Public  R&D  intensity 
declined from 0.35% of GDP in 2020 to 0.26% in 
2024, well below the EU average (0.72%), placing 
Cyprus among the lowest-performing EU countries. 
Over  the  last  decade,  the  figure  has  overall 
stagnated. Consequently, funding is inadequate to 
expand 
sustain 
institutional 
long-term 
research agendas, despite additional support from 
cohesion  policy investments.  This trajectory  might 
need  to  be  aligned  with  Cyprus’s  strategic 
objective to reach the target of 2.5-3% of GDP in 
R&D  by  2035  recommended  by  the  Cyprus 
Economy and Competitiveness Council in the Long-
term  Strategy  for  Sustainable  Growth,  Cyprus 
Vision  2035(43).  The  research  landscape,  which 
comprises  12  universities,  9  research  institutions 
and  7  centres  of  excellence,  many  established 
through  Horizon  2020  and  Horizon  Europe,  is 
increasingly  reliant  on 
internationalisation  for 
sustainability.  While  centres  of  excellence  benefit 
from EU funding and visibility, their dependence on 
project-based  financing  raises concerns  about  the 
long-term sustainability of attracting and retaining 
research  talents.  Existing  high-performing  centres 
(such  as  KIOS  or  PHAETHON)  represent  isolated 
successes  rather  than  evidence  of  systemic 
strength.  In  line  with  the  2025  country-specific 
recommendation 
(CSR)  on  R&D  multiannual 
funding, in 2026 Cyprus plans to introduce, under 
the recovery  and 
(RRP),  a 
mechanism  for  multiannual,  performance-based 
institutional  funding,  thus  addressing  a  long-
standing systemic gap. 

resilience  plan 

The 
low  number  of  researchers  further 
undermines  scientific  sustainability.  The 
number  of  researchers  employed  in  the  public 
sector  amounted  to  only  1.7  FTEs(44)  per  1  000 

(42)  Table of indicators. 

institutional 

active  population  in  2024,  compared  with  an  EU 
average of 4.3, ranking Cyprus 26th in the EU. This 
restricts  the  formation  of  competitive  research 
teams,  reduces  mentoring  capacity  and  weakens 
the ability to absorb both national and EU research 
funding  effectively.  Additionally,  the  absence  of 
predictable  multiannual 
funding 
affects  career  prospects  in  research.  Between 
2018  and  2025,  the  share  of  foreign  doctoral 
students as a percentage of all doctorate students 
increased  sharply 
(+137  percentage  points), 
reaching 168% of the EU average in 2025(45). This 
reflects  dependence  on  international  inflows  to 
compensate for a limited domestic talent pipeline. 
This reliance extends to post-doctoral researchers, 
the  2024  post-doctoral 
as 
researchers  programme(46) 
(EUR  2.5  million), 
where  the  13%  success  rate(47)  indicates  strong 
demand but limited capacity. 

illustrated  by 

Business innovation 

and 

innovation 

in  Cyprus 

geographical 

Business 
remains 
constrained  by  structurally  low  private  R&D 
investment,  weak  technological  outputs  and 
limited scale-up capacity, despite a broad set 
of  recent  policy  initiatives.  Innovation  activity 
is concentrated  in a small number of firms, often 
in  service-oriented  sectors, 
limiting  diffusion 
across  the  economy.  Cyprus’s  small  domestic 
market 
further 
contribute  to  a  reliance  on  high-tech  imports, 
particularly  from  non-EU  partners(48).  This  reflects 
the  country’s  economic  structure,  where  in  2022 
market  services  accounted  for  66.0%  of  gross 
value added and non-market services for a further 
18.5%,  while  SMEs  represented  nearly  84%  of 
employment in the business economy and around 
three  quarters  of  total  employment.  Foreign-
concentrated 
controlled 
in 
enterprises  are 
information  and 
wholesale  and  retail  trade, 
communications,  and  scientific  and 
technical 
services.  However,  enterprise  counts  do  not 

position 

(45)  European Innovation Scoreboard 2025. 

(46)  Programme co-financed by the Republic of Cyprus and the 

ERDF, which aims to integrate and retain young post-doctoral 
researchers. 

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

(47)  Research Innovation Foundation (RIF), Annual report 2024. 

Cyprus1.pdf. 

(44)  Full-time equivalents. 

(48)  Cyprus Economy and Competitiveness Council (ECC), Cyprus 

Competitiveness Report 2023. 

39 

 
 
 
translate  proportionally  into  economic  activity,  as 
information  and  communication 
illustrated  by 
sector generating roughly three times the turnover 
of  professional,  scientific  and  technical  services 
despite a similar number of firms(49). 

Graph A4.1: Business R&D intensity (BERD) as % of 
GDP, CY vs EU, 2010-2024 

Source: DG Research and Innovation, based on Eurostat 

system 

innovation 

relatively  strong, 

Cyprus’s 
still 
underperforms in terms of output, with a low 
number  of  researchers in  the  private sector. 
Innovation  outputs  remain  weak:  in  2022(50), 
Cyprus  recorded  0.74  (Patent  Cooperation  Treaty 
patent applications per billion GDP, compared with 
an  EU  average  of  2.81.  This  indicates  that  while 
scientific  outputs  from  the  public  research  base 
are 
into 
business-driven technological innovation is limited. 
This is exacerbated by the very low integration of 
research  into  the  business  sector,  with  only  1.2 
FTEs per 1 000 active population in 2024, among 
the lowest in the EU (26th place, vs an EU average 
of  5.9),  constraining  commercialisation,  spin-off 
creation  and  productivity  spillovers.  Meanwhile, 
women  remain  largely  under-represented  in  the 
business enterprise sector(51). 

translation 

their 

Digitalisation of SMEs in Cyprus is advancing, 
with 74.35% reaching at least a basic digital 
intensity level, up from 60.69% in 2023 and 
above  the  2025  EU  average  of  71.39%. 
Cyprus  is  experiencing  a  gradual  increase  in  the 
adoption  of  advanced  digital  technologies  by 
businesses and performs above the EU average in 

the  share  of  SMEs  with  at  least  basic  digital 
intensity,  as  well  as  in  the  uptake  of  cloud 
computing  (48.45%  in  2025)  and  data  analytics 
(42.84%),  while 
the  adoption  of  artificial 
intelligence  remains  comparatively  low  (9.27%); 
further  progress(52) 
is  supported  through  the 
“Digital  Upgrade  of  Enterprises”  programme, 
funded partly by the Recovery and Resilience Plan 
and  the  2021–2027  THALIA  programme.  The 
targets  existing  SMEs  upgrading 
programme 
digitally  including  ecommerce  and  new  SMEs 
investing  in  ecommerce  or  advanced  technologies 
like  AI,  blockchain,  cloud  computing  and  big  data. 
Innovation  Hub  DiGiNN 
The  European  Digital 
infrastructure, 
provides  one-stop  access 
investments, 
innovation 
ecosystems  for  Cypriot  businesses.  Additionally, 
the  absence  of 
rights 
framework  in  innovation  public  procurement(53) 
can  deter  private-sector  participants  who  want  to 
exploit developed solutions commercially. This can 
also hamper the public sector’s ability to reuse the 
solutions. Ensuring significant progress in research 
and  innovation  will  require  not  only  the  adoption 
of  clear,  well-defined  access  policies  for  public 
research  facilities  but  also  a  substantial  increase 
in  resources  dedicated  to  supporting  technology 
transfer  and 
the  commercialisation  of  new 
technologies. 

intellectual  property 

networking 

to 
and 

Entrepreneurial dynamism 

Entrepreneurial  dynamism 
in  Cyprus  has 
strengthened in recent years, supported by a 
growing  start-up  and  scale-up  ecosystem 
and increasing international visibility.  Around 
500  start-ups  and  scale-ups  are  active 
in 
Cyprus(54), with more than 100 start-ups and 140 
medium-sized and large technology firms certified 
as Innovators. According to StartupBlink(55), Cyprus 
ranks  among  the  top  40  globally,  with  an 

(52)  “AI in Government” programme, a new initiative launched in 
2025 aims to modernise public administration and support 
AI solutions for public sector challenges.Announcement of 
the Flagship Funding Programme “AI in Government” – ΙδΕΚ. 

(53)  CYPRUS Legal Assessment on Innovation Procurement. 

(49)  Cyprus Economy and Competitiveness Council (ECC), Cyprus 

ec_rtd_cyprus-country-assessment.pdf.   

Competitiveness Report 2023. 

(50)  Latest data available. 

(51)  She figures 2024, Country fiche – CY. Link: 

shefigures2024fiche-cy.pdf. 

(54)  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). 

(55)  https://www.startupblink.com/reports?filter=all.  

40 

00.20.40.60.811.21.41.620102015201620172018201920202021202220232024CYEU 27 
   
 
 
reflecting  persistent 

ecosystem  growth  rate  of  nearly  30%  year-on-
year(56). Entrepreneurial  activity is concentrated in 
fintech (15%), followed by life sciences, retail tech, 
entertainment  &  media(57).  Sectoral  performance 
is  particularly  strong  in  gaming  (second  globally, 
first  in  Europe),  alongside  notable  positions  in 
medtech,  blockchain  and  social  &  leisure.  Despite 
this  positive  momentum,  entrepreneurial  activity 
translates  weakly  into  industrial  value  added  and 
structural 
employment, 
constraints.  These  structural  weaknesses  are 
reflected 
The 
employment  share  of  high-growth  enterprises 
remained extremely low, at around 0.23% in 2023, 
one tenth of the EU average (2.25%). While start-
up  creation  and  early-stage  entrepreneurial 
activity  have  increased,  only  a  small  number  of 
firms 
into  high-growth  employers, 
limiting  productivity  spillovers,  labour  absorption 
and 
of 
the 
entrepreneurship. 

firm  growth  outcomes. 

economic 

transition 

broader 

impact 

in 

The  start-up  ecosystem  remains  heavily 
reliant  on  public  support  due 
to  an 
underdeveloped  private  equity  and  venture 
capital  market.  Within  this  environment,  access 
to  finance  remains  a  central  bottleneck.  Venture 
capital  investment  declined  sharply  by  85.7% 
between 2020 and 2024, from 0.07% to 0.01% of 
GDP,  only  16.7%  of  the  EU  average  (0.06%)(58). 
Although  the  market  capitalisation  of  start-ups 
and scale-ups reached 15% of GDP in 2022, these 
firms  generated  only  2.6%  of  total  employment. 
This reveals a structural imbalance between value 
creation  and  labour  absorption  and  confirms  the 
limited  depth  of  the  growth-stage  financing 
market. Cyprus has deployed a broad set of policy 
instruments  under  the  RRP  and  the  national 
RESTART programme to improve access to finance 
for  innovative  SMEs  and  start-ups.  These  include 
PRE-SEED,  SEED,  INNOVATE  and  blended  finance 
schemes 
such  as  DISRUPT  and  BOOST, 
implemented  by  the  Research  and  Innovation 
Foundation(59).  However,  funding  success  rates 
suggest  limited  competitive  depth  and  a  narrow 
pipeline  of  mature  projects,  while  continued 

(56)  https://www.startupblink.com/reports?filter=all. 

fragility(60)  of 

the  ecosystem  and 

reliance on public and blended finance underscores 
its 
the 
insufficient  anchoring  in  private,  market-driven 
investment.  The  overall  budgetary  envelope 
remains  limited  relative  to  needs,  and  further 
efforts  are  needed  to  increase  the  scale  and 
predictability  of  public  support  for  business 
innovation.  The  State  funded  equity  fund(61)  has 
also  been  launched  to  provide  early-stage  capital 
to technology firms. 

to 

legal 

framework 

innovation.  Cyprus 

is  still  potential  to 

There 
improve  the 
country’s  regulatory  framework  and  make  it 
lacks  a 
conducive  to 
dedicated 
facilitate 
procurement  of  innovative  solutions  from  start-
ups  and  SMEs(62).  Since  2024,  the  regulatory 
sandbox(63)  supported  under  the  Resilience  and 
Recovery  Facility  has  provided  a  controlled 
environment for fintech and other innovative firms 
to  test  new  products  and  business  models, 
partially  addressing 
to 
experimentation. 

regulatory  barriers 

Skills  shortages  further  constrain  Cyprus’s 
entrepreneurial dynamism. In 2025 only 55.8% 
of  the  population  possesses  at  least  basic  digital 
skills,  while  ICT  graduates  increased  from  1.7  per 
thousand of the population aged 25-34 in 2013 to 
3.0 in 2024. Despite this progress, Cyprus remains 
below  the  EU  average  (3.8  ICT  graduates  per 
thousand  of  the  population  aged  25-34  in  2024). 
Overall,  Cyprus  has  one  of  the  lowest  shares  of 
students  enrolled  in  STEM  subjects  in  the  EU, 
despite  a  growing  demand  for  STEM  skills  in  the 
labour  market  (see  Annex  13).  Combined  with  a 
limited  supply  of 
researchers  employed  by 
business  and  a  weak  domestic  science  and 
engineering  graduate  pipeline, 
factors 
increase  labour  and  skills shortages,  hinder  firms’ 
absorptive  capacity,  and  prevent  entrepreneurial 
into  sustained, 
momentum 

translating 

these 

from 

(60)  RIF Annual report 2024- Cyprus has launched in 2024 
targeted programmes, including the ‘Strengthening the 
Capacity of Enterprises for the Development of New 
Products’ programme (EUR 0.93 million), which funded 6 of 8 
proposals (75% success rate). 

(61)  State funded equity fund - European Commission. The fund 

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

started providing support from January 2025. 

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

(58)  Table indicators. 

(59)  RIF Annual Report 2024. 

(62)  CYPRUS Legal Assessment on Innovation Procurement, 

ec_rtd_cyprus-country-assessment.pdf. 

(63)  Cyprus Securities and Exchange Commission | Regulatory 

Sandbox. 

41 

 
 
 
innovation-driven  growth  (see  Annex  13).  Policy 
efforts  in  this  area  include  the  strategy  for 
attracting  businesses  and  talent  from  2021  and 
the establishment of scientific visa schemes. 

levels 

in  Cyprus 

is 
Entrepreneurship  education 
acknowledged 
in  national  policies  but 
remains  driven  by  youth  strategies  rather 
than  a  system-wide  framework.  Provision  of 
entrepreneurship education in Cyprus varies across 
remains 
educational 
unevenly 
and 
implemented.  Efforts  are 
largely  shaped  by 
initiatives  responding  to  the  needs  of  young 
people,  alongside  national  actions  and  practical 
experiences  developed  in  parallel,  particularly  JA 
Europe  and  EU  programmes,  which  promote 
In 
entrepreneurship  and  financial 
compulsory 
highly 
fragmented  due  to  the  lack  of  an  integrated 
approach, 
and 
defined 
monitoring and evaluation mechanisms. At primary 
level,  entrepreneurship-related  elements  are 
embedded  within 
/ 
Education  for  Sustainable  Development’,  while  at 
and 
level, 
upper 
Technology(65)  introduce  students  to  identifying 
needs  and  problems.  However,  these  are  not  part 
of a broader, coherent entrepreneurship education 
framework. 

'Environmental  Education 

literacy(64). 
is 

the  Design 

objectives, 

education, 

secondary 

provision 

clearly 

(64)  Eurydice report (2025). Entrepreneurship education at school 

in Europe. 

(65)  Eurydice report (2025). Entrepreneurship education at school 

in Europe. 

42 

 
 
Table A4.1:  Key innovation indicators 

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

43 

R&D intensity (gross domestic expenditure on R&D as % of GDP)0.440.480.830.70.660.65:2.243.44Public expenditure on R&D as % of GDP0.310.30.350.30.290.26:0.720.64Scientific publications of the country within the top 10% most-cited publications worldwide as % of total publications of the country 9.029.4710.4910.16:::9.4412.31Researchers (FTEs) employed by public sector (Gov+HEI) per thousand active population1.51.51.81.81.7::4.3:International co-publications as % of total number of publications65.4265.4573.575.8375.4675.46:57.24:Business enterprise expenditure on R&D (BERD) as % of GDP0.080.110.370.290.280.29:1.492.69Business enterprise expenditure on R&D (BERD) performed by SMEs as % of GDP0.050.080.32:0.24::0.470.30Researchers employed by business per thousand active population0.50.41.21.11.11.2:5.9:Patent applications filed under the Patent Cooperation Treaty per billion GDP (in PPS €)0.370.580.960.74:::2.812.20Employment share of high-growth enterprises measured in employment (%):::0.320.23::0.87:SMEs with at least a basic level of digital intensity% SMEs (EU Digital Decade target by 2030: 90%)::::67.28:74.3571.39:Data analytics adoption% enterprises (EU Digital Decade target by 2030: 75%)::::33.50:42.8439.85:Cloud adoption% enterprises (EU Digital Decade target by 2030: 75%)::::45.47:48.4546.69:Artificial intelligence adoption % enterprises (EU Digital Decade target by 2030: 75%)::::4.677.909.2719.95:Public-private scientific co-publications as % of total number of publications11.427.59.689.6610.5810.37:7.62:Public expenditure on R&D financed by business enterprises (national) as % of GDP0.000.000.01:0.01::0.060.02Total public-sector support for BERD as % of GDP0.020.020.05::::0.21:R&D tax incentives: foregone revenues as % of GDP0.000.000.000.000.00::0.100.16BERD financed by the public sector (national and abroad) as % of GDP 0.020.020.05:0.04::0.11:Venture capital (market statistics) as % of GDP (calculated as a 3-year moving average)0.010.000.070.040.020.01:0.06:Seed stage funding share (% of GDP)0.000.000.000.000.010.01:0.01:Start-up stage funding share (% of GDP)0.000.000.060.040.010.01:0.03:Later stage funding share (as % of GDP)0.000.000.000.000.000.00:0.03:New graduates in science & engineering per thousand population aged 25-34:7.897.67.87.66.9:16.8:Graduates in the field of computing per thousand population aged 25-34:1.661.982.312.53.0:3.8:Innovative talentR&D investment & researchers employed in businessesInnovation outputsDigitalisation of businessesAcademia-business collaboration Public support for business innovationFinancing innovation202320242025EU average (1)USScience and innovative ecosystemsHeadline indicatorCyprus2010201520202022 
 
  
 
ANNEX 5: SINGLE MARKET AND INDUSTRY 

of 

for 

the 

urged 

facilitation 

start-ups  and 

improving  access 

Cyprus’s  high  energy  costs,  administrative 
burden  and  regulatory  barriers  drag  down 
competitiveness.  In  this  regard,  Cyprus’s  2025 
country‑specific  recommendations  (CSRs)  called 
for  measures  to  simplify  regulation,  improve 
regulatory tools and reduce administrative burden, 
with particular emphasis on streamlining licensing 
and permitting procedures for investment projects 
and  the  establishment  of  new  businesses.  They 
also 
economic 
diversification  and  further  productive  investment 
to  non‑bank  financing 
by 
innovative 
opportunities 
businesses,  among  others.  Lack  of  skilled  labour, 
high energy costs and uncertainty about the future 
are  weighing  heavily  on  companies’  investment 
decisions. However, Cyprus is taking some steps to 
improve  its  business  environment  and  dynamism, 
for  example by  enabling  a  single  point  of  contact 
for  investors  to  streamline  permitting  and  reduce 
proper 
red 
implementation  and  monitoring  are  key  for  these 
measures to prove effective and boost investment. 
Moreover,  certain  regulatory  barriers  remain  for 
investors regarding business and labour regulation 
and  there  are  barriers  to  competition  in  some 
regulated professions and the retail sector. Cyprus 
also  has  a  poor  transport  infrastructure  and 
significant  difficulties  exist  when  it  comes  to 
accessing  non-banking  financing  for  high-risk 
profiles,  such  as  start-ups  and 
innovative 
businesses. Cyprus has made remarkable progress 
in  gigabit  connectivity  infrastructure.  Also, greater 
interconnectivity is key to increasing the country’s 
investment 
the 
fostering 
industry  and  economic 
development  of 
diversification, 
and 
dependencies 
improving 
competitiveness  and 
integration into the Single Market. 

tape.  Nevertheless, 

its 
reducing 

attractiveness, 

its  overall 

ensuring 

Business dynamics 

Small to medium-sized enterprises  (SMEs)  in 
Cyprus have a greater weight in the economy 
than  in  the  rest  of  the  EU.  In  2024,  SMEs  in 
Cyprus represented 79% of value added and 82% 
of  employment,  against  the  EU  average  of  54% 
In  2024,  SMEs 
and  65%, 

respectively 

(66). 

experienced  sustained  growth,  in  terms  of  both 
employment  (2.1%)  and  real  value  added  (2.7%). 
The  sector  with  the  highest  growth  was  that  of 
electricity,  gas, steam and air conditioning supply, 
rising  by  10.7%  in  employment.  and  23.2%  in 
value  added.  On  the  other  hand,  SMEs  in  energy-
intensive 
the  greatest 
decline  in  both  employment  and  value  added  (-
2.1% and -5.6%, respectively). 

industries  experienced 

Business  dynamism  is  relatively  low  but 
improving.  Cyprus’s  business  birth  rate  was 
9.67%  in  2023,  which  together  with  a  death  rate 
of  7.17%,  gives  a  total  business  churn  rate  of 
16.84%.  Thus,  Cyprus’s  business  dynamism  is 
lower than the EU average, which has an 18.97% 
churn  rate  (EU  business  birth  rate:  10.46%;  EU 
business  death  rate:  8.51%)  (67).  However,  it  has 
increased  since  2021,  when  it  was  slightly  above 
15%.  In  May  2025,  the  Business  Support  Centre 
began  its  operations  as  a  single  point  of  contact 
for  investors  (domestic  and  foreign),  streamlining 
administrative procedures and reinforcing the new 
licensing  framework  for  strategic  development 
projects. Together with the Law on the Facilitation 
of  Strategic  Development  Projects  of  2023 
(recovery and resilience plan (RRP) measure), these 
new measures are expected to significantly reduce 
red  tape,  improve  predictability  for  investors  and 
facilitate the timely  implementation of high-value 
projects, 
to  a  more 
competitive  and 
investment-friendly  economic 
environment. (CSR 2025.3). 

contributing 

thereby 

for 

activity 

The  entrepreneurial  environment  in  Cyprus 
remains underdeveloped. According to the GEM 
2024/2025  Global  Report,  Cyprus  ranks  just  33rd 
total  early-stage 
out  of  51  countries 
19th 
(68), 
entrepreneurial 
for 
intentions  and  43rd  for  good 
entrepreneurial 
opportunities to start a business. For the past four 
years,  the  quality  of  Cyprus’s  entrepreneurial 
environment  has  been  considered  to  be  less  than 
satisfactory, with a NECI (National Entrepreneurial 
Context  Index)  score  fluctuating  between  4.0  and 
4.2,  ranking  Cyprus  as  38th  among  the  56  GEM 
economies  in  2024.  Nevertheless,  10  out  of  13 
in 
underlying  framework  conditions 
2024.  The  biggest 
for 
entrepreneurial  education  at  school,  still  regarded 

improvements  were 

improved 

(66)  European Commission, 2025 SME country fact sheet – 

Cyprus. 

(67)  Eurostat, [bd_size] Business demography by size class and 

NACE Rev. 2 activity. 

(68)  GEM Global Entrepreneurship Monitor, Report 2024/2025. 

44 

 
 
 
 
 
 
transfers, 

as  very  poor,  and  social  and  cultural  norms.  Poor 
scores  for  entrepreneurial  finance  conditions,  for 
government  entrepreneurial  programmes,  and  for 
research  and  development 
remain 
concerning  (CSR  2025.3).  A  dedicated  cluster 
policy,  focusing  on  development  of  clusters  in 
strategic 
enable 
cooperation  between  research  institutions  and 
enterprises,  facilitate  access  to  finance  for  SMEs 
and 
and 
internationalisation of enterprises through capacity 
building. 

sectors,  would 

competitiveness 

economic 

support 

ICT  sector  productivity  growth,  among  other 
things, is boosting overall labour productivity 
and  total  factor  productivity.  The 
labour 
productivity level in  Cyprus increased from 74.2% 
of the EU average in 2020 to 80.6% in 2024. Total 
factor  productivity  (TFP)  has  been  growing  faster 
than  for  the  EU  aggregate  recently  (69).  Over  a 
longer period,  the Cypriot economy has been able 
to  move  focus  from  services  such  as  tourism 
(usually  characterised  by  low  productivity  levels) 
to  more  dynamic  ones 
information  and 
communication  technologies  (ICT),  the  wholesale 
and  retail  trade,  and  financial  and  insurance 
activities. Labour productivity in these sectors has 
increased  strongly  over  the  last  20  years  and  in 
2024  these  industries  together  represented  more 
than  a  third  of  the  economy's  gross  value  added 
(GVA)  (14.2%,  11.1%  and  9.3%  respectively). 
Conversely,  accommodation  and  food  services 
activities  have  shrunk  to  6.7%,  scaled  back  from 
representing  the  largest  contribution  to  GVA  in 
(13.8%).  Energy  and  construction  also 
2000 
labour 
experienced  a 
productivity and the share of GVA. 

contraction 

in  both 

like 

Both  business  and  public  investment  levels 
lower  than  the  EU  average.  Public 
are 
investment  in  Cyprus  has  been  stagnating  and  it 
stood  at  2.8%  of  GDP  in  2024,  against  the  EU 
average  of  3.9% 
investment 
decreased  from  9.8%  of  GDP  in  2023  to  8.7%  in 
2024,  well  below  the  EU  average  (12.6%)  and 
back  to  its  2020  level.  It  is  important  to  bear  in 
mind  that,  in  the  case  of  Cyprus,  household 
investment is significantly higher (9.1%) due to the 
participation of many SMEs (71). Moreover, there is 

(70).  Business 

(69)  European Commission. 

(70)  Eurostat. 

(71)  Eurostat. 

45 

a  need  for  improving  business-science  linkages 
(CSR 2025.3). Currently, private companies are not 
allowed  to  fund  or  invest  in  research  in  public 
universities,  thus  investment  in  R&D  is  extremely 
low (less than 1% of GDP), in both the public and 
private sectors (see Annex 4). 

Foreign  direct  investment  (FDI)  activity  has 
been  declining  recently.  FDI  in  Cyprus  declined 
from  an  average  of  EUR 5.7  billion  per  year  over 
the  period  2018-2021  to  EUR 4.2  billion  in  2023 
(72).  The  main  sector  attracting  FDI  projects 
remains  the  financial  services  sector,  followed  by 
the  real  estate  and  ICT  sectors.  The  real  estate 
sector  saw  its  FDI  inflows  triple  during  2021-
2023.  Labour  costs, 
the 
bureaucratic  and  administrative  environment  are 
among  the  main  areas  where  Cyprus  is  less 
attractive  for  foreign  investors.  By  contrast,  it  is 
considered  highly  attractive 
its 
corporate  tax  system  and  legal  framework.  The 
main 
in  Cyprus  are  from  Russia, 
Luxembourg, the UK, the US, Greece, Germany, the 
Netherlands, Ireland and Israel. 

labour  skills  and 

in  terms  of 

investors 

To  support  FDI,  Cyprus  has  initiatives  to 
attract skilled individuals and entrepreneurs. 
A ‘Cyprus Start-up Visa’ programme allows non-EU 
entrepreneurs  to  establish  start-ups  in  Cyprus, 
fostering innovation in fintech and digital services. 
This, alongside streamlined work permit processes 
for foreign employees of international  companies, 
aims  to  ensure  that  investors  have  access  to  the 
talent they need in Cyprus. 

Availability  of  skills,  energy  costs  and 
uncertainty  about  the  future  are  highlighted 
by  firms  as  main  investment  obstacles. 
According to the EIB Investment Survey,  the main 
long-term  obstacles  to  investment  reported  by 
Cypriot  firms  in  2025  were:  (i)  availability  of 
skilled staff (CY 89% vs EU 79%); (ii) energy costs 
(CY 87% vs 75%); (iii) uncertainty about the future 
(CY  84%  vs  EU  83%)  (73).  Cyprus’s  business 
environment  would  benefit  from  ensuring  that 
recently  arrived  foreign  companies  and  investors 
stay and integrate into the real economy. The main 
bottleneck  for  Cyprus’s  competitiveness  is  the 
small  size  of  most  Cypriot  businesses,  together 
with  the  above-mentioned  large  skills  mismatch 

(72)  EY Attractiveness Survey – Cyprus - 2024. 

(73)  European Investment Bank, 2025, EIB Investment survey – 

Cyprus. 

 
 
 
(CSR.2025.5)  and  weak  diffusion  of  knowledge 
(see Annex 4). 

Business environment 

and 

regulatory 

The 
administrative 
improvement. 
framework  has  room  for 
According to the 2025 EIB Investment Survey (74), 
a  large  proportion  of  firms  stated  that  business 
regulations represented an obstacle to investment 
(78% vs 69% in the EU). As regards labour market 
regulation,  40%  deemed  it  a  major  obstacle,  well 
above 
the  EU  average  of  27%.  A  higher 
percentage  of  SMEs  than  of  large  firms  perceive 
regulations to be an obstacle. In the overall 2023 
OECD  Product  Market  Regulation  (PMR)  indicator 
(75), Cyprus scored 1.63 out of 6, performing worse 
than  the  average  OECD  economy  (1.34),  but 
making some progress since 2018. 

firms 

have 

eased, 

that  are 

constraints 

Finance 
but 
availability of finance is still an obstacle for 
firms’  growth  (CSR  2025.3).  The  share  of 
Cypriot 
finance-constrained 
decreased  significantly,  from  16.7%  in  2024  to 
6.8%  in  2025  (76).  This  is  the  lowest  proportion 
since  2019  and  is  only  marginally  above  the  EU 
average  (6.1%).  Most  financing  of  Cypriot  firms 
takes  the  form  of  bank  loans.  Cyprus’s  banking 
system  has  a  large  excess  liquidity  (currently 
standing  at  about  60%  of  GDP) and  Cypriot  firms 
are  traditionally  ‘loyal’  to  loan  financing.  Thus, 
there  are 
favourable  supply  and  demand 
conditions for loan financing to continue to be very 
dominant  in  Cyprus.  Nonetheless,  availability  of 
finance  is  a  greater  barrier  to  investment  for 
Cypriot  businesses  than  the  EU  average  (70%  vs 
45%).  32%  of  firms  deem  it  a  major  obstacle, 
against 16% in the EU. Among the main barriers is 
the  cost  of  financing,  with  2.2%  of  firms 
considering it too expensive (vs 1% in the EU). The 
Cypriot  government  acknowledges  that  there  is  a 
need  to  further  develop  non-bank  financing  for 
start-ups  and  companies  which  are  at  a  risky 
stage  of  their  life  cycle,  and  for  which  bank 

(74)  European Investment Bank, 2025, EIB Investment survey – 

Cyprus. 

(75)  2023 OECD Product Market Regulation (PMR) Report. 

(76)  European Investment Bank, 2025, EIB Investment survey – 

Cyprus. 

to 

the 

lack  of 

financing  may  be  too  expensive  or  inaccessible 
collaterals.  Business 
due 
associations  acknowledge  that  certain  schemes 
are  helpful  for  financing manufacturing. However, 
they believe more needs to be  done to satisfy an 
increasing  demand  to  develop industry  (especially 
in  the  defence,  space,  health,  agrifood  and  wine 
sectors, among others) (see Annex 6). 

by 

providing 

A National Promotional Agency (NPA) is being 
put  in  place  to  address  market  failures  in 
SMEs’  access  to  capital  and  to  support 
financial 
businesses 
instruments  such  as  loans,  guarantees  and 
equity  financing  in  a  coordinated  way  (RRP 
measure).  Five  initial  gaps  have  been  identified 
and  various  financial  instruments  and  advisory 
services will be  offered during the first five years 
of  operations  (starting  June  2026):  (i)  First  loss 
capped  portfolio  guarantee  for  general  needs;  (ii) 
direct  lending  scheme  for  digitalisation  purposes; 
(iii)  loans  for  energy  efficiency  investments  (on-
bill-scheme);  (iv)  subsidisation  for  the  cost  of 
advisory  services;  (v)  business  clinic  programme. 
Moreover,  the  Cyprus  Equity  Fund 
is  being 
managed by the European Investment Fund. It is a 
very small fund with EUR 27 m of capitalisation. It 
has  invested  in  33East  VC  fund  that  has  a  total 
fund size of EUR 35.6m. So far, 33East has funded 
seven  startups 
fintech, 
renewable energy, HR software, AI, medical); 81% 
of  the  invested  capital  has  been  invested  in 
companies  with  an  establishment  in  Cyprus,  with 
the  rest  invested  in  companies  in  the  UK  (15%) 
and  USA  (4%).  Thus,  Cyprus  would  benefit  from 
scaling up alternative funding sources. 

consumer, 

(sectors: 

late  payments  challenges. 

Cyprus  is  an  average  performer  when  it 
comes  to 
In 
business-to-business (B2B) transactions, 48.8% of 
Cypriot  SMEs  experienced  late  payments  from 
private entities in the previous six months in 2025, 
making  Cyprus  perform  worse  than  the  EU 
In  government-to-business 
average 
(G2B)  transactions,  12.48%  of  Cypriot  SMEs 
experienced  late  payments  from  public  entities  in 
the previous six months (EU average: 15.94%) (77). 
In  2024,  the  payment  performance  of  public 
administrations 
in  Cyprus  seemed  to  slightly 
improve, with 53.67% of its invoices settled in the 

(47.13%). 

(77)  SAFE Survey 2024; these figures need to be treated with 

caution because the size of the survey sample was less than 
100, which reduced its representativeness. 

46 

 
 
 
first  30  days  after  being  issued,  which  is  one 
percentage  point  more  than  in  2023  (78).  The 
average payment period by public administrations 
in  2024  was  42  days.  Late  payments  in  G2B 
transactions  mainly  stem  from:  (i)  budget  line 
constraints  (mainly  due  to  internal  budgetary 
controls); (ii) administrative and procedural delays 
(i.e.  processing  of 
for 
specialised  products  or  services);  (iii)  system  and 
process  inefficiencies  (i.e.  manual  handling  of 
invoices and lack of automated workflows). 

invoices,  especially 

To  address  the  issue  of  late  payments, 
Cyprus’s  government  is  introducing  several 
measures  to  ensure  timely  payments:  (i) 
issuance  of  a  circular  establishing  guidelines  and 
timelines requiring all invoices to be settled within 
30 days from the date of receipt; (ii) departmental 
accountability  (monitoring  compliance  with  this 
circular);  (iii)  introduction  of  electronic  invoicing, 
with the added incentive of giving priority to valid 
e-invoices  over  those  submitted  in  physical  form. 
E-invoicing is expected to lead to timely payments 
within  20  days  from  the  date  of  receipt  or 
acceptance,  while  also  preventing  the  risk  of 
document loss and eliminating postage costs. 

network 

high-capacity 

Cyprus’s  gigabit  connectivity  infrastructure 
roll-out is  clearly  accelerating  and  looks 
likely  to  achieve  the  2030  target.  Cyprus’s 
very 
(VHCN) 
coverage, of 89.05%  in  2024,  outstripped  the  EU 
average  of  82.49%. For  households  in  sparsely 
populated  areas,  Cyprus’s  coverage  also  grew 
significantly  to  78.10%  in  2024,  while  the  EU 
average stood at 61.89%. However, the take-up of 
fixed  broadband  subscriptions  with  speeds  of  1 
Gbps or more remains low. In 2024 only 3.32% of 
subscriptions  were  at this  speed  compared  to  the 
investment  project 
EU’s  22.25%.  The  major 
supported  by  the  Recovery  and  Resilience  Facility 
(RRF)  to  incentivise  the  uptake  of  VHCN  services 
(voucher scheme) is progressing well. It is coupled 
with  planned  reforms  to facilitate and  accelerate 
investments  in  VHCN,  which  are  contributing  to 
tangible  results.  In  5G  coverage,  Cyprus  already 
reached  the  2030  target  of  100%  coverage  in 
2022. 

(78)  EU Payment Observatory: Annual Report 2025, Observatory 
Analysis - Internal Market, Industry, Entrepreneurship and 
SMEs. 

47 

Poor  transport  infrastructure  poses  a  major 
obstacle to investment. The World Bank’s 2023 
Logistics  Performance  Index  (LPI)  ranks  Cyprus 
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 
international 
out  of  5),  customs 
shipments 
the  EIB 
to 
Investment  Survey  (80),  74%  of  businesses  in 
Cyprus  considered  the  state  of  the  transport 
infrastructure  to  be  an  obstacle  to  investment  in 
2025 (vs 45% in the EU). 

(2.9)  and 
(79).  According 

(3.1) 

Single Market and barriers 

Cyprus  has  a  relatively  high  level  of  trade 
integration  in  services  in  the  Single  Market 
but not in goods.  The volume of its exports and 
imports  of  goods  and  services  to/from  other  EU 
countries  represented  42.4%  of  its  GDP  in  2025 
(EU  average  40.7%).  This  is  mainly  explained  by 
Cyprus’s trade in services: in 2025, service exports 
and  imports  stood  at  29.2%  of  GDP,  the  third 
highest value and far ahead of the EU average of 
7.6%.  By  contrast,  exports  and  imports  of  goods 
only represented 13.2% of GDP, which was below 
the EU  average 18.7% (81). This is consistent with 
the structure and limited size of Cyprus’s economy, 
which is mostly service-based. 

transposed  by  Cyprus 

Cyprus  performs  well  on  Single  Market 
indicators  (82).  The  share  of  Single  Market 
directives  not 
(the 
‘transposition deficit’) was 1% in 2025, in line with 
the  1%  target  set  by  the  EU  Council  and  better 
than  the  EU  average  of  1.1%  (83).  In  the  same 
year,  Cyprus  was  among  the  best  performers  as 
regards the conformity deficit: it transposed 0.5% 
of  the  Single  Market  directives  incorrectly  (EU 
average 1.1%). It also had 16 open infringements, 
against  an  EU  average  of  25.  In  2025,  Cyprus 

(79)  World Bank Logistic Performance Index 2023 | Logistics 

Performance Index (LPI.) 

(80)  European Investment Bank, 2025, EIB Investment survey – 

Cyprus. 

(81)  Eurostat, bop_c6_a. 

(82)  Part of the barriers highlighted in the 2025 Single Market 

Strategy (‘Terrible Ten’), Single market strategy. 

(83)  European Commission, Single Market and Competitiveness 

Scoreboard. 

 
 
 
ranked 13th among Member States in terms of the 
average  time  taken  to  resolve  Single  Market 
infringement proceedings, at 41 months, below the 
EU  average  of  44.5  months.  In  2025,  Cyprus 
resolved 92%  of  the  SOLVIT  cases  it  handled  as 
lead  centre,  above  the  EU  average  of 84.6%  and 
improving from 88.1% in 2024.  

surveillance 

investigations 

Compliance  of  products circulating  in  the 
Single Market (84) is key to ensuring a level-
playing  field  for  law-abiding  companies  and 
the safety of consumers. In Cyprus, the number 
has 
of  market 
increased  compared  with  2019.  In  2025,  national 
authorities  reported  in  the  EU  system  for  market 
surveillance 
310.2 
investigations per one million inhabitants, which is 
higher  than  the  EU median  of  136.2.  The  number 
of  notifications remains limited  in  absolute  terms, 
which  may  also  be  the  result  of  insufficient  IT 
national interoperability to the ICSMS system. The 
upcoming  revision  of  the  Market  Surveillance 
Regulation  will  upgrade 
fully 
interoperable EU digital platform. 

(ICSMS) 

ICSMS 

to  a 

total 

of 

a 

to 

reduce  market 

Cyprus  would  benefit  from  supporting  its 
NSB 
fragmentation, 
improving  the  competitiveness  of  Cypriot 
companies,  and  fully  benefiting  from  the 
opportunities  of  the  Single  Market.  For  the 
Cypriot  National  Standardisation  Body 
(NSB) 
Cyprus Organisation for Standardisation, reporting 
having  a  staff  of  20  people,  strengthening 
sufficient 
capacity 
participation  of  experts  and  stakeholders 
in 
European  standardisation  processes.  Moreover, 
additional  resources  are  needed  to  ensure  that 
Cyprus Organisation for Standardisation undertake 
the necessary digital transition to allow for faster, 
more  efficient  and  more  inclusive  standardisation 
process. 

is  essential 

to  ensure 

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). 

to 

reforms 

implemented  some 

Further  reforms  can  help  reduce  regulatory 
barriers for real estate agents. There are 115 
specific  regulated  professions  in  Cyprus,  which  is 
at  the  low  end  of  the  EU  distribution  (86).  Cyprus 
reduce 
has 
regulatory barriers for certain professions, such as 
architects and civil engineers (87). Further progress 
can be made in the case of real estate agents. For 
real  estate  agents,  Cyprus  could  consider  opening 
access  to  exclusively  reserved  activities  to  other 
the  duration  of 
professionals; 
mandatory 
and 
reassess the justification for and proportionality of 
requiring 100% of shares to be held by real estate 
agents.  Other  professions,  such  as  accountants 
and tax advisers, remain unregulated. 

requirements; 

qualification 

re-evaluate 

The retail sector and trade in services would 
benefit  from  a  reduction  of  administrative 
and  regulatory  barriers.  Cyprus  has  a  higher 
retail  restrictiveness  indicator  (2.9)  than  the  EU 
median (1.7) (88). The most notable administrative 
and regulatory barriers are in establishing a retail 
store  (89)  (for  example,  the  number  of  entities  to 
impact  assessments; 
contact;  permitting  and 
economic  data 
location-specific 
requirements; 
rules;  the  size  threshold;  and  the  length  of  the 
procedure). So far, progress in addressing barriers 
in  the  field  of  business  services  has  remained 
limited.  In  answer  to  a  survey  carried  out  by  the 
Commission  between  December  2025  and 
fully 
February  2026,  Cyprus 
implemented  eight  out  of  nine  of  the  2021 
Commission 
The 
recommendations 
Commission is currently assessing Cyprus’s answer 
to  measure  actual  progress  in implementing the 
2021 recommendations. 

reported 

(90). 

it 

Some  professions  and  the  retail  sector  in 
Cyprus  have  high  barriers  to  entry  and 
competition.  This  is  especially  significant  in  the 
retail sale of medicines (3.88 in Cyprus vs the EU 
average of 2.96) (85) as well as some professional 
services such as lawyers (3.86 in Cyprus vs the EU 

(86)  European Commission, Regulated Professions Database. 

(87)  European Commission, Communication on updating the 
reform recommendations for regulation in professional 
services, COM(2021) 385. 9 July 2021. 

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

(89)  Part of the barriers highlighted in the 2025 Single Market 

(84)  Part of the barriers highlighted in the Single market 

Strategy (‘Terrible Ten’), Single market strategy. 

strategy (‘Terrible Ten’) and the 2026 Annual Single Market 
and Competitiveness Report. 

(85)  2023 OECD Product Market Regulation (PMR) Report. 

(90)  European Commission, 2021, Communication on updating 
the reform recommendations for regulation in professional 
services, COM(2021)385. 9/7/2021, Eur-lex.europa.eu. 

48 

 
 
 
Public  procurement  competition  in  Cyprus 
has  significant  room  for  improvement.  The 
percentage  of  contracts  awarded  based  on  a 
single  bid  was  26%  in  2025,  lower  than  the  EU 
median  of  27%.  However,  Cyprus  is  the  second 
worst  performer  in  terms  of  the  share  of  direct 
awards  (22%  vs  6%  EU  median),  which  is  mainly 
attributed  to  direct  awards  relating  to  purchases 
of patented medical products. 

review  body 

Businesses’  views  on  corruption  risks  in 
public  procurement  are  above  the  EU 
average.  In  Cyprus,  81%  of  companies  (EU 
average: 58%)  consider tailor-made  specifications 
for  particular  companies  in  public  procurement 
procedures,  and  79%  (EU average:  53%)  conflicts 
of interest in the evaluation of bids to be  a ‘very’ 
or  ‘fairly  widespread’  practice.  Among  companies 
that have experience of and have participated in a 
public  procurement  procedure,  37%  think  that 
corruption  has  prevented  them  from  winning  a 
public  tender  or  a  public  procurement  contract  in 
practice (EU average: 25%) (91). 47% of businesses 
perceive  the  level  of  independence  of  the  public 
(Tender  Review 
procurement 
Authority)  to  be  ‘very’  or  ‘fairly  good’  when  it  is 
reviewing public procurement cases (92). The police, 
the  Audit  Office,  civil  society  and  business 
stakeholders highlight public procurement as being 
particularly  prone  to  corruption,  which  creates  an 
uncertain 
and 
investment  (93).  Cyprus  has  made  efforts  to 
improve  accountability,  transparency,  accessibility 
and  efficiency,  while  digitalising  public  services 
and  procurement.  Moreover,  the  more  efficient 
approval  process  for  small  developments  should 
help  improve  the  business  environment  (94).  As 
part of the RRP, it introduced a new e-procurement 
system  in  February  2026.  The  system  aims  to 
improve  the  transparency  and  accountability  of 
public  tendering  procedures,  improve  data  quality 
and assist the work of audit authorities to ensure 
a level playing field for businesses. 

environment 

business 

for 

and  stronger  data  governance.  Cyprus’s 
centralised e-procurement service allows economic 
operators  to  use  a  single  system  to  access  all 
national  public  procurement  procedures.  However, 
issues with cross-border procurement remain (also 
at EU level (95)), creating complexity and barriers to 
participation for firms from other Member States. 
In  terms  of  data  monitoring,  Cyprus  is  creating  a 
the 
public  procurement  data 
management  and  utilisation  of  data  related  to 
their  procurement  processes.  Therefore, 
the 
Cypriot  system  would  benefit  from  a  dedicated 
public  procurement  data  collection  and  analysis 
service  within  the  government  to  support  data-
driven  oversight  of the  procurement lifecycle.  The 
once-only principle is only partially implemented at 
national level (see Annex 7), and buyers across the 
EU still lack digital access to relevant evidence (96). 

strategy  on 

companies 

Cyprus  remains  outside  the  unitary  patent 
(UP)  system.  Although Cyprus  participates in  the 
enhanced cooperation on unitary patent protection 
and  has  already  signed  the  Unified  Patent  Court 
Agreement  (UPCA),  it  has  not  ratified  it  yet.  The 
unitary  patent  therefore  does  not  cover  Cyprus. 
This  has  the  following  consequences.  Firstly, 
Cypriot  and  non-Cypriot 
remain 
burdened by the significant administrative costs of 
national  validation  and  maintenance  fees  for 
obtaining  patent  protection  in  Cyprus.  Secondly, 
enforcing  European  patents  in  Cyprus  can  only 
take  place  before  national  courts,  without 
benefiting  from  the  advantages  offered  by  the 
UPC as regards centralised litigation. For all these 
reasons,  by  refraining  from  joining  the  unitary 
patent  system  Cyprus  may  be  less  attractive,  in 
terms  of  innovation  support,  than  the  Member 
States already participating in that system. Finally, 
the  fact  that  several  Member  States  do  not 
participate  in  the  unitary  patent  system  weakens 
the  Single  Market,  making  the  EU  less  attractive 
for inventors and innovative entities. 

Cyprus’  e-procurement  landscape  and  data 
quality 
for 
interoperable  systems,  common  standards 

issues  highlight 

the  need 

(91)  Flash Eurobarometer 557, p. 133. 

(95)  Study on competition in the European Union’s public 
procurement markets (2018-2023) – World Bank 
(September, 2025)  

(92)  Justice Scoreboard (2025), p. 53; Flash Eurobarometer 555, 

p. 39. 

(93)  Rule of Law Report - Country Chapter Cyprus (2025), p. 13. 

(94)  Rule of Law Report - Country Chapter Cyprus (2025), p. 13. 

(96)  European Court of Auditors, Special Report 28/2023: Public 
Procurement in the EU. Less competition for contracts 
awarded for works, goods and services in the 10 years up to 
2021, 2023, Special report 28/2023: Public procurement in 
the EU. 

49 

 
 
 
Industry and economic security 

As 

Industry  shows  development  potential,  but 
environmental  conditions  are  key  for  its 
realisation. 
of  2024,  manufacturing 
production of energy-intensive industries in Cyprus 
has 
is 
increased  by  7.5%  since  2021  and 
significantly  above  pre-COVID-19  levels.  Business 
associations  indicate  that  there  is  an  increasing 
demand  to  develop  industry  in  Cyprus.  However, 
three  main  challenges  remain:  (i)  high  electricity 
costs;  (ii)  the  need  to  simplify  and  streamline 
permitting  procedures;  and  (iii)  a  lack  of  political 
initiative  and  no  industrial  strategy.  Electricity 
prices  for  businesses in Cyprus  stood  at  EUR/kWh 
0.1991 by the end of the first half of 2024, above 
the  EU  average  of  EUR/kWh  0.1542  (97).  In  2023, 
the overall rate of electrification stood at 26.03%, 
which was higher than the EU average of 22.92%. 
By contrast, when it comes to the industry sector, 
the figure for Cyprus is lower than the EU average 
(21.44%  vs  32.65%).  The  share  of  energy  from 
renewable sources increased from 13.8% in 2019 
to 20.8% in 2024 but is still below the EU average 
of  25.2%  (see  also  Annex  9).  To  reduce  energy 
costs, business associations suggest: (i) technology 
(iii)  on-site 
neutrality; 
generation. 

(ii)  dynamic  pricing; 

facilitating  the  advancement  of  net-zero  strategic 
projects. So far, Cyprus has no confirmed net-zero 
strategic  projects.  Nevertheless,  it  is  possible  to 
submit  applications,  which 
reflects  Cyprus’s 
proactive  approach  to  advancing  initiatives  that 
align  with  net-zero  goals.  Finally,  Cyprus  has  not 
expressed  an  interest  in  the  acceleration  valleys 
described in the NZIA regulation, which could help 
attract strategic projects. 

Graph A5.1: Manufacturing industry production: 
total and selected sector, index (2021=100), 
2015-2024 

Source: Eurostat 

in  Cyprus 

in 
Cyprus  could  make  further  progress 
Industry  Act 
implementing  the  Net-Zero 
for  net-zero 
(NZIA).  The  main  bottlenecks 
technology  deployment 
(i) 
include 
restricted  access  to  tailored  financing  for  clean-
tech manufacturing projects; (ii) complex and slow 
permitting processes for strategic investments; (iii) 
a small industrial base; and (iv) the limitations of a 
small  economy.  To  address  these  challenges  in 
alignment  with  the  NZIA,  Cyprus  is  implementing 
financial  support  schemes  (grants  and  EU  funds) 
to  de-risk 
the  Business 
Facilitation  Unit  (BFU)  and  the  Business  Support 
Centre streamline licensing and permit procedures 
and act  as a  single point of  contact  for investors. 
This is crucial for streamlining communication and 
thereby 
coordination 
facilitating  the  development  of  strategic  clean-
tech projects and improving the overall investment 
environment. Furthermore, Cyprus has established 
a  national  contact  point  to  process  applications, 

investment,  while 

stakeholders, 

among 

are 

(CRM) 

Cyprus  is  highly  reliant  on  imports  of  raw 
materials.  One  third  of  Cyprus’s  material  needs 
are  met  through  imports, with  its  material  import 
dependency  being  above  the  EU  average  in  2024 
(32.7%  vs  22.4%)  (98).  Cyprus’s  main  critical  raw 
material 
aluminium 
imports 
(EUR 14.7 m)  and  nickel  (EUR 3.18 m).  Aluminium 
is mainly imported from the United Arab Emirates 
imported  from 
(UAE),  while  nickel 
Switzerland  and  Côte  d’Ivoire 
smaller 
quantities)  (99).  As  regards  the  level  of  strategic 
dependency  on  raw  materials,  in  2025  Cyprus’s 
imports  were  as  geographically  diversified  as  for 
the  rest  of  the  EU  (import  concentration  index  of 
0.24  vs  0.23)  (100).  According  to  the  Cypriot 
government,  no  local  industrial  companies  have 
been identified as using critical raw materials and, 

is  mostly 

(in 

(98)  Eurostat, env_ac_mid. 

(99)  European Commission, Raw Materials Information System 

(RMIS) – Country Profile – Cyprus. 

(97)  Eurostat, nrg_pc_205 (prices at purchasing power parity). 

(100) Source: COMEXT. 

50 

7075808590951001051102015201620172018201920202021202220232024ManufacturingManufacture of wood and of products of wood and cork, except furniture; manufacture ofarticles of straw and plaiting materialsManufacture of paper and paper productsManufacture of chemicals and chemical productsManufacture of rubber and plastic productsManufacture of other non-metallic mineral productsManufacture of basic metals 
 
       
 
therefore,  no  national  strategy  for  reducing 
dependencies  on  critical  raw  materials  has  been 
developed.  While  the  extraction  of  critical  raw 
materials from scrap metals is a viable enterprise 
in  Cyprus,  due  to  the  lack  of  manufacturing 
industry  to  absorb  these  raw  materials  the  vast 
majority  is  exported.  In  addition,  the  geographical 
isolation  of  Cyprus  from  the  European  mainland 
hinders  the  circulation  of  materials  within  the 
European market. 

The  circular  use  of  material  would  help 
reduce  Cyprus’s  dependency  on  imports.  In 
this  regard,  Cyprus’s  circular  material  use  rate  is 
well  below  the  EU  average  (5.5%  vs  12.2%)  and 
could  be  improved  (101).  No  strategic  programme 
for the recycling/recovery of critical raw materials 
has been implemented.  A programme  of this kind 
is  expected  to  be  formulated  as  part  of  the 
ongoing  update  of  the  Cyprus  action  plan  on 
management  of  other  waste  except  municipal 
waste  2026-2032.  Nevertheless,  critical 
raw 
materials  are  recovered  to  some  extent  by 
separate 
particular 
aluminium  and  copper  from  waste  from  electrical 
and  electronic  equipment  as  well  as  nickel  from 
household batteries while non-CRMs cadmium and 
lead are also refined during the process. 

collection 

systems, 

in 

(101) Eurostat, env_ac_cur. 

51 

 
 
Table A5.1:  Single Market and Industry 

Source: (1) Eurostat, (2) EIB Investment Survey, (3) EIF SME Access to Finance Index, (4) Intrum Payment Report, (5) SAFE survey, 
(6) OECD, (7) data up to 2024: Single Market and Competitiveness Scoreboard, 2025: Commission calculation based on TED data, 
accessible at the Public Procurement Data Space (PPDS) (*) the value represented here under EU average is the median, (8) Single 
Market and Competitiveness Scoreboard, (9) European Commission calculations. 

52 

POLICY AREA20212022202320242025EU-27 average75.378.279.780.679.6100.07.28.49.88.7-12.62.72.43.12.8-3.9Business environment and simplification33.439.731.534.035.034.00.190.340.220.33-0.430.050.050.170.25-0.19-----17.4-----13.6from private entities in the previous or current quarter---44.248.847.1from public entities in the previous or current quarter---15.712.515.937.142.040.241.442.440.7-----0.05023171442627283831192261.80.90.90.91110.70.90.40.51.197989588.19284.62320231716250.15260.22820.22030.1991-0.146219.420.021.4--32.719.119.420.220.8-25.231.931.132.332.7-22.45.88.35.45.5-12.2CyprusINDICATOR NAMEBusiness environment and investmentProductivity and investmentLabour productivity (GDP per hour worked in PPP terms), % of EU271Business investment (share of GDP)1Public investment (share of GDP)1Impact of regulation on long-term investment, % of firms reporting business regulation as a major obstacle2SME liquidityEIF Access to Finance for SMEs index - loans3EIF Access to Finance for SMEs index - equity3Late paymentsPayment gap - corporates B2B, difference in days between offered and actual payment4Payment gap - public sector, difference in days between offered and actual payment4Share of SMEs experiencing late payments, %5Industry and economic securitySingle Market IntegrationEU trade integration, average(intra-EU imports + intra EU exports)/GDP, %1EEA Services Trade Restrictiveness index6Public procurementSingle bids, % of total contractors7*Direct awards, % of negotiated procedures7*ComplianceTransposition deficit, % of all directives not transposed8Conformity deficit, % of all directives transposed incorrectly8SOLVIT, resolution rate per country, %8Number of pending infringement proceedings8Energy-intensive industriesElectricity prices for non-household consumers1Electrification (electricity as a share of total energy consumption in industry)1Share of energy from renewable sources (renewable energy generation as a share of overall energy consumption)1Critical raw materialsMaterial import dependency, %1Circular material use rate1Operational cleantech manufacturing capacity in 20259 - Solar PV (c: cell, w: wafer, M:module), GW- - Electrolyzer, GW- - Heat pump assembly - - Battery, GW- 
 
     
 
ANNEX 6: SAVINGS, INVESTMENT AND ACCESS TO FINANCE 

Table A6.1:  Savings and Investments Union summary diagnostic 

Source: Eurostat (households' financial wealth), FISMA CMU dashboard (VC and PE), national sources (capital taxation). End-2024.  
(*) Pensions are based on ECB pension statistics, as opposed to the EU average that is based on OECD  pension statistics.  

Some  reforms  addressing  elements  of  the 
2025  CSR  (102)  have  been  implemented,  but 
further  progress 
is  needed.  Cyprus  ranks 
relatively low across the key indicators monitoring 
progress  with  the  policy  goals  of  the  Savings and 
Investment  Union 
(see  Table  A6.1).  Cyprus’s 
economy  is  dominated  by  micro  and  small  firms, 
and  it  remains  heavily  reliant  on  bank  financing, 
while  capital  markets  play  a  limited  role.  Despite 
continued credit growth, Cypriot banks are not well 
suited  to  finance  innovative  firms  and  start-ups, 
underscoring  the  need  to  develop  non-bank  and 
market-based  financing  channels.  The  domestic 
listed  equity  market  remains  small,  and  the 
corporate debt market is largely untapped by local 
non-financial  corporations  (NFCs),  with  issuance 
concentrated  in  the  public  sector.  Households’ 
financial  assets  are  largely  held  in  deposits,  with 
limited  investment  in  pensions,  insurance  and 
investment  funds.  This  suggests  that  there  is 
scope 
to  expand  capital-market  participation 
through  better  incentives  and  improved  financial 
literacy,  in  line  with  the  objectives  of  the  Savings 
financial 
and 
intermediaries  (NBFIs)  remain  too  small  and  too 
conservative  to  drive  capital-market  development 
in  Cyprus,  while  the  venture  capital  ecosystem  is 
limited  and  largely  shaped  by  publicly  funded 
In  this  context,  ongoing  pension 
instruments. 

Investments  Union.  Non-bank 

(102) ‘…Facilitate  the  diversification  of  the  economy  and  further 
productive  investment  by  enabling  alternative  saving  and 
investment 
literacy, 
facilitating the participation in capital markets and improving 
access to non-bank financing opportunities for businesses…’. 

instruments, 

increasing 

financial 

reform  and  gradual  development  of  the  venture 
capital  ecosystem  are  key  to  deepening  capital 
markets and supporting long-term growth. 

Business landscape and company 
funding 

During  2024,  Cyprus’s  corporate  financing 
structure continued to reflect a highly bank-
dependent system. Total NFC financing stood at 
274.7%  of  GDP,  well  above  the  EU  average  of 
226.2%.  Loans  accounted  for  about  42%  of  total 
NFC  financing,  compared  with  the  EU  average  of 
27%,  underscoring  the  central  role  of  loan-based 
financing  as  the  primary  source  of  external 
funding  for  corporates  in  Cyprus.  By  contrast, 
remained  significantly 
market-based  sources 
underdeveloped.  Listed  shares  accounted  for  just 
above  1%  of  total  financing  (vs  19%  in  the  EU), 
while  corporate  bond  issuance  was  negligible 
(0.1%)  and  far  below  the  EU  average  of  4.7%. 
Equity financing in Cyprus is instead dominated by 
unlisted shares (30% of NFC financing) and other 
equity  instruments (25% of NFC financing), which 
together  account  for  more  than  half  of  total  NFC 
financing  and  exceed  the  respective  EU  averages 
of 25% and 21% (see Graph A6.1). 

The  funding  profile  of  Cypriot  corporates  is 
closely  linked  to  the  dominance  of  SMEs.  In 
Cyprus,  microenterprises 
employees) 
contribute  25.7%  of  total  value  added  (vs  20.1% 

(1–9 

53 

Main featuresRelative EU positioningAssets at 13.5%(*) of GDP (32.3% in the EU)10-year real return of n.a. (1.4% in the EU)N/AEUR 60 733 per capita (EUR 85 090 in the EU)o/w 9.1% in listed shares and bonds (7.6% in the EU)o/w 4.7% in investment funds (11.0% in the EU)o/w 4.2% in life insurance (13.4% in the EU)o/w 9.2% in pension claims (13.6% in the EU)Low household wealth per capita. A relatively high share of households' financial assets is invested in listed shares and bonds. Significant gap in the proportion of financial assets invested in investment funds, life insurance and pension funds. Cyprus has no dedicated tax-advantaged retail savings and investment account.VC at 0.015% of GDP (0.064% in the EU)PE at 0.019% of GDP (0.487% in the EU)Very low venture capital and private equity investments.For corporates, profits from the disposal of shares and bonds are exempt from corporate income tax, subject to specific exceptions. For individuals, capital gains on the disposal of securities (shares and bonds) are generally exempt from tax in Cyprus, subject to specific exceptions; however, Cyprus tax-resident and domiciled individuals are subject to special defence contribution on dividend and interest income. Capital-market investing in Cyprus is broadly tax-neutral rather than actively encouraged.1-34-1011-1718-2425-27TopicAsset-backed pension schemesHouseholds' financial assetsVenture capital (VC)Private equity (PE)Capital taxationColours indicate the country's relative ranking based on five groups, ranging from the three best to the three worst performers. The relative ranking as regards an SIU diagnostic topic derives from a consistent cross-country comparison, the starting point of which is the average of the underlying main features. 
 
 
 
 
 
 
   
 
firms 

in  the  EU),  while  small  firms  (10–49  employees) 
account for 29% of total value added (vs 16.6% in 
the  EU)  and  medium-sized 
(50–249 
employees)  account  for  24.1%  of  total  value 
added  (vs  16.9%  in  the  EU).  In  contrast,  large 
enterprises  (250+  employees)  account  for  only 
21.2%  of  value  added,  less  than  half  the  EU 
average  (46.4%)  (103).  This  structure  has  direct 
implications for corporate financing, as large firms, 
which  are  typically  better  positioned  to  access 
capital  markets 
innovative 
investments,  represent  a  much  smaller  share  of 
the economy than in the EU on average.  

support 

and 

Graph A6.1: Composition of non-financial 
corporations funding 

Source: Eurostat. End-2024. 

Size and structure of the financial 
sector 

The  banking  sector  continues  to  dominate 
Cyprus’s  financial  landscape. 
In  December 
2024,  banks’  total  assets  were  equivalent  to 
199.4%  of  2024  GDP,  more  than  four  times  the 
combined size of assets held by NBFIs (see Graph 
A6.2).  By  comparison, 
insurance  assets  were 
equivalent to 15.7% of GDP (vs 53.3% in the EU), 
pension funds to 13.5% (vs 32.3% in the EU), and 
investment  funds  to  21.2%  (vs  24.5%  in  the  EU 
(104)).  Although  investment  funds  in  Cyprus  have 
expanded  gradually,  the  insurance  and  pension 
fund  sectors  remain  small  and  fragmented, 
limiting  their  role  in  capital-market  development. 

(103) See Annex 5 for more details. 

(104) The  median  is  used  instead  of  the  EU  average  to  avoid 
distortion from outliers (Luxembourg, Ireland and Malta). 

structural 

This 
the 
characteristic 
economy’s dependence on bank credit. By contrast, 
other  Member  States  with  more  developed  NBFI 
sectors  provide  more  diversified 
financing 
channels.  

increases 

Graph A6.2: Capital markets and financial 
intermediaries 

Source: ECB, EIOPA, EMACO. End-2024. 

domestic 

Cyprus’s  domestic  capital  market  remains 
small  and  illiquid,  with  a  limited  number  of 
listed 
traded 
companies  and  actively 
securities.  Equities  and  bonds  trade  on  the 
Cyprus  Stock  Exchange  (CSE),  which  has  the 
necessary  infrastructure  and  is  open  to  both 
foreign  and 
investors.  However, 
participation  on  the  CSE  remains  modest.  In 
December  2024,  the  market  funding  ratio  in 
Cyprus  stood  at  11.2%  of  GDP,  one  of  the  three 
lowest  in  the  EU  (see  Table  A6.2).  The  shallow 
local  equity  market  plays  only  a  marginal  role  in 
corporate  financing,  and  many  firms  incorporated 
in Cyprus prefer to list and raise funds abroad. In 
2024,  all  initial  public  offerings  (IPOs) by  Cyprus-
foreign  stock 
firms  were  on 
incorporated 
exchanges.  Notably,  no  IPOs  of  significance  have 
taken  place  on  the main market  of  the  CSE  since 
2018.  As  a  result,  in  December  2024,  the  CSE’s 
at 
equity  market 
EUR 5.7 billion  (105),  equivalent  to  16.4%  of  GDP, 
while  the  outstanding value  of  Cypriot  companies 
listed  domestically  and  abroad  was  equivalent  to 
41%  of  GDP  (see  Table  A6.2).  Market  inefficiency 
is  further  reflected  in  persistently  wide  bid–ask 
spreads  (3.6%  in  2024  vs  1.4%  in  the  EU).  In 
February 2025, the Cypriot Parliament approved a 
bill  enabling  the  privatisation  of the  CSE,  marking 

capitalisation 

stood 

(105) See CSE Annual report and Fact book 2024. 

54 

050100150200250300CYEU% of GDPLoansTrade credit and advancesBondsListed sharesUnlisted sharesOther equityNon-financial corporationsFinancial corporationsNon-financial corporationsMFIsInsurance  and pension fundsOther financialsGovernmentMFIsPension fundsInsurance corporationsInvestment funds050100150200250   Listed equity               Bonds                        Assets by sector% of GDP 
     
 
     
 
an  important  capital-market  reform  that  aims  to 
strengthen the CSE’s competitiveness. On the bond 
market,  its  size  increased  sharply  in  2024,  from 
EUR 240m 
is 
attributed mainly to new issuances of government 
bonds  and  treasury  bills,  as  the  corporate  bond 
market remains virtually untapped by local NFCs. 

to  EUR 11.9 billion.  This 

rise 

Households’ participation in capital 
markets 

Cypriot  households  heavily  favour  holding 
their  financial  assets  in  deposits  over  other 
types of investments. On average, they allocate 
56.2%  of  their  financial  assets  to  deposits,  well 
above the EU average of 31.6% (see Graph A6.3). 
Their second largest exposure is 16.6% in unlisted 
shares,  reflecting  a  strong  culture  of  private  or 
family-owned  businesses.  Household  holdings  of 
listed  shares  (at  5.3%)  and  bonds  (at  3.8%)  are 
both  slightly  above  the  EU  average,  of  4.8%  and 
2.8%,  respectively.  However,  Cypriot  households 
invest 
intermediated  and 
diversified  instruments.  Insurance  and  pension 
funds  account  for  13.4%  of  their  financial  assets 
(vs 27% in the EU) and investment funds for 4.7% 
(vs  11%),  pointing  to  a  significant  capital-market 
intermediation gap. This composition bias towards 
deposits and family-business equity constrains the 
channelling  of  household  savings  into  diversified 
capital-market  instruments  that  could  support 
productive investment and innovation.  

relatively 

little 

in 

Graph A6.3: Composition of households' financial 
assets 

Source: Eurostat. End-2024. 

tax 

the 

instruments 

There  is  still  ample  scope  to  increase  the 
level of direct or indirect retail investment in 
Cypriot  capital  markets 
to  strengthen 
households’ financial wealth. In 2024, financial 
assets  held  per  capita  amounted  to  EUR  60 733, 
compared  with  an  EU  average  of  EUR  85 090.  At 
the same time, household financial assets remain 
concentrated  in  deposits,  while  participation  in 
remains 
diversified  market-based 
limited.  Nevertheless, 
treatment  of 
financial  assets in Cyprus is  rather  favourable,  as 
there  is  no  tax  levied  on  capital  gains  from  the 
sale of shares (106), and no taxation of dividend or 
interest 
targeted 
savings  and  investment  vehicles,  such  as  those 
recommended by the European Commission at EU 
level  (108),  could  still:  (i)  raise  awareness  among 
Cypriots  of  alternative  investment  pathways;  and 
(ii)  support  a  gradual  rebalancing  of  household 
savings 
long-term  market-based 
instruments(102).  Some  tax  deductibility  is  offered 
on  life-insurance  premiums,  but  these  products 
are  not  primarily  structured  as  vehicles  for  long-
term capital-market participation. 

(107).  Nevertheless, 

towards 

income 

Weak  financial  literacy  in  Cyprus  inhibits 
saving  behaviour  and  constrains  capital-
market  participation.  A  recent  analysis  by  the 
Organisation  for  Economic  Co-operation  and 
Development  (OECD)  (109)  aimed  to  support  the 
implementation  of  the  Cypriot  national  strategy 
for  financial  literacy  and  education  adopted  in 
2022  (110).  The  analysis  assessed  the  financial 
literacy  of  people  aged  15–79  in  Cyprus,  and 
confirmed  that  financial  literacy  levels  in  the 
country  are  low.  According  to  the  report,  the 
average  score  of 
literacy  among 
participants  was  56%,  and  only  17%  reached  the 
OECD’s  minimum  target  of  70%.  While  the 
financial  knowledge  of  Cypriots  was  deemed 

financial 

(106) Except for gains on property or property-related shares.  

(107) Domiciled residents still currently pay a 5% (down from 17% 
in  2025)  special  defence  contribution  on  capital  gains  and 
dividend  and  interest  income,  plus  a  2.65%  contribution  to 
the General Healthcare System (total 7.65%).  

(108) Refer  to  Commission  recommendation  and  to  Commission’s 
SWD  on 
the  availability  of  Savings  and 
Investment  Accounts  with  simplified  and  advantageous  tax 
treatment. 

increasing 

(109) See  OECD’s  publication,  March  2025,  Financial  literacy  in 

Cyprus. 

(110) National  strategy  for  financial  literacy  and  education  in 

Cyprus. 

55 

0100200300050100CYEUCYEUper capita (000 EUR) (lhs)% of GDP (rhs)Other equityUnlisted sharesListed sharesBondsInvestment fundsInsurance and pension fundsCurrency and depositsHH Debt (liability) 
      
 
moderate,  financial  behaviours  that  support  long-
financial  health,  attitudes  and  digital 
term 
financial  literacy  were  particularly  weak.  In  June 
2024, the Cyprus Financial Literacy and Education 
Committee was formally established to coordinate 
efforts to improve financial literacy in the country. 
In  September  2024,  the  Cypriot  government 
introduced  a  financial  education  curriculum  for 
third-grade  high  school  students  (approximately 
15 years old). The ongoing implementation of the 
strategy  will  help  to  address  the  relevant  CSR  on 
  and  should  strengthen 
financial 
including 
everyday 
saving and investing behaviour.  

literacy(102) 
financial  decision-making, 

The banking sector: resilience and 
financing of the economy 

The  Cypriot  financial  sector  remains  robust, 
with  banks  maintaining  strong  profitability 
and  further  strengthening  already-robust 
capital  positions  amid  ample  liquidity.  The 
overall profitability of Cypriot banks was strong in 
2024 and remained strong in the first nine months 
of 2025, despite reduced net interest income. The 
sector’s  (annualised)  return-on-equity  ratio  of 
11.3%  in  September  2025  outperformed  the 
corresponding  EU  average  of  9.6%  (see  Table 
A6.2).  Solvency  reached  a  record  high,  supported 
by  strong  internal  capital  generation,  and  the 
common  equity  tier 1  ratio  of  26.1%  was  the 
highest  in  the  EU.  Liquidity  conditions  remain 
ample,  as  evidenced  by  the  sector’s  liquidity 
coverage ratio of 326% and the net stable funding 
ratio  of  191%.  In  addition,  all  Cypriot  banks 
subject  to  minimum  requirements  for  own  funds 
and eligible liabilities met their end-2024 targets. 
Asset  quality  continued  to  strengthen,  supported 
by  ongoing  efforts 
legacy  non-
to 
performing  loans  (NPLs).  In  September  2025,  the 
NPL  ratio  fell  to  2.3%  from  3.1%  in  2024  (vs  an 
EU average of 1.9%), while coverage increased to 
62%,  well  above  the  EU  average  of  42%.  Banks’ 
direct  exposure  to  Middle  Eastern  countries  is 
limited,  and  their  well-diversified  loan  portfolios 
help  mitigate  risks  from  current  geopolitical 
tensions. However, second-round effects could still 
weigh on asset quality, particularly in sectors such 
as accommodation and hospitality. 

reduce 

In  2024,  lending  activity  remained  resilient, 
while  balance-sheet  credit  growth  was 

largely offset by repayments and write-offs. 
Despite  the  high  interest-rate  environment  and 
geopolitical uncertainty, new lending has remained 
robust.  Mortgage  lending  in  2024  exceeded  the 
previous  year’s  level,  while  consumer  lending 
reached  historic  highs.  Overall,  banks  extended 
EUR 3.9 billion  in  new  lending  to  households  and 
NFCs  in  2024,  a  18%  year-on-year  increase  (111). 
However, repayments and write-offs largely offset 
new  lending,  leaving  loan  stocks  broadly  stable. 
This  trend  continued  in  2025;  in  September  2025 
households’  growth  rate  was  2.2%  year-on-year, 
while  NFCs’  credit  growth  rate  was  3.5%.  The 
resilience of new lending suggests that banks have 
sufficient  liquidity  and  capacity  to  provide  credit, 
particularly to established SMEs. 

Role of non-bank financial 
intermediaries 

and 

savings 

The  Cypriot  insurance  market  is  small,  and 
plays  a  complementary  role  in  the  financial 
system, making only a limited contribution to 
long-term 
capital-market 
financing.  The  Cypriot  insurance  market  consists 
of  33  locally  registered  insurers  and  reinsurers, 
which  are  regulated  by  the  Insurance  Companies 
Control Service (ICCS) (112). In September 2025, the 
sector’s  total  insurance  assets  were  equivalent  to 
16% of GDP, significantly below the EU average of 
53.9%,  reflecting  the  sector’s  limited  scale.  The 
sector  is  nevertheless  well  capitalised,  with  an 
average Solvency II ratio of 285%, well above the 
EU  average  of  244%.  Despite  its  small  size,  the 
Cypriot insurance sector has shown robust growth, 
with  gross  written  premiums  reaching  a  record 
EUR 1.3 billion in 2024 (113). Insurance coverage is 
relatively  strong  in  the  life  and  health  segments, 
where  premiums  have  continued  to  increase.  By 
contrast,  Cyprus  faces  notable  protection  gaps  in 
general  insurance, particularly for earthquake and 
wildfire  risks,  reflecting  underinsurance 
in  a 
climate-exposed  economy. 
In  terms  of  asset 
allocation,  Cypriot  insurers  pursue  a  conservative 
investment strategy compared with their EU peers. 

(111) Refer  to  CBC  Monetary  and  Financial  Statistics  December 

2024. 

(112) Refer  to  Cyprus’s  ICCS  Register  of  Insurance/Reinsurance 

Undertakings. 

(113) Refer to Insurance Association of Cyprus statistical results. 

56 

 
 
collective 

In  September  2025, 
investment 
undertakings  (CIUs)  dominated  balance  sheets 
(constituting 45% of insurers’ assets), followed by 
government bonds (19%), corporate bonds (12%), 
equities 
(7%),  cash  and  deposits  (8%),  and 
property  (7%)  (114).  The  comparable  EU  average 
figure for equity was 16% and for corporate bonds 
18%, while EU insurers hold on average only 4% in 
cash  and  deposits  and  1.4%  in  property.  The 
relatively  small  scale  of  domestic  insurers  and 
limited  local  market  depth  incentivise  portfolio 
diversification  through  CIUs,  rather  than  direct 
holdings of equities and corporate bonds.  

hub 

regional 

into  a 

Thanks  to  EU  passporting,  Cyprus  has  fast 
developed 
for 
investment-fund  domiciliation  and  asset 
management.  Funds  domiciled  in  Cyprus  benefit 
from  a  favourable  tax  environment  (no  capital 
gains  tax  on  most  securities  and  no  withholding 
tax).  The  industry  is  regulated  by  the  Cyprus 
Securities  and  Exchange  Commission.  The  two 
main  legal  structures  are  alternative  investment 
funds 
(AIFs)  and  undertakings  for  collective 
investment in transferable securities (UCITS). Total 
assets  under  management  (AUM)  of  all  funds 
managed in Cyprus, amounted to EUR 10.6 billion, 
of  which  EUR 7.6 billion  (21.2%  of  GDP)  are 
resident funds (115). AIFs, which are more typically 
used  for  longer-term  and  less  liquid  investment 
strategies,  given  fewer  portfolio  and  liquidity 
constraints  than  UCITS,  account  for  93.5%  of 
Cypriot  investment  funds’  total  AUM.  Of  the  total 
AUM,  around  EUR 2.7 billion  are  invested  in  key 
sectors of the Cypriot economy (116), indicating that 
the  fund  sector  supports  market-based  financing 
and 
investment  alongside  bank 
intermediation. 

long-term 

life 

occupational pension schemes and a small number 
insurers  offering  group  occupational 
of 
pension  products,  while  the  third  pillar  covers 
voluntary  private  pension  arrangements.  Overall, 
funded pensions remain relatively underdeveloped 
in  Cyprus  compared  with  other  EU  countries:  in 
December 2024, pillar 2 total pension fund assets 
were  equivalent 
(about 
EUR 4.6 billion,  below  the  EU  average  of  32.3% 
(117)  (118).  In  many  EU  Member  States  with  more 
mature  funded  pension  systems,  these  schemes 
play  a  larger  role  in  retirement  provision  and 
channelling 
development 
capital-market 
employees’ savings into long-term investments.  

to  13.5%  of  GDP 

by 

to 

income  and 

Fragmentation  in  the  second  pillar  and  the 
small  size  of  the  third  pillar  limit  their 
capacity  to  deliver  adequate  supplementary 
retirement 
contribute 
meaningfully  to  financing  the  economy.  The 
role  of  the  second  pillar  in  retirement  provision 
and  capital-market  development  remains  limited, 
as the system is highly fragmented and dominated 
by  many  small,  company-specific  schemes, 
preventing economies of scale (119). Participation in 
pillar  2  schemes  remains  largely  confined  to 
employees of large or unionised companies, which 
is particularly problematic in light of demographic 
pressures  (120).  This  fragmentation  results 
in 
modest 
investment 
inefficiencies,  as  funds  lack  scale.  This  results  in 
higher  costs,  weak  diversification  and  ineffective 
market  engagement.  Against  this  backdrop,  the 
Cypriot  pension  fund  sector  is  undergoing  reform. 
Expanding 
up 
occupational  pension  funds  is  a  key  structural 
requirement in Cyprus. Broader coverage (including 

participation 

flows  and 

contribution 

scaling 

and 

Cyprus’s  second  pillar  pension  system  is 
fragmented,  while  the  third  pillar  remains 
small, which limits its role in capital-market 
development.  The  first  pillar  pension  (i.e.  the 
state  pension)  relies  on  a mandatory  pay-as-you-
go  scheme,  while  the  second  and  third  pillars 
provide supplementary pensions. The second pillar 
employer-sponsored 
of 
consists 

mainly 

(114) Refer to EIOPA’s insurance statistics for Cyprus.  

(115) Resident  funds  are  domiciled  in  Cyprus  and  managed  by  a 
Cypriot  management  company,  whereas  non-resident  funds 
are domiciled abroad and distributed in Cyprus. 

(116) Refer  to  Cyprus  Securities  and  Exchange  Commission’s 

Quarterly Statistical Report Q2 2025. 

(117) The ‘total assets of pension funds’ in Cyprus include mainly 
Pillar  2  funded  private  pension  schemes,  but  exclude  most 
Pillar 3 funds, because in Cyprus these are usually structured 
as insurance contracts. The EU average includes both private 
and public pensions assets. 

(118) Cyprus’s  pension  data  are  based  on  ECB  pension  statistics, 
as opposed to the EU average that uses OECD data (Cyprus 
is not a member of the OECD and is therefore not covered by 
OECD pension statistics); however, the scope of ECB pension 
funds  is  more  restricted  than  the  scope  of  OECD  pension 
providers therefore statistics are not directly comparable. 

(119) In September 2024, there were 837 pension funds in Cyprus, 
a  number  that  is  disproportionately  large  compared  with 
larger EU members with more developed pension systems. 

(120) Cyprus  is  among  the  Member  States  projected  in  the  2024 
Ageing Report to face a significant increase in ageing-related 
costs.  

57 

 
 
 
through mechanisms such as auto-enrolment into 
multi-employer  or  employer-sponsored  schemes) 
and the portability of pension entitlements across 
employers  are  both  central  to  increasing  scheme 
size  and  effectiveness  (121).  A  larger  and  more 
integrated pension fund sector would improve the 
adequacy  of  retirement  income  by  strengthening 
supplementary  pensions  and 
the 
capacity  of  pension  funds  to  contribute  to  the 
long-term financing of the economy. 

increasing 

Cyprus  does  not  have  a  single  independent 
supervisory  authority  covering  both  the 
insurance  and  occupational  pension  fund 
sectors.  The  possibility  of  establishing  a  unified 
independent  supervisor  has  been discussed  in  the 
past,  and  remains  under  consideration  (122).  This 
institutional  separation  results  in  a  fragmented 
supervisory  set-up,  which  is  not  aligned  with  the 
broader  EU  policy  objective  of 
increasing 
supervisory  convergence  and  efficiency  (123).  In 
insurance  and 
several  EU  Member  States, 
occupational  pension  supervision 
is  organised 
under  a  consolidated  supervisory  structure,  which 
is associated with more integrated risk monitoring 
and  data  collection,  and  can  reduce  operational 
duplication.  Moreover,  Cyprus  does  not  operate  a 
formal  nationwide  pension  tracking  system  that 
consolidates information on all pension sources in 
one  place  –  typically  a  dedicated  website  –  for 
individuals  so  they  can  track  their  pension 
entitlements, both private and public. 

Venture capital ecosystem 

The  venture  capital  (VC)  and  private  equity 
(PE)  ecosystem  in  Cyprus  is  underdeveloped, 
thus  falling  short  of  meeting  the  financing 
needs of innovative firms and start-ups. Lack 
for 
of  capital 

the  key  constraint 

remains 

(121) See  Commission  Recommendation  (EU)  2025/2384  on 

pensions. 

(122) Insurance  companies  are  supervised  by  the  ICCS,  which  is 
administratively  under  the  Ministry  of  Finance,  while 
occupational  pension  funds  (IORPs)  are  supervised  by  the 
Registrar of Occupational Retirement Benefit Funds, which is 
administratively  under  the  Ministry  of  Labour,  Welfare  and 
Social Insurance. 

(123) Refer  to  Commission  Communication,  December  2025, 
Further  development  of  capital  market  integration  and 
supervision within the Union. 

innovative,  start-up  and  scale-up  firms  in  Cyprus. 
These  firms  face  persistent  barriers  to  accessing 
bank credit, because of their higher risk profile and 
their  lack  of  tangible  collateral  compared  with 
other  NFCs.  In  more  mature  markets,  these  firms 
rely on VC and PE for access to capital. In Cyprus, 
both VC and PE investment (equivalent to 0.015% 
and 0.019% of GDP based on a three-year moving 
average  in  2024,  respectively)  have  been  very 
lag  behind  the  EU 
limited  and  significantly 
averages  of  0.064%  and  0.487%  of  GDP, 
respectively (124). For PE in particular, Cyprus is one 
of  the  three  worst  performers  in  the  EU.  The 
Cypriot  VC  and  PE  ecosystem 
further 
constrained  by  fragmentation  and  the  absence  of 
a  national  venture  capital  strategy,  or  dedicated 
venture  capital  association  to  support  market 
to  new 
coordination  and  provide  guidance 
entrants.  Consequently, 
rely 
instruments, 
predominantly  on  public  funding 
research 
including  grants  and  support 
commercialisation. 

innovative  firms 

for 

is 

initiatives  aim 
finance  gap, 

Recent  government 
to 
in 
the 
partially  address 
particular  through  the  launch  of  dedicated 
VC-type  funds  supported  by  public-private 
financing  structures.  National  grant  schemes 
and  EU-co-financed  programmes  can  play  an 
important  role  in  reducing  early-stage  investment 
risk. In January 2025, the 33East VC fund, backed 
(125),  with  total 
by  the  Cyprus  Equity  Fund 
committed capital of EUR 35.6m to invest in early-
stage,  Cyprus-linked  technology  companies  made 
its  first  investment  (126).  Cyprus  also  offers  tax 
incentives  –  valid  until  the  end  of  2026  –  for 
investments  in  approved  innovative  SMEs  (127). 
These  initiatives  help  to  address  the  relevant 
subpart  CSR  on  improving  access  to  non-bank 
businesses(102). 
financing 
Nevertheless,  the  funding  raised  so  far  remains 
very  small  and  unless  increased,  access  to  risk 
capital  will  remain  difficult,  particularly  for  high-
growth,  high-risk  start-ups,  many  of  which 
continue  to  depend  on  public  funding  or  foreign 

opportunities 

for 

(124) See also Annex 4.  

(125) The Cyprus equity fund is one of the reforms of the  Cypriot 

recovery and resilience plan. 

(126) Under the CY RPP, there have to at least 7 investments in the 
first  18  months  in  pre-seed  and  seed-stage  startups  that 
have a Cyprus connection, for the fund to meet its targets. 

(127) Refer to Republic of Cyprus practical guide for tax incentives 
for legal and natural persons investing in innovative SMEs. 

58 

 
 
 
Table A6.2:  Financial sector indicators 

(1) Annualised data. EU data for credit growth and pension funds refer to the EA average. 
Source: ECB, Eurostat, European Insurance and Occupational Pensions Authority, DG FISMA CMU dashboard, AMECO. 

Support 

start-ups 

investors. 
remains 
for 
predominantly  grant-based,  while  equity  and 
quasi-equity  instruments  play  a  limited  role.  The 
absence  of  a  national  VC  strategy  limits  Cyprus’s 
ability  to  align  existing  grant  schemes,  public-
private  equity  instruments,  tax  incentives  and 
regulatory  frameworks  around  clear  long-term 
objectives,  such  as  increasing  the  number  of  VC 
transactions,  supporting  scale-ups,  or  attracting 
foreign VC investors.  

59 

20182019202020212022202320242025-Q3EUTotal assets of MFIs, % of GDP320.9280.0290.1280.1228.7211.4199.4195.6246.1Common equity Tier 1 ratio14.817.417.617.617.821.524.626.116.8Total capital adequacy ratio17.119.920.320.621.325.828.129.520.2Overall NPL ratio, % of all loans20.218.111.05.64.53.73.12.31.9NPL ratio, loans to NFCs33.724.814.68.27.96.65.54.43.5NPL ratio, loans to HHs37.735.223.714.812.010.27.95.32.1Return on equity ratio17.13.5-3.30.65.121.818.311.39.6Loans to NFCs, % of GDP79.776.356.747.137.727.725.424.829.3Loans to HHs, % of GDP65.660.259.648.242.734.332.330.743.6NFC credit growth rate, %1.50.81.52.71.6-3.4-0.13.52.5HH credit growth rate, %-0.2-0.23.02.57.31.31.92.22.6Stock market capitalisation, % of GDP38.339.537.228.425.341.041.047.169.9Initial public offerings, % of GDP0.000.000.000.000.000.003.03-0.06Market funding ratio6.19.29.09.59.69.911.2-49.7Private equity, % of GDP0.0460.1920.2420.2610.1220.0580.019-0.487Venture capital, % of GDP0.0310.0500.0680.0620.0480.0160.015-0.064Financial literacy, composite index-----45.5--45.5Bonds, % of HHs' financial assets2.52.62.52.12.33.43.8-2.8Listed shares, % of HHs' financial assets2.22.12.02.82.73.55.3-4.8Investment funds, % of HHs' financial assets1.11.61.62.02.03.14.7-11.0Insurance/pension funds, % of HHs' financial assets13.113.713.413.312.113.113.7-27.8Total assets of insurers, % of GDP17.517.518.617.814.915.015.716.053.9Pension assets, bn EUR--------5813.8Pension assets, % of GDP--------32.310y real return average of pension assets, %--------1.4Pension funds assets, ECB (% of GDP)----13.412.813.612.923.01-34-1011-1718-2425-27Colours indicate performance ranking among the 27 EU Member States.Banking sectorNon-banking sector 
 
 
 
      
 
ANNEX 7: EFFECTIVE INSTITUTIONAL FRAMEWORK 

institutional  framework 

An  effective 
is 
essential  for  competitiveness.  This  requires 
public  trust  built  on  integrity,  quality  legislation, 
regulatory  simplification  and  efficient  services  for 
people  and  businesses.  For  Cyprus,  the  2025 
recommendations  highlighted 
country-specific 
challenges  in  simplifying  regulation,  improving 
regulatory 
reducing  administrative 
burden, focusing especially on improving licensing 
and permit procedures for investment and setting 
up new businesses. 

tools  and 

Public trust 

Graph A7.1: Trust in the justice system, regional / 
local authorities and in government 

(1) EU-27 since 2019; EU-28 before 
Source: European Commission, Standard Eurobarometer 
surveys 

Trust  in  government  has  returned  to  pre-
COVID levels, while trust in justice continues 
to deteriorate and trust in regional and local 
authorities  has  remained  relatively  stable 
(Graph  A7.1).  Moreover,  41%  of  people  perceive 
public  administration  as  insufficiently  close  to 
them,  and  44%  view  Cypriot  civil  servants  as 
in  the 
under-skilled 
EU)(128).  While businesses retain confidence in the 
public administration's ability  to handle their data 
securely  and  responsibly,  people  question  the 

(the  highest  percentage 

public  administration’s  ability  to  protect  their 
information adequately(129). 

Quality of lawmaking 

laws. 

Ability 

to  monitor 

Despite  some  progress,  gaps  persist 
in 
quality  of  lawmaking  (Table  A7.1).  Regulatory 
impact assessments are mandatory for all primary 
laws,  partially  addressing  the  2025  country-
specific  recommendations  to  improve  regulatory 
tools,  but  only  some  subordinate  regulations  are 
assessed.  Although  regulators  must  assess  the 
costs  and  benefits  for  government,  people  and 
businesses  when  drafting  primary  laws,  such 
assessments  are  not  required  for  subordinate 
legislation. Similarly, the impact of non-regulatory 
options  is  systematically  assessed  exclusively  for 
the 
primary 
implementation  of  legislation  is  weakened  by  the 
absence  of  formal  requirements  for  legislators  to 
develop  methods  of  measuring  progress,  identify 
enforcement  mechanisms  and  assess  compliance 
levels. Overall oversight and quality control remain 
below  the  EU  average.  The  oversight  of  better 
regulation tools is also undermined by the lack of 
the 
publicly 
effectiveness of regulatory impact assessments in 
amending 
Importantly, 
regulatory  proposals. 
Cyprus  has  no  system  for  ex  post  evaluation  to 
verify  whether  rules  achieve  their  objective  in 
practice(130).  With 
Support 
the 
Instrument,  Cyprus  is  digitalising  the  lawmaking 
process, including the drafting and consolidation of 
legislation,  as  well  as  publishing  legislation  in  a 
machine-readable and interoperable format. 

assessments 

Technical 

available 

of 

but 

transparency 

Consultation  on  legislative  proposals  has 
challenges 
improved 
remain.  Further  to  the  launch  of  an  interactive 
online  platform  (e-consultation.gov.cy),  updated 
guidance  in  2024  requires  at  least  four  weeks  of 
consultation  on  all  primary  laws,  and  on  some 
subordinate regulations. However, stakeholders are 
regulations  have  been 
consulted  only  after 
initial  option 
drafted, 

than  during 

rather 

(128) European Commission, 2026, Flash Eurobarometer surveys 
567 and 568 on satisfaction with administrative services. 

(130) OECD, 2025, Better Regulation Practices across the European 

Union 2025, https://doi.org/10.1787/6f007516-en.  

(129) European Commission, 2026, Flash Eurobarometer surveys 
567 and 568 on satisfaction with administrative services. 

60 

00.10.20.30.40.50.60.70.80.9AutumnSpringAutumnSpringAutumnSpringWinterSummerWinterSpringWinterSummerAutumnSpringAutumnSpringAutumnSpring202520242023202220212020201920182017Justice,  legal system EU-27Justice,  legal system CYRegional or local public authorities EU-27Regional or local public authorities CYGovernment  EU-27Government  CY 
 
     
 
 
 
 
Table A7.1:  Cyprus. Selected indicators on better regulation practices for primary legislation 

Source: OECD, 2025, Regulatory Policy Outlook 2025 [https://doi.org/10.1787/56b60e39-en] and Better Regulation across the 
European Union 2025. 

development(131).  Furthermore,  regulators  are  not 
obliged to publish online responses to consultation 
comments for primary and subordinate legislation, 
hampering transparency in lawmaking. 

improving 

In  response  to  the  2025  country-specific 
recommendations, Cyprus is simplifying laws 
its  business  environment. 
and 
Government  action  plans  focus  on  simplifying 
rules, with the Law Commissioner revising national 
legislation,  albeit  on  an  ad  hoc  basis.  Also,  the 
Business  Support  Centre  has  been  set  up  as  a 
single  contact  point  for  investors,  aiming  to 
streamline  permits  and  cut  red  tape  (see  also 
Annex  5).  Effective  monitoring  is  essential  to 
reduced 
in 
ensure 
administrative burdens for businesses. 

change 

results 

this 

Public service delivery and 
digitalisation 

Despite  some  progress  with  digitalisation, 
Cyprus 
is  facing  significant  challenges 
relating  to  user-friendliness  and  overall 
satisfaction.  Only  29%  of  people  and  36%  of 
companies are satisfied with public administrative 
services,  well  below  the  EU  average  of  45%.  The 

same 

times, 

highlighting 

main  challenges  faced  by  both  people  and 
companies  (46%)  are  the  lengthy  processing  and 
response 
administrative 
inefficiencies  (Graph  A7.2).  However,  there  has 
been  a  notable  improvement  compared  to  2023, 
as the perception of public administration as being 
slow  has  fallen  from  67%  to  49%.  A  substantial 
77%  of  people  are  concerned  about  the  need  to 
repeatedly  provide 
information, 
the 
indicating a low level of data exchange and reuse 
within  the  administration.  Furthermore,  34%  of 
companies interact  with public  administration  just 
to  obtain  necessary  information,  indicating  a  lack 
of clear guidance. Additionally, 37% of businesses 
find 
to  collect  and  prepare 
documents,  suggesting  a  need  for  step-by-step 
instructions.  34%  of  companies  report  increased 
operational costs due to challenges with the public 
administration. Some 28% of them report wasting 
time  because  of  difficulties  in  resolving  errors 
during  application  processes,  exemplified  by  the 
cumbersome  online  business  registration  process, 
which  lacks  user-friendly  interfaces  and  clear 
instructions(132). 

it  challenging 

(131) OECD, 2025, Better Regulation Practices across the European 

Union 2025, https://doi.org/10.1787/6f007516-en.  

(132) European Commission, 2026, Flash Eurobarometer surveys 
567 and 568 on satisfaction with administrative services. 

61 

Tools for smart legislation: Share of possible impacts assessed for all primary laws when developing legislation 1Regulators are required to identify and quantify the benefits of a new primary law1Regulators are required to identify and assess the impacts of alternative non-regulatory options1Tools for effective implementation: when developing laws, regulators are required to:Assess the level of compliance0Identify and assess potential enforcement mechanisms0Specify the methodology of measuring progress in achieving the law's goals0Oversight of better regulation: There is an external  body responsible for reviewing the quality of RIAs and of ex post evacuations 1There are publicly available assessments of the effectiveness of RIA in modifying regulatory proposals 0There are reports on the level of compliance by government department with the requirements of RIA1There are indicators on the percentage of ex post evaluations that comply with guidelines0The effectiveness of ex post evaluations in improving the regulatory stock has been assessed in the last five years0 
 
 
 
   
 
Table A7.2:  Digital Decade key performance indicators: availability of digital public services 

(1) Digital Decade target by 2030: 100. (2) Publishing year, data was collected in the previous year 
Source: European Commission, State of the Digital Decade report 2025 

Graph A7.2: Most time-consuming aspects of 
service delivery 

Source: European Commission. Flash Eurobarometer 567 / 
568 on satisfaction with administrative services (2026) 

Availability  of  digital  public  services  for 
people  remains  below  the  EU  average  (Table 
A7.2). The number of people interacting online with 
the government dropped from 79% to 75%, falling 
below  the  EU  average  (EU  76%).  Nevertheless, 
initiatives, 
Cyprus  has  undertaken  strategic 
evidenced  by  advancements  in  establishing  a 
national  digital  identity  (eID).  Also,  substantial 
funding  has  been  allocated  under  the  RRP  to 
digitalise public services through a digital one-stop 
shop known as the ’Digital Services Factory’ and to 
implement a new service standard framework(133). 
Despite efforts to promote digital services, Citizen 
Service  Centres  remain  the  preferred  mode  of 
access, with digital applications rising slowly from 
0.5% to 5% for ID applications. Further efforts are 
needed to improve user experience, for example by 
offering  more  pre-filled  features  on  the  gov.cy 
portal  during  the  ID  card  application,  ensuring 
exchange  with  Civil  Registry  data(134).  The 
availability  of  access  to  electronic  health  records, 
while improving, remains below the EU average. 

The  provision  of  digital  public  services  for 
businesses is in line with the EU average but 
has  not  improved  since  2023  (Table  A7.2).  At 
the  same  time,  75%  of  companies  report  using 
digital  public  administration  services  always  or 
often,  and  85%  believe  that  digital  services  save 
time  and  effort(135).  For  example,  the  company 
registration  process 
largely  digital, 
featuring automated checks, online tax registration 
and  electronic  signatures  compliant  with  the  EU's 
eIDAS Regulation. Further measures are needed to 
the  online  service  by  eliminating 
improve 
physical 
integrating 
mandatory 
presence, 
tools 
cohesive  system, 
submission 
increasing 
improving 
and 
transparency 
interoperability with external registries(136). 

is  now 

into  a 

significantly 

reformed  by 

Cyprus has made progress in modernising its 
planning  and  building  permit 
system, 
improving  digital  processes  and  multi-level 
governance.  Since  July  2024,  the  permit  system 
was 
transferring 
authority  for  planning  and  building  permits  from 
individual municipalities and district offices to five 
local  government 
newly  established  district 
organisations  (DLGOs).  This  reform  streamlined  a 
fragmented system of over 30 authorities to five, 
operating  under  a  standardised  digital  process. 
Alongside  the  DLGO  reform,  Cyprus  launched  a 
single  digital  platform  for  development  permits 
(Ippodamos)(137), 
It 
processes 
permit 
applications  through  an  online  portal  at  gov.cy, 
implementing  statutory  timelines  and  a  silent 
consent  mechanism  for  automatic  approval  if 
deadlines are not met. Initial transition challenges 

funded  under 
and 

the  RRP. 

planning 

building 

(133) https://dsf.dmrid.gov.cy/service-standard.  

(136) European Commission, forthcoming, Simplification of key life 

(134) European Commission, forthcoming, Simplification of key life 

events. 

events. 

(137) https://hippodamus.tph.moi.gov.cy/. 

(135) European Commission, 2026, Flash Eurobarometer surveys 
567 and 568 on satisfaction with administrative services. 

62 

0%10%20%30%40%50%Time forresponsesDocumentspreparationServiceidentificationTime forresponsesDocumentspreparationApplicationprocessissuesPeopleBusinessesEUEU-272023202420252025647478828586868670687583Access to electronic health records (0 to 100)Digital public services for citizens (0 to 100)Digital public services for businesses (0 to 100)Cyprus 
   
 
 
 
 
  
 
affected  statistics,  but  according  to  performance 
data, over 40 000 permits had been processed by 
February  2026,  with  monthly  building  permit 
issuance increasing by 190% and planning permits 
by 54%. 

Despite initial progress, challenges persist in 
fully 
implementing  a  streamlined  digital 
platform  for  renewable  energy  permitting. 
The ’Digital One-Stop Shops’, funded by the RRP to 
digitise  renewable  energy  permits 
in  Cyprus 
through bfu.meci.gov.cy(138), is facing challenges in 
achieving  full  digital  approvals,  primarily  due  to 
interoperability  issues,  affecting  solar  park  and 
storage submissions. 

the 

through 

cross-border 
Cyprus  has  enabled 
exchange  of  data  and  administrative 
documents 
the  EU  once-only 
technical  system(139).  As  once-only  enabled 
services(140)  become  accessible,  people  and 
businesses  will  no  longer have to  search  for  their 
data,  manually  download  and  upload  documents 
across  e-government  portals  in  different  Member 
States.  Cyprus  still  needs  to  identify  the  types  of 
documents and data needed for exchange through 
the  system  and  explore  ways  to  shift  from 
to  structured  data 
submitting  unstructured 
formats. 
the 
population  domain  connected.  Further  efforts  are 
needed  to  connect  authorities  to  the  once-only 
technical  system,  foster  cross-border  exchanges, 
and encourage  cooperation  between  related EU-
wide projects. 

It  has  authority 

registries 

in 

Civil service 

Cyprus  is  advancing  with  reforms  for  a 
merit-based  civil  service.  The  new  system  for 
recruitment  and  promotions  through  examination 
centres  (adopted  in  2024)  has  been  used  to  fill 
management  positions  such  as  directors  of 
departments 
secretaries. 
Furthermore,  a  written  examination  for  middle 

permanent 

and 

(138) https://bfu.meci.gov.cy/el/home/. 

(139) European Commission, Once-Only Technical System 

Acceleratormeter, Ec.europa.eu. 

(140) Procedure types under Annex II of the SDGR (2018/1724/EU) 
and directives 2005/36/EC, 2006/123/EC, 2014/24/EU and 
2014/25/EU. 

63 

management  posts  was  conducted  at  these 
centres,  with  the  Public  Service  Commission 
expecting to complete the process in 2026. 

of 

public 

As of April 2026, Cyprus's public service will 
adopt  a  regulated  hybrid  working  model,  as 
expected  under  the  Cypriot  RRP(141).  This 
follows  the  introduction  of  a  new  manual  by  the 
and 
department 
personnel.  The  manual,  tied  to  a  law  regulating 
remote  work,  published  in  the  official  gazette  in 
December  2025,  outlines  the  practical  aspects  of 
include  eligibility  criteria, 
the  model.  These 
application  processes,  equipment  standards  and 
essential 
cybersecurity  and 
personal data(142). 

administration 

safeguards 

for 

Despite  these  improvements,  ageing and  the 
rate  of  upskilling pose a  risk to  civil  service 
capacity. Cyprus still lags behind on civil servants’ 
participation  in  adult  learning  (Cyprus:  12%;  EU: 
19%). In addition, the civil service is ageing faster 
than the workforce in the rest of the public sector 
and in the overall economy(143). 

Integrity 

Although  corruption  is widely perceived as a 
serious  issue  for  doing  business  in  Cyprus, 
reported  experiences  of  corruption  remain 
below the EU average. With 93% of companies 
viewing  corruption  as  widespread  (EU:  63%)  and 
90%  stating  that  overly  close  links  between 
business and politics lead to corruption (EU: 76%), 
perceptions  point  to  entrenched,  systemic  risks. 
The  fact  that  66%  also  see  corruption  as  a 
problem  when  doing  business  (EU:  35%)(144) 
suggests  these  concerns  translate  into  real-life 
is 
obstacles  for  companies.  A  sector 

that 

(141) Component 3.2, Reform 2 (C3.4R2): Regulate flexible working 
arrangements in the public sector, milestones 158 and 159. 

(142) https://cyprus-mail.com/2026/01/13/cyprus-public-service-

sets-out-rules-for-hybrid-remote-work. 

(143) European Commission, Eurostat, 2026, European Union 
Labour Force Survey, Participation rate of employees in 
education and training (last 4 weeks) by NACE Rev. 2 activity 
(2008-2026), European Commission, Eurostat, 
2026, European Union Labour Force Survey, Employed 
persons by economic activity (NACE Rev. 2) (2008-2026). 

(144) European Commission, 2025, Flash Eurobarometer survey 
557 on Businesses' attitudes towards corruption in the EU. 

 
 
 
Justice 

the 

increased 

(788  days 

The  efficiency  of 
justice  system 
continues to face serious challenges. The time 
taken  to  reach  a  decision  in  civil  and  commercial 
cases at first instance courts rose  to 682 days in 
2024 (from 605 days in 2023) and remains one of 
the highest in the EU. The estimated time taken to 
resolve  administrative  cases  at  first  instance 
courts  also 
in  2024, 
compared  to  380  days  in  2023).  Although  the 
targets  for  the  reduction  of  backlog  cases  set  by 
the  National  Recovery  and  Resilience  Plan  have 
been reached and surpassed, a substantial number 
of backlog cases persist. Delays and difficulties in 
enforcing  final  judgments,  which  are  delivered 
after 
lengthy  proceedings,  are  an  additional 
challenge.  Improving  the  efficiency  of  the  judicial 
sector  is  essential  to  support  investment-driven 
growth. The establishment of the Commercial and 
Admiralty  Courts  could  speed  up  high-value 
dispute  resolutions,  but  neither  is  operational  yet. 
Cyprus has long  underperformed in digitalising its 
justice  system.  The  country  lags  behind  in  digital 
solutions  to  initiate  and  follow  proceedings  in 
civil/commercial  and  administrative  cases,  as  well 
in  the  general  public’s  online  access  to 
as 
published  judgments  and  on  arrangements  for 
producing  machine-readable 
judicial  decisions. 
A comprehensive reform is needed to digitalise the 
integrated 
justice  sector.  A  fully  functional, 
electronic  case  management  system 
is  still 
lacking,  hampering  judicial  digital  transformation, 
complicating 
tasks  such  as  court  statistics 
collection  and  reducing  efficiency.  An  upgrade  of 
the 
is 
case  management 
underway,  however  full  implementation  is  not 
expected  until  2030.  Plans  to  gradually  introduce 
digital  audio  recording  in  court  proceedings  to 
replace  stenography  have  been  abandoned.  Save 
for the upgrade of the existing i-justice system, no 
major reform is currently planned to maximise the 
effective  use  of  digital  technologies  in  courts. 
However,  previously  identified  concerns  about  the 
independence 
the 
prosecution service remains. This is mainly due to 
delays  in  advancing  an  ambitious  reform,  which 
should lead to separation of the Attorney General’s 
dual  role  as  legal  adviser  to  the  government  and 
the 
head  of 

the  prosecution  service,  and 

accountability 

system 

current 

and 

of 

particularly  vulnerable  to  corruption  in  Cyprus  is 
public procurement(145) (see also Annex 5). Despite 
very  high  overall  perceptions  of  corruption, 
relatively  few  companies  report  being  asked  for 
gifts, favours or extra money for permits, services 
or  procurement  (Cyprus:  6%;  EU:  10%).  However, 
only  10%  believe  that  those  caught  bribing  a 
senior  official  are  punished  appropriately  (EU: 
33%)(146), suggesting that high perceptions may be 
driven less by day-to-day solicitation and more by 
low confidence in effective enforcement at senior 
levels. 

Cyprus  has  taken  some  steps  to  improve 
prevention  and  detection  of  corruption.  The 
Independent  Authority  Against  Corruption  can 
appoint  its  own  permanent  staff.  An  awareness, 
education  and  prevention  strategy 
is  being 
implemented. Two laws establishing standards for 
regular and detailed asset declarations and audits 
for both elected and appointed officials (including 
politically  exposed  persons  or  ‘PEPs’)  entered  into 
force  and  are  being  enforced.  Compliance  with 
lobbying  rules  is  improving,  which  is  helping  to 
increase  transparency  between  the  private  and 
public  sectors.  Training  courses  on  whistleblower 
reporting were organised and codes of conduct for 
public officials were approved. 

Cyprus has taken some measures to improve 
the 
investigation  and  prosecution  of 
corruption.  Police  investigations  of  corruption 
cases continued steadily while  the Anti-Corruption 
Taskforce  (within  the  Attorney  General’s  Office) 
continued  to  supervise  the 
investigation  and 
prosecution of corruption offences, including high-
level cases. The amounts of recovered assets also 
increased.  A  new  District  Financial  Crime 
Investigation  Office  was  set  up  in  Paphos,  with 
investigators.  Police  acquired 
five  specialised 
direct  access  to  the  Land  Registry  and  the 
Companies  Ultimate  Beneficial  Owners  Registry, 
which  improves  their  investigative  capacity  and 
efficiency,  and  enhances  cooperation  with  other 
Member States. 

(145) European Commission, 2025, Rule of Law Report. 

(146) European Commission, 2025, Flash Eurobarometer survey 
557 on Businesses' attitudes towards corruption in the EU. 

64 

 
 
introduction of an effective review of decisions not 
to prosecute(147). 

(147) For  a  more  detailed  analysis  of  the  performance  of  the 
justice system in Cyprus, see the upcoming 2026 EU Justice 
Scoreboard and the 2025 Rule of Law Report, link. 

65 

 
 
SUSTAINABILITY 
ANNEX 8: INDUSTRY DECARBONISATION, CIRCULARITY AND CLIMATE MITIGATION 

from 

Abating 

emissions 

recommendations 

Cyprus  faces  multiple  challenges,  especially 
on  the  transition  to  a  decarbonised  and 
circular  economy,  as  well  as  on  water 
the 
pollution. 
manufacturing  sector,  especially  from  non-energy 
sources,  requires  additional  efforts.  The  2025 
to  Cyprus 
country-specific 
underscored the need for progress on sustainable 
transport,  to  invest  more  in  waste  management 
infrastructure,  and  for  further  action  to  prevent 
waste  and  improve  the  separate  collection  of 
municipal  and  packaging  waste.  To  promote 
sustainable  transport,  some  measures  are  being 
implemented  but  further  action  is  necessary. 
Despite  increasing  employment  in  the  circular 
economy,  the  implementation  of  the  action  plan 
for  the  transition  to  a  circular  economy  remains 
slow,  with  very  low  scores  on  recycling  rates  and 
on performance in waste management.  

Industry decarbonisation 

Greenhouse gas emissions from industry 

Cyprus’s industrial emissions remain hard to 
abate,  notably  process  emissions  from  the 
non-metallic  mineral  sector  that  includes 
cement production (148). In 2024, manufacturing 
production  provided 
for  18%  of  Cyprus’ 
greenhouse gas emissions, similar to the  share in 
the  EU  overall (149).  With  1.28 kg  CO2eq  per  euro 
of  gross  value  added  (GVA)  in  2023,  the  GHG 

(148) This Annex discusses the transition of Cyprus' manufacturing 
industry, specifically its energy-intensive industries, to low-
carbon and net-zero modes of production, which is key to 
preserving competitiveness on the path towards climate 
neutrality as mandated by the European Climate Law. A 
broader perspective on the current competitiveness 
challenges facing Cyprus' manufacturing industry is provided 
in Annex 5. For a more detailed description of greenhouse 
gas emissions from industry, see European Commission 
(2025), 2025 Country Report - Cyprus, Commission staff 
working document, SWD (2025) 205 final, Brussels, 
4.6.2025, Annex A7. Clean industry and climate mitigation. 

(149) Data on the manufacturing sector exclude the NACE division 
C19 – manufacture of coke and refined petroleum products, 
for better match of the sectoral data from Eurostat (gross 
value added) with those from the UNFCCC under the 
Common Reporting Format. Also see further indicators on 
industry decarbonisation, as well as the annotation for 
further information, in table A8.1 at the end of this Annex. 

66 

emissions  intensity  of  manufacturing  in  Cyprus 
was  the  highest  among  EU  Member  States.  In 
manufacturing, 29% of GHG emissions stem from 
energy  use,  while  the  remaining  69%  are  non-
energy  related,  generated  by  industrial  processes 
and  product  use.  Between  2017  and  2022,  the 
emissions 
intensity  from  non-energy  sources 
decreased  by  7%,  the  lowest  improvement  in  the 
EU  compared  with  an  average  reduction  of  23%. 
Over the same period, the emission intensity from 
energy  use  improved  by  17%,  in  line  with  the  EU 
industries  generated 
average.  Energy-intensive 
17%  of  Cyprus’s  manufacturing  GVA  in  2022,  of 
which  11  percentage  points  came  from  the 
processing  of  non-metallic  minerals  (150).  This 
sector  emits  9.9 kg  of  CO2eq  per  euro  of  GVA  – 
four times the EU average of 2.4kg (151). 

Policies to promote industry decarbonisation 

industries 

Cyprus  has  some  measures 
to  boost 
industrial decarbonisation. Its updated national 
(NECP)  describes 
energy  and  climate  plan 
measures  to  promote  the  decarbonisation  of 
(152).  For 
Cyprus’  energy-intensive 
example,  the  local  cement  industry  is  already 
implementing  a  scheme  to  replace  coal  and  coke 
with  solid  biomass,  mainly  derived  from  waste 
(153). The updated NECP recognises the key role of 
carbon  capture,  utilisation  and  storage  (CCUS)  in 
tackling  hard-to-abate  emissions  (154).  Despite 
lacking a comprehensive CCUS strategy,  Cyprus is 
considering  the  deployment  of  CCUS  systems  for 
EU  ETS  installations  in the  electricity,  cement  and 

(150) See European Commission (2025), 2025 Country Report – 
Cyprus, Commission Staff Working Document, SWD (2025) 
213 final, Brussels, 4.6.2025. Annex A7: Clean industry and 
climate mitigation, pp. 55ff. 

(151) See European Commission (2025), Climate Action Progress 
Report 2025, Commission Staff Working Document – 
Technical Information, November 2025. Section 4.2: Industry 
emissions, pp. 43ff. 

(152) See European Commission (2025), Commission assessment 
of the final updated national energy and climate plan of 
Cyprus, pp. 113ff. 

(153) See European Commission (2024), Final updated National 
Energy and Climate Plan of Cyprus 2021–2030, Brussels, 
December 2024. Section 2.3: Dimension energy security, pp. 
46-47. 

(154) See European Commission (2025), Commission Assessment 
of the Final Updated National Energy and Climate Plan of 
Cyprus, May 2025. Section 2: Consideration of Commission 
Recommendations on draft NECP update, pp. 113ff. 

 
 
 
 
 
 
 
Sustainable transport 

for 

Cyprus 

Cyprus  has  been  taking  some  measures  to 
promote  clean  transport,  but  much  remains 
to be done. Road transport generates the highest 
share  of  effort  sharing  emissions  in  Cyprus,  at 
48%  in  2024  (157).  The  2025  country-specific 
recommendations 
highlighted 
challenges  on  sustainable  transport.  To  address 
this,  Cyprus  is  implementing  a  coordinated  set  of 
legislative,  infrastructural  and  policy  measures  to 
accelerate 
low-emission 
transport system. The legal framework established 
by  Law  117(I)/2023  on  special  measures  for  the 
reduction 
and 
atmospheric 
greenhouse gases originating from road transport 
has  led  to  measures  to  tackle  road  transport 
emissions,  such  as  low-emission  zones  in  urban 
areas (158).  

pollutants 

transition 

to  a 

the 

of 

Graph A8.1: Greenhouse gas emissions in the 
effort sharing sectors, 2005, 2023, and 2024 

emissions, 

industries (155).  To  further  abate 
CY 

ceramics 
its 
develop 
industrial 
decarbonisation  solutions  which  could  then  be 
supported by EU funding programmes such as the 
Innovation Fund. 

should 

Reduction of effort sharing emissions 

Compliance  with  effort  sharing  limits  with 
domestic measures 

Cyprus’s  effort  sharing  emissions  are 
projected  to  be  above  its  target  in  2030; 
earlier  years’  unused  emission  allocations 
are not sufficient to close the gap and achieve 
compliance with the Effort Sharing Regulation (156). 
In  2024,  greenhouse  gas  emissions  from  Cyprus’ 
effort  sharing  sectors  are  expected  to  have  been 
6.4%  above  2005  levels.  By  2030,  current  and 
planned  policies  and  measures  are  expected  to 
lead  to  a  25.9%  reduction,  leaving  a  gap  of  6.1 
percentage  points  to  the  2030  target,  a  32% 
reduction. Cyprus could bridge part of this gap with 
own  unused  annual  emission  allocations  from 
earlier years but would also need allocations from 
other  Member  States  to  achieve  compliance  with 
the  Effort  Sharing  Regulation.  Progressing  to 
climate 
swift 
implementation  of  additional  measures  and  the 
identification of new measures. 

neutrality 

require 

would 

Source: European Environment Agency. 

Grant  schemes  and  other  investments  are 
being deployed to promote cleaner means of 
transport. A grant scheme is being implemented 
under  the  Recovery  and  Resilience  Facility  (RRF), 
with  a  total  estimated  budget  of  approximately 
EUR  50  million.  Completion  is  expected  by  June 
2026.  The  scheme  provides  incentives  for  the 
uptake  of  zero-emission  vehicles,  alongside 
measures  supporting  the  withdrawal  of  older, 
high-emitting  vehicles.  The 
cohesion  policy 
programme  Thalia  2021–2027  invests  EUR 40 
in  sustainable  urban 
million  from  the  ERDF 
mobility  to  improve  alternative,  sustainable  and 
transport. 
environmentally  friendly  modes  of 

(157) See Graph A8.1, and Table A8.1 at the end of this Annex.  

(158) Information  from  Cyprus’  written  response  to  the  2025 

European Semester mission questionnaire. 

(155)See European Commission (2025), 2025 Country Report – 

Cyprus, Commission staff working document, 
SWD (2025) 213 final, Brussels, 4.6.2025.. 55ff. 

(156) The  national  GHG  emission  reduction  target  is  set  out  in 
Regulation (EU) 2018/842 (the Effort Sharing Regulation). It 
applies  jointly  to  buildings  (heating  and  cooling),  road 
transport,  agriculture,  waste  and  small  industry  (known  as 
the effort sharing sectors). The emissions from effort sharing 
sectors for 2024 are based on approximated inventory data. 
The  final  data  will  be  established 
in  2027  after  a 
comprehensive  review.  Projections  about  the  impact  of 
current  policies 
(‘with  existing  measures’,  WEM)  and 
additional  policies (‘with  additional  measures’,  WAM)  as  per 
Cyprus’  2025  reporting  under  Article  17  of  Regulation  (EU) 
2018/1999 (the Governance Regulation). See also European 
Commission  (2025),  Climate  Action  Progress  Report 2025  – 
Technical  Information,  Commission  staff  working  document, 
Brussels, Chapter 9 (pp. 111ff.), and in particular Tables 25 
and 26. 

67 

00.511.522.533.544.55200520232024MtCO2eDomestic transport (excl. aviation)Buildings (under ESR)AgricultureSmall industryWaste 
 
   
 
Under the Social Climate Fund, proposals for grant 
schemes are being promoted for the allocation of 
up  to  EUR  75  million  to  encourage  vulnerable 
users  to  switch  to  cleaner  forms  of  transport,  in 
anticipation of rising fuel costs under ETS2 (159). In 
2024,  it  invested  EUR 19.4 million  from  EU  ETS 
revenues in improving public transport (160). Lastly, 
the  GreenH2CY  project  designed  to  produce 
hydrogen  from  renewable  energy  to  refuel  trucks 
and  replace  diesel  vehicles  in  Cyprus  received 
EUR 4.5  million  from  the  Innovation  Fund.  The 
project is currently under development (161).  

The  share  of  alternative  fuelled  light-duty 
vehicles in Cyprus in 2025 is still very low, in 
the  order  of  0.5%  of  the  fleet.  The  total 
number  of  alternative  fuelled  vehicles  reached 
5 655.  Battery  electric  vehicles  (BEVs)  accounted 
for  the  highest  share  of  alternative  fuelled 
vehicles  (3 404  BEVs  in  total).  There  are  no 
indicating  a 
hydrogen  vehicles  on  Cyprus, 
preference  for  electric  vehicles/BEVs,  in  line  with 
the  overall  EU  trend.  In  terms  of  alternative  fuel 
infrastructure,  by  end  2025  Cyprus  has  installed 
715  AC  and  46  DC  charging  points.  Cyprus  has 
already installed 11 LPG refuelling points (162).  

Cyprus  has  the  second  lowest  recycling  rate  of 
municipal waste in the EU, at 16% (against the EU 
average of 48% in 2023)(163), far below the 2025 
EU  target  of  55%,  and  one  of  the  lowest 
construction  and  demolition  waste  recovery  rates 
at  79%  (against  the  EU  average  of  89%)(164). 
Cyprus  has  filed  no  patents  related  to  recycling 
and secondary raw materials since 2015(165).   

On  the  positive  side,  there  has  been  a  22% 
increase since 2014 in the number of people 
employed  in  the  circular  economy  sector. 
Employment rose to 2.8% of total employment in 
2023,  above the  EU  average  of  2%(166).  However, 
per capita material consumption has increased by 
10.6%  over  the  past  five  years  to  reach  22.14 
in  2024(167).  Resource 
tonnes  per 
productivity increased by 22% from 2019 to 2024, 
but  it  remains  significantly  below  the  EU  average 
(EUR 1.69/kg, against almost EUR 3/kg)(168). Waste 
generation is still one of the highest in the EU. The 
use of secondary  materials was only 5.5% (albeit 
a  significant  increase  since  2016,  when  it  was 
the  EU  average  of  12.2%, 
2.4%),  against 
reliance  on  primary 
underscoring  persistent 
resources (169). 

capita 

Sustainable industry 

Circular economy industry 

Progress  on  implementing  Cyprus’s  2021-
2027  action  plan  for  the  transition  to  a 
circular  economy  is  slow.  The  plan  is  built  on 
four  pillars:  (i)  cultural  change  for  a  circular 
economy  (including  a  grant  scheme  for  SMEs  to 
move  to  circular  economy  models);  (ii)  providing 
incentives for investment in the circular economy; 
(iii) 
economy 
of 
infrastructures; 
(iv)  municipal  waste 
management.  However,  progress  in  most  areas 
remains  limited,  despite  growth  in  employment. 

development 

circular 

and 

Cyprus 

revenue 

While Cyprus performs above the EU average 
on fiscal tools for circular practices, there is 
scope  to  raise  further  revenue  and  reduce 
waste. 
from 
collected 
environmental  taxes  of  EUR 609  million  in  2022, 
representing 2.2% of GDP (EU average: 2.0(170)%).  
Taxes  on  pollution  and  resources,  at  0.25%,  were 
higher than the EU average (0.08%). However, the 
landfill  tax,  which  is  part  of  the  green  taxation 
reform  in  Cyprus’s  RRP  and  was  due  to  be  rolled 
out in 2025 has been delayed. The roll-out of 'pay 
as  you  throw'  schemes  (so  far  only  applied  at  a 
local scale) has also been delayed.  

(163) Eurostat, Recycling rate of municipal waste. Link. 

(164) Techno-economic  and  environmental  assessment  of  CDW 

management, JRC, 2024. Link.   

(165) Eurostat, Patents related to recycling and secondary raw 

(159) Information  from  Cyprus’  written  response  to  the  2025 

materials. Link. 

European Semester mission questionnaire. 

(160) See European Commission (2026), Climate Action Progress 

Report 2025 – Cyprus Country Profile, January 2026. Section 
5: Emissions in effort sharing sectors (ESR), pp. 9-12. 

(161) See European Commission (2025), GreenH2CY: Green 

Hydrogen Project for Transport in Cyprus - Project Factsheet. 

(162) EAFO data. 

(166) Eurostat, Person employed in circular economy sectors. Link. 

(167) Eurostat, Material footprints. Link. 

(168) Eurostat, Resource productivity. Link. 

(169) Eurostat, Circular material use rate. Link. 

(170) European Commission, Environmental Implementation 

Review (2025), Cyprus country report, link. 

68 

 
 
 
Cyprus  performs  significantly  below  the  EU 
average on waste management. Although there 
has  been  an  improvement  since  2010  (but  a 
plateauing over the past three years), the share of 
municipal  waste landfilled  was  still  one  of  the 
highest  in  the  EU,  at  66.4%,  far  above  the  EU 
average (22%) in  2024(171),  while  the  recycling 
rate  was  only  16%(172). At  688 kg  per  capita,  the 
volume  of  municipal  waste  generation  is  still  one 
of  the  highest  in  the  EU(173).  More  broadly,  the 
cohesion  policy  programme  Thalia  2021–2027 
invests  EUR 37.7  million  from  the  Cohesion  Fund 
in the circular economy to promote action that will 
help  Cyprus  meet  its  national  targets  to  improve 
waste collection and management and support the 
transition to a circular economy. 

Cyprus  has  adopted  measures  designed  to 
improve 
the  performance  of  extended 
producer  responsibility  (EPR)  schemes  for 
products  rich  in  critical  raw  materials.  EPR 
schemes  have  been  set  up  for  batteries,  waste 
electrical  and  electronic  equipment  and  for 
construction  and  demolition  waste.  For  vehicles, 
end-of-life  procedures  are  in  place  to  ensure 
sustainable  management.  Reaching  the  circular 
economy  and  waste  management  objectives 
would require an increase in investment of EUR 53 
million  per  year 
from  current  annual 
investments of EUR 71 million), representing 0.2% 
of Cyprus's GDP(174). 

(up 

Bioeconomy industry 

Cyprus's  bioeconomy  supports 
the  country's 
circular economy transition across several sectors. 
This  is  in  line  with  the  National  Circular  Economy 
Action Plan 2021–2027, which covers the primary, 
industrial  and  service  sectors  and  aims  to build a 
industry, 
circular 
businesses  and  consumers(175).  The  food  and 
beverage  sector  leads  by  turnover,  creating  value 
from  agricultural  residues  into  bio-based  outputs 

culture  among 

economy 

(171) Eurostat, Municipal waste by waste management operations. 

Link. 

(172) Eurostat, Recycling rate of municipal waste. Link. 

(173) Eurostat, Municipal waste by waste management operations. 

Link. 

(174) European Commission, Environmental Implementation 

Review (2025), Cyprus country report, Link. 

(175) European Environment Agency, Cyprus country profile, 
available at: cyprus-ce-country-profile-2022_for-
publication.pdf. 

69 

including  essential  oils  and  biocomposites.  The 
wood products and furniture sector is transitioning 
toward  higher-value  circular  applications,  while 
bio-based  chemicals  and  plastics  -  the  highest-
performing  sub-sector  with  9.4%  average  growth 
in  value  added  between  2018  and  2023(176)  -  is 
emerging  through  microalgae  research  and  bio-
based polymer development. Despite these trends, 
labour productivity in the bioeconomy – measured 
as  value  added  per  person  employed  -  fell  from 
64.9% to 52.3% of the national average between 
2018 and 2023(177). R&D business expenditure on 
the  bioeconomy  has  grown  slightly  less  than 
overall R&D expenditure in the country(178).   

Zero-pollution industry 

The  air  quality  in  Cyprus  is  generally  good, 
with  some  exceptions.  Cyprus  has  significantly 
reduced  its  emissions  of  several  air  pollutants 
since 2005, despite continued GDP growth(179). The 
highest  costs  of  air  pollution  are  the  annual 
damages  caused  by  PM10  pollution,  PM10 
pollution,  estimated  at  EUR 95-(180)158  million.  
The European Environment Agency (EEA) estimates 
that  724  years  of  life  are  lost  per  100 000 
inhabitants  attributable  to  air  pollution  from 
PM2.5 concentrations that  exceed 
the  Health 
Organization’s air quality guidelines levels (181), as 
well as the EU average (see Annex 15). This form 
of pollution has seen a mostly upward trend since 
2016 (see Annex 15).  

Cyprus  has  not  levied  any  new  taxes  on 
major  air  pollutants  such  as  NOx,  SO₂  or 
particulate  matter  in  this  period(182).  Bringing  in  a 

(176) Joint Research Centre, Developments of Economic Growth 

and Employment in Bioeconomy Sectors across the EU, Link. 

(177) Ibid. 

(178) Business expenditure in Research and Development (R&D) in 

the EU bioeconomy, JRC analysis. 

(179) European Commission, Environmental Implementation 

Review (2025), Cyprus country report, Link. 

(180) European Commission: Directorate-General for Environment, 
EMRC, Logika Group and RPA Europe; Update of the costs of 
not implementing EU environmental law (2025), Link. The 
damage cost is computed as VOLY.    

(181) EEA, 2025, Harm to human health from air pollution in 

Europe: burden of disease status, 2025, Link.   

(182) European Commission: Directorate-General for Environment, 
Camboni, M., Markandya, A., Tyrer, D., Goonesekera, S. et al., 
Greening the European Semester – Resource and pollution 
taxes. Annex 6, Country factsheets, Publications Office of the 
European Union, 2026. Link. 

 
 
 
system to tax pollution could reduce pollutants by 
rate,  while 
7-30%,  depending  on 
generating  up  to  EUR 8  million  in  revenue  by 
2030(183).   

the 

tax 

under 

Water pollution  from  industry is a  cause  for 
concern.  There  has  been  a  546-fold  increase  in 
industrial  heavy  metal  emissions 
(cadmium, 
mercury, nickel and lead) to water since 2010, as 
reported 
Emissions 
Directive(184).  On  the  positive  side,  82.1%  of 
Cyprus’s  surface  water  bodies  is  reported  to 
achieve  good  chemical  status.  Water  pollution  by 
industry imposes direct and indirect costs of EUR 2 
million  annually(185),  not  yet  sufficiently  borne  by 
the polluters.  

Industrial 

the 

healthcare 

The  total  economic  cost  of 
industrial 
pollution in Cyprus is EUR 0.7 billion per year 
encompassing 
lost 
productivity(186)  and  environmental  degradation. 
However, investment still falls short of the needs. 
To  meet  national  and  EU  targets  on  pollution 
prevention  and  control,  Cyprus  would  need  to 
spend  an  additional  EUR 33  million  per  year 
(0.12% of GDP), mostly on (187) measures.     

expenses, 

(183) European  Commission:  Directorate-General  for  Environment, 
Camboni, M., Markandya, A., Tyrer, D., Goonesekera, S. et al., 
Greening  the  European  Semester  –  Resource  and  pollution 
taxes. Annex 6, Country factsheets, Publications Office of the 
European Union, 2026. Link. 

(184) EEA, Water pollutant releases changes from 2010 to 2022 

for the EU Member States, 2024, Link. 

(185) European Commission: Directorate-General for Environment, 
IEEP, Green taxation and other economic instruments – 
Internalising environmental costs to make the polluter pay, 
2021, Link. 

(186) EEA, The cost of health and the environment from industrial 
air pollution in Europe - 2024 update, 2024. Link. The costs 
reported are computed as value of a statistical life.   

(187) 2025 Environmental Implementation Review (SWD(2025) 

304 final), country report – Cyprus, Link. 

70 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table A8.1:  Key clean industry and climate mitigation indicators: Cyprus 

Sources and notes: Industry decarbonisation: All data are from Eurostat; data following the UNFCCC Common Reporting 
Format (CRF) are from the European Environment Agency (EEA), republished by Eurostat. (1) Sectors covered: all divisions of 
section C - Manufacturing - of the NACE Rev. 2 statistical classification of economic activities, except C19 (manufacture of coke 
and refined petroleum products). (2) GHG emissions as per UNFCCC Common Reporting Framework (CRF) categories 1.A.2 - fuel 
combustion in manufacturing in industries and construction (that broadly correspond to the broadly correspond to the NACE 
sections C - Manufacturing and E - Construction, excluding C-19),  and CRF2 - industrial processes and product use. The figures 
shows the emissions in the 1.A.2 category as a share of the sum of CRF1.A.2. and CRF2 emissions. (3) Sectors covered: CRF 1.A.2 
as described above. Gross value added (GVA) data in the denominator aligned in sectoral coverage, in 2020 prices. (4) Sectors 
covered: NACE section C excluding C19. (5) Nominator: NACE divisions C17, 20, 23, 24; denominator: NACE section C excluding 
C19 (see above). (6) GVA (denominator) in 2020 prices. Reduction of effort sharing emissions: Data source: European 
Environment Agency, greenhouse gas data viewer; European Commission, Climate Action Progress Report, 2025. For details, see 
the footnote in the "Reduction of effort sharing emissions" section. Sustainable road transport: (7) Source: Eurostat; (8) Source: 
European Alternative Fuels Observatory; (9) Source: Eurostat. For all climate mitigation indicators, the trend arrows compare the 
latest available data (year t) with the data four years earlier (t-4). Sustainable industry: Bioeconomy value added, employment 
and productivity: JRC, Developments of Economic Growth and Employment in Bioeconomy Sectors across the EU. Bioeconomy 
R&D business expenditure: JRC, Business expenditure in Research and Development (R&D) in the EU bioeconomy. Damage cost for 
industrial pollution: EEA, The costs to health and the environment from industrial air pollution in Europe, 2024. Water industrial 
pollutants releases: EEA, Industrial releases of pollutants to water and economic activity in the EU-27, 2024. Water chemical 
status: WISE, Surface water bodies: Chemical status, 2024 and WISE Groundwater bodies: chemical status, 2024. Other indicators: 
Eurostat. For circular economy indicators, the trend arrows compare the latest available data (year t) with the data two years 
earlier (t-2). 

71 

Climate mitigationTrendIndustry decarbonisation201820192020202120222023202420182023GHG emissions intensity of manufacturing production, g/€ (1)127011411255123713791277-330-Share of energy-related emissions in industrial GHG emissions (2)31.332.230.730.329.928.7-55.557.9Energy-related GHG emissions intensity of manufacturing and construction, g/€ (3)462.4435.5445.7452.6510.5452.8-203.9163.0Share of electricity and renewables in final energy consumption in manufacturing, % (4)34.633.636.138.237.838.436.642.843.9Energy intensity of manufacturing, GWh/€ (4)2.081.892.102.112.352.091.971.271.05Share of energy-intensive industries in manufacturing production, % in GVA (5)16.4216.6217.9217.6716.6519.05---GHG emissions intensity of production in sector [...], g/€ (6)- paper and paper products (NACE C17) 202          184          242                 129            122                  110           -722             619            - chemicals and chemical products (NACE C20) 169          172          195                 263            457                  335           ---- other non-metallic mineral products (NACE C23) 10 353     8 798       9 006              9 553         11 045             8 859        -2 495          2 352         - basic metals (NACE C24) 177          166          143                 82              109                  66             -2 842          3 099         Reduction of effort sharing emissions201820192020202120222023202420182023GHG emission reductions relative to base year, % -6.9-5.7-4.46.4- domestic road transport0.21.5-9.1-7.9-5.22.82.9-1.4-5.6- buildings-22.1-9.7-14.8-19.6-14.8-23.7-23.7-20.3-33.520052021202220232024TargetWEMWAMEffort sharing: GHG emissions, Mt; target, gap, %4.34.04.04.14.5-32.0%-3.8%-25.9%Sustainable road transport2018201920202021202220232024202520182021New zero-emission vehicles, electricity motor, % (7)0.040.460.410.743.465.387.921.038.96Number of publicly accessible AC/DC charging points (8)--476067329512761446956n/aShare of electrified railways, % of total (9)-------55.4756.49Sustainable industryTrendEU-27Circular economy transition20182019202020212022202320242018latest dataMaterial footprint, tonnes per person19.520.019.119.919.921.222.114.813.7Circular material use rate, %2.8            3.2           3.8                  5.8             8.3                    5.4             5.511.612.2Resource productivity, €/kg1.4            1.4           1.4                  1.4             1.7                    1.7             1.72.13.0Employees in circular economy2.9            2.92.8                  2.9             2.8                    2.8             -2.12.0Patents in circular economy0-           -                  -            12.312.0Recycling rate           16.8           16.9                  17.0             14.0                   14.8            15.8 15.8            46.4048.1Plastic recyling 54%50%49%42%39%:-41%42%Construction and demolition waste (CDW) recovery 64-798889Bioeconomy industry 2018201920202021202220232024CAGR 2018-202320182023Value added, million EUR9471 0281 0201 0209981 083-2.3%642 438863 436Employment, total number of people employed33 08334 37134 65135 21536 20336 621-1.7%17 649 04017 085 642ProductivityValued added per worker, thousand EUR28.629.929.429.027.629.6-0.5%36.450.5Valued added per worker, % of national average64.965.866.558.951.152.3--3.5%62.270.7R&D business expenditureTotal bioeconomy (biomass producing and converting sectors)5677888.1%15 67223 335Total R&D business expenditure547182848690-8.8%196 587259 525Zero pollution industry201820192020202120222023202420182021Damage cost for industrial pollution0.80.80.70.7---414.9352.7Water industrial pollutants releases 2021change (2010)2021change (2010)2021change (2010)2021change (2010)427          22384%612 079          297%-                   no data110 562      151% Water chemical statusGood174                 Good (%)0.8                    Poor32.0Poor (%)15%EUTOCPhosporusCyprusCyprusCd, Hg, Ni, Pbnitrogen 
 
  
 
 
ANNEX 9: AFFORDABLE ENERGY TRANSITION 

This  annex  outlines  the  progress  made  and 
the  ongoing  challenges  faced  in  increasing 
energy  affordability,  while  advancing  the 
transition 
the 
implementation  of  past  energy-related  country-
specific recommendations (CSRs). 

to  net  zero. 

reflects 

It 

2025 

highlighted 

interconnections  with 

country-specific 
Cyprus’s 
challenges 
recommendations 
regarding  the  island’s  energy  isolation,  its 
heavy  reliance  on  fossil  fuels  and 
its 
underexploited  potential  for  renewables.  The 
recommendations  called  on  Cyprus  to  develop 
energy 
neighbouring 
countries  and  to  upgrade  its  electricity  grid  to 
accommodate  more 
renewables.  Furthermore, 
Cyprus  was  encouraged  to  deploy  large-scale 
energy  storage  to  mitigate  the  curtailment  of 
renewable  energy  and 
to  scale-up  energy 
efficiency  funding.  Overall,  Cyprus  has  made 
progress with the roll-out of smart meters but still 
needs  to  address  major  delays  affecting  the 
delivery  of  storage  infrastructure  and  the  Great 
Sea Interconnector project. 

 Energy prices and costs 

Electricity  energy  prices  in  Cyprus  remain 
above  the  EU-27  average  despite  falling 
slightly in early 2025. Cyprus has reduced non-
recoverable  taxes  and  levies,  which  fell  by  nearly 
10% compared to the previous year. Nevertheless, 
average  household  electricity  prices  in  the  first 
half  of  the  year  were  EUR 0.2932/kWh,  while 
industrial  prices  were  EUR 0.2267/kWh  (the  third 
highest in the EU). For large businesses, taxes and 
non-household 
levies 
consumers  accounted  on  average  for  30%  of 
electricity  bills,  whereas  for  household  consumers 
non-recoverable  taxes  and  levies made  up  29.2% 
of  bills (the  second  highest  in  the  EU)(188).  Energy 
poverty  remains  a  pressing  issue  in  Cyprus  (see 
Annex 12). 

(excluding  VAT) 

for 

(188)Eurostat.  

72 

Graph A9.1: Electricity and gas prices for 
household and non-household consumers, first 
half of 2025 

(i) For household consumers, the consumption band is DC for 
electricity and D2 for gas. 
(ii) For non-household consumers, the consumption band is ID 
for electricity and I4 for gas. VAT and recoverable charges are 
not displayed for non-household consumers as these are 
typically recovered by businesses. This also applies to the ‘% 
of taxes and levies’, which is shown excluding VAT and 
recoverable charges for non-household consumers. 
(iii) ‘Without taxes and levies’ indicates the retail price 
excluding all taxes and levies. It always includes the 
energy/supply and network cost components, which are not 
disaggregated in Eurostat’s six-monthly price dataset. 
Source: Eurostat 

Flexibility and electricity grids 

launched 

important  milestone 

In  October  2025,  Cyprus 
its 
competitive electricity market, which marked 
an 
its  energy 
transition. More work remains to be done so that 
the  various  timeframes  on  which  the  market  is 
based  mature  and  align  with  those  of  other  – 
interconnected – Member States. 

in 

2025 

called 

country-specific 
Cyprus’s 
energy 
for 
recommendations 
interconnections 
to  be  developed  with 
neighbouring  countries,  notably  with  Greece, 
through  the  Great  Sea  Interconnector  (GSI) 
project,  as  the  country  remains  the  only  EU 
Member  State  isolated  from  the  internal 
energy  market.  The  project,  which  in  its  first 
phase will connect Cyprus to Greece through Crete, 
has been beset by delays. As a Project of Common 
Interest,  it  has  received  substantial  EU  funding 
from the Connecting Europe Facility (CEF), notably 

 
 
 
 
 
 
 
 
the  largest  ever  grant  to  a  single  Project  of 
Common  Interest  of  EUR 658 million  to  construct 
the  section  between  Cyprus  and  Crete.  Moreover, 
the  project  is  one  of  eight  Energy  Highways 
included in the European Grids Package. 

its  electricity 

Despite  Cyprus’s  2025 
country-specific 
recommendation  to  upgrade  the  electricity 
grid  to  accommodate  an  increasing  share  of 
renewables,  the  country  has  again  seen 
major  delays  in  the  connection  of  new 
renewables plants to the grid. This stresses the 
importance  of  Cyprus  further  expanding  and 
upgrading 
system  and  grid, 
something  which  is  currently  under  progress.  The 
level  of  curtailment  of  renewable  energy  remains 
a very serious issue greatly hampering renewables 
consumption  from  increasing  in  Cyprus.  In  2025, 
the  curtailment  of  renewable  energy  went  up  by 
83%  compared  to  2024,  reaching  306 GWh 
(167 GWh  in  2024).  Under  the  EU’s  cohesion 
policy,  the  Thalia  2021–2027  programme 
is 
investing EUR 97.1 million from the Just Transition 
Fund  in  increasing  the  incorporation  of  renewable 
energy sources into the energy mix and supporting 
energy-intensive  businesses,  while  also  helping to 
upskill 
training  and 
through 
the  workforce 
education in green skills and jobs. 

its 

the 

Cyprus  has  no  non-fossil  electricity  storage 
capacity  in  operation  and  has  experienced 
levels  of  renewable  energy 
record-high 
curtailment  due  to 
lack  of  storage 
capacity  and  grid  flexibility.  In  an  effort  to 
address 
country-specific 
2025 
recommendation  to  deploy  energy  storage,  there 
are  projects  being  under  development  and  the 
Cypriot Ministry of Energy, Commerce and Industry 
last  year  published  guidelines  on  a  grant  scheme 
for  energy  storage  systems  in  combination  with 
renewable  energy  sources,  with  a  total  budget  of 
EUR 35 million.  Even 
regulatory 
framework  for  storage  has  been  in  place  since 
2019 and permits were issued in 2023 for stand-
alone  and  co-located  storage  facilities,  no  project 
has yet been brought into operation. Cyprus would 
benefit  from  further  encouraging  and  developing 
energy storage capacity and grid flexibility in order 
to avoid future curtailment and prevent blackouts 
as observed during the summer of 2025. 

though 

the 

country-specific 

recommendation 

procurement  challenges  and  delays.  Cyprus 
has  thus  made  progress  towards  achieving  the 
2025 
on 
upgrading  the  grid.  The  objective  is  to  install 
400 000  smart  meters  by  2027,  followed  by  a 
second  phase  where  an  additional  200 000 
meters  will  be  installed,  covering  all  electricity 
consumers.  The  deployment  of  smart  meters  will 
help  to  empower  consumers  and  support  new 
capacity,  including  photovoltaic,  in  the  electricity 
system through smart energy services. Cyprus has 
renewable  energy 
introduced  provisions  on 
energy 
communities 
communities  (CECs)  in  its  national  framework. 
Furthermore, Cyprus’s Energy Regulatory Authority 
(CERA)  has  adopted  a  ‘Regulatory  framework  to 
promote and facilitate the development of energy 
communities  and  renewable  energy  communities’, 
aimed  at  simplifying  the  activation  of  energy 
communities. Despite this, progress in establishing 
energy communities has been slow. 

citizen 

(RECs) 

and 

In  2024,  electricity  accounted  for  27.4%  of 
Cyprus’s  final  energy  consumption  (above 
the EU average of 23.4%), a share which has 
increased  slightly  over  the  last  decade(189). 
Electricity  accounts  for  46.4%  and  21.5%  of 
household and industrial final energy consumption 
respectively (see Annex 8). In the transport sector, 
the  share  accounted  for  by  electricity  remains 
negligible 
in 
electrification  across  sectors  would  help  to  cost-
effectively decarbonise the economy and bring the 
benefits  of  affordable  renewable  generation  to 
consumers. 

at  0.1%. 

progress 

Further 

Renewables and long-term contracts 

Cyprus  has  made  progress  deploying 
renewables, with 27.4% of its electricity mix 
supplied by renewables in 2025, as compared 
to  24%  in  2024(190).  Installed  capacity  for 
renewables  in  Cyprus  represented  1,042  MW  in 
2025,  an  increase  of  13.3%  compared  to  2024 
(920 MW). Installed capacity for wind energy grew 
to  170  MW  in  2025  (compared  to  158  MW  in 

Financed  by  the  Recovery  and  Resilience 
Facility,  Cyprus  began  the  roll-out  of  smart 
electricity  meters  in  early  2025,  following 

(189)CAGR (compound annual growth rate) of 1.16% between 
2015 and 2024 and minimum/maximum share of 24.6% and 
26.0%, respectively (Source: Eurostat).  

(190) ENTSO-E Transparency Platform. 

73 

 
 
(+14.6%  compared 

2024,  +7.6%),  whilst  installed  capacity  for  solar 
to  2024), 
grew  notably 
reaching  861  MW(191).  In  the  final  version  of  its 
updated  national  energy  and  climate  plan,  Cyprus 
set  a  renewables  target  of  33.17%  by  2030,  just 
above  the  contribution  calculated  under  the  EU 
Regulation on the Governance of the Energy Union 
and  Climate  Action.  Furthermore,  under  the  EU’s 
cohesion 
2021–2027 
programme is investing EUR 22.1 million from the 
European Regional Development Fund and the Just 
Transition  Fund  in  the  promotion  of  renewable 
energy sources. 

policy, 

Thalia 

the 

to 

regard 

In  2025,  Cyprus  adopted  a  new  law  in  order 
to  amend  pre-existing 
legislation  and 
transpose  a  new  ambitious  permitting 
framework  for  renewables  in  line  with  the 
revised Renewable Energy Directive, however 
work  is  still  needed  to  fully  transpose  the 
Directive.  Cyprus  has  expanded  its  digital  one-
stop-shop/single  point  of  contact  by  including  a 
digital permitting portal. However, issues remain in 
incorporating  and 
particular  with 
the  ministries  and  authorities 
coordinating 
involved  in  the  licensing  process.  Interest 
in 
storage projects (stand-alone and co-located solar 
and battery storage – mostly lithium batteries) has 
increased  significantly,  however  the  permitting 
process  has  been  causing  major  delays.  In  2025 
Cyprus  delivered  on  its  commitment  to  install 
12 MW  of  onshore  wind  capacity  as  one  of  its 
Wind  Pledges  under  the  European  wind  power 
action  plan.  As  a  result,  the  total  installed  wind 
capacity reached 170 MW. In addition, no schedule 
the  expected  allocation  of  support  for 
on 
renewables  has  been  published  on  the  Union 
Renewables  Development  Platform.  Nevertheless, 
the  Cypriot  government  is  continuing  its  support 
scheme  under  Cyprus’s  recovery  and  resilience 
plan  aimed  at  fitting  existing  homes  with 
photovoltaic systems and/or roof insulation(192). 

renewable 

Once  again,  Cyprus  has  yet  to  register  any 
corporate 
purchase 
agreements,  in  part  due  to  ongoing  market 
liberalisation.  Similarly,  contracts  for  difference 
continue to suffer from a lack of visibility. 

power 

(191) Renewable capacity statistics 2026, IRENA. 

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

74 

Graph A9.2: Cyprus’s installed renewable capacity 
vs electricity generation mix 

Electricity mix is given as net electricity generation (gross 
electricity production minus consumption of power stations’ 
auxiliary services). Electricity produced in pumped hydro 
plants is excluded from total net electricity production, as it 
was previously counted as electricity produced from another 
source. 
“Other” includes renewable municipal waste, solid biofuels, 
liquid biofuels, and biogas. 
Source: IRENA, Eurostat 

Energy efficiency 

Cyprus  has  failed  to  make  progress  on 
energy  efficiency,  thus  its  2025  country-
specific recommendation to scale-up funding 
for  energy  efficiency  remains  relevant.  In 
2024, final energy consumption (FEC) increased by 
2.6%  to  1.92  Mtoe,  as  compared  to  2023, 
continuing the slight upward trend observed since 
2019.  Cyprus’s  FEC  in  2024  was  not  in  line  with 
the trajectory for meeting its expected contribution 
by  2030.  While  FEC  since  2019  has  decreased  in 
the  residential  sector  (-3.6%),  it  has  increased  in 
industry  (+8.0%),  services  (10.6%)  and  transport 
(+1.1%).  

in 

the 

Between  2019  and  2024,  final  energy 
consumption 
residential  sector 
decreased  by  3.6%,  mostly  driven  by  energy 
savings  by  households,  including  changes  in 
heating  behaviour.  This  decrease  in  residential 
final  energy  consumption  is  largely  in  line  with 
Cyprus’s  2020 
long-term  renovation  strategy, 
which  set  an  objective  of  an  8%  reduction  in 
energy  consumption  between  2020  and  2030. 
Given  that  buildings  are  responsible  for  32%  of 
energy use in Cyprus, they play  an important role 
in 
improving  energy  efficiency.  Cyprus  has 
submitted  its  draft  national  building  renovation 
plan  pursuant  to  the  recast  of  the  Energy 
Performance  of  Buildings  Directive  in  order  to 

 
 
 
towards  achieving 

ensure  a  clear  and  predictable  pathway  towards 
an  energy  efficient  and  decarbonised  building 
stock.  Heating  and  cooling  account  for  70%  of 
Cyprus’s residential final energy consumption, with 
renewables  supplying  43%  of  total  energy  used 
for  heating  and  cooling  across  all  sectors. 
Furthermore,  heat  pumps  account  for  23%  of 
residential final energy consumption, while boilers 
make  up  41.5%.  Cyprus’s  Renewable  Energy 
Sources  and  Energy  Conservation  Fund  and  its 
Save-Upgrade  Homes  grant  scheme  provide 
support  for  improving  the  energy  performance  of 
buildings,  including  for  vulnerable  households. 
However,  the  way  the  support  schemes  are 
designed could be improved to better target multi-
In  2025,  Cyprus  made 
apartment  buildings. 
intermediate 
progress 
target set under its recovery and resilience plan to 
improve  the  energy  performance  of  at  least 
16 200 dwellings, including 1 600 households with 
vulnerable  electricity  consumers.  This  measure, 
which benefits from financial support, is aimed at 
achieving,  on  average,  a  reduction  in  primary 
energy  demand  of  at  least  30%.  Furthermore, 
under  the  EU’s  cohesion  policy,  the  Thalia  2021–
2027 programme is investing EUR 76 million from 
the  European  Regional  Development  Fund 
in 
energy  efficiency  by  supporting  actions  that  will 
increase the energy performance of existing public 
and private buildings. Cyprus has not reported any 
ecodesign  or  energy  labelling  checks  since  2010, 
which is a major breach of its legal obligations and 
field, 
seriously  undermines  a 
consumer benefits and the EU's environmental and 
energy goals. 

level  playing 

the 

the 

2025 

against 

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  up  to  the  fifth  Union 
list,  however  the  project  has  been  hit  by  major 
delays.  In  terms  of  Cyprus’s  internal  distribution 
grid,  no  progress  has  been  to  upgrade  the  grid, 
going 
country-specific 
recommendation  to  diversify  Cyprus’s  energy 
supply. Cyprus currently benefits from a temporary 
exemption 
gas 
interconnection rules due to certain projects which 
feature  on  the  Union  list  of  Projects  of  Common 
Interest and Projects of Mutual Interest. One such 
project is the EastMed project, a pipeline intended 
to  transport  gas  from  the  Levantine  Basin  to 
Cyprus  and  then  on  to  Greece,  which  will  link 
Cyprus  to  the  continental  European  gas  grid  via 
Greece. The project is in the pre-application stage 
as  the  project  promoter  has  not  yet  filed  a 
completed application.  

regards 

natural 

EU 

as 

In  response  to  the  regional  crisis  in  the 
Middle  East,  Cyprus  has  reduced  duties  on 
petrol  and  transport  fuels  to  EU  Energy 
Taxation  Directive  minima  and  introduced 
vulnerable 
electricity 
Additional 
households 
measures  include  a  VAT  reduction  on  electricity 
from  21%  to  5%  (1  May  2026-31  March  2027), 
30%  wage  subsidies  for  the  hotel  industry,  and 
fertiliser subsidies for farmers.  

subsidies 
and 

businesses. 

for 

Security of supply and diversification   

In 2024, Cyprus’s energy mix(193) continued to 
be  dominated  by  fossil  fuels,  with  oil  and 
petroleum products accounting for 85.2%  of 
gross  inland  consumption,  and  renewables 
(including  biofuels)  accounting  for  12.3%. 
This  is  not  in  line  with  Cyprus’s  2025  country-
specific recommendation to reduce its  reliance on 
fossil fuels and diversify its energy supply. 

(193) Source: Eurostat. Electricity and heat are excluded from gross 
inland consumption to avoid double-counting. The focus is on 
primary energy sources. 

Fossil fuel subsidies 

In  2024,  environmentally  harmful  ([1])  fossil 
fuel  subsidies  without  a  planned  phase-out 
represented  0.11%([2])  of 
before  2030 
Cyprus’s  GDP([3]).  However,  Cyprus’s  2023 

([1])  Explicit fossil fuel subsidies (e.g. direct transfers) and implicit 
fossil fuel subsidies (i.e. tax expenditures linked to forgone 
tax revenues that have an identifiable fiscal impact for the 
central budget) that support fossil fuel energy production, 
transmission and/or consumption. 

([2])  European Commission calculation based on underlying data 
from the Study on energy subsidies and other government 
interventions in the EU – 2025 edition, Enerdata.  

([3])  2024 Gross Domestic Product at market prices, Eurostat. 

75 

 
 
 
Effective  Carbon  Rate([5])  averaged  EUR 76.47  per 
tonne  of  CO₂,  below  the  EU  weighted  mean  of 
EUR 84.80(194). 

([5])  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. 

(194) OECD (2024), Pricing Greenhouse Gas Emissions 2024. 

76 

 
 
 
ANNEX 10: CLIMATE ADAPTATION, PREPAREDNESS AND ENVIRONMENT 

Cyprus  would  benefit  from  increasing  its 
efforts  and  become  more  resilient  and 
prepared  for  the  increasing  negative  impact 
of  climate  change.  A  comprehensive  new 
adaptation strategy and action plan were finalised 
last  year  (their  adoption  is  still  pending)  and  its 
governance  system  can  be  improved  (the  specific 
CSR  was  issued  on  this  in  2025).  Wildfire  risk  is 
the  main  critical  issue  that  would  benefit  from 
increased  prevention  measures.  As  highlighted  in 
the  2025  CSR,  Cyprus’s  high  exposure  to  climate 
change  impacts  calls  for  significant  investments 
across sectors (for example, in further progressing 
on systematic climate-proofing of infrastructure – 
including  in  coastal  areas  –  and  sustainability  of 
the transport system).  

Cyprus also faces chronic water scarcity. This 
poses  challenges  for  water-dependent  sectors  – 
particularly 
for  sustainable  water  use  and 
wastewater treatment  -  and entails a high risk of 
hydropower  reduction.  Ageing  infrastructure  is 
causing drinking water leaks. Cyprus is addressing 
these  issues  through  its  recovery  and  resilience 
is  funding  several  water-related 
plan,  which 
actions,  as  well  as  ESIF,  with  funds  for  water 
actions  increasing  in  the  context  of  the  mid-term 
review. The 2025 CSR highlighted the need to step 
up  investment  in  water  and  wastewater,  and  to 
promote sustainable water use practices. Cyprus is 
also struggling with habitat degradation, and with 
environmental  and  public  health  risks  due  to 
agricultural  pollution  (particularly  from  nitrates 
and pesticides). Finally, Cyprus’s slow transition to 
a circular economy highlights the need for further 
efforts  to  improve  resource  efficiency,  waste 
reduction and sustainable practices.  

Climate adaptation and preparedness  

is  subject  to  climate  risks  and 
Cyprus 
extreme  weather  events  and  still 
lacks 
substantial resources for climate adaptation. 
Wildfires and water scarcity pose the highest risk. 
The  2025  wildfire  season  in  Cyprus  was  marked 
by  extreme  conditions 
(including  a  severe 
heatwave  and  dry  weather)  that  resulted  in  the 
worst  wildfire in Cyprus’s history, burning an area 
almost as large as Nicosia. In July, fires destroyed 
and damaged houses, agricultural land and Natura 
2000  sites;  and  killed  two  people.  In  addition, 
increasingly  affecting 
climate 

changes  are 

77 

the 

the  preparation  of 

fisheries  and  aquaculture  (195).  In  February  2025, 
Cyprus  presented  its  revised  national  adaptation 
strategy  (NAS)  for  2025-2050,  containing  an 
adaptation plan. The NAS is still awaiting adoption 
at  the  ministerial 
level.  A  relevant  technical 
support instrument (TSI) project, which was signed 
in November 2023 and initiated in January 2024, 
supported 
revised 
adaptation  strategy  and  plan.  Cyprus  intends  to 
reduce its vulnerability to climate change impacts 
by  strengthening  its  governance  and  promoting 
cross-sectoral  coordination.  The  revised  NAS  has 
15 policy areas and 118 measures (each measure 
will  be  linked  to  the  strategic  goals  of  these 
15 policy areas and to 2 cross-sectoral areas). The 
NAS is accompanied by a national adaptation plan, 
which outlines how the NAS is to be implemented. 
It particularly specifies how adaptation efforts are 
to be  coordinated and allocates responsibilities to 
local  authorities  and 
individual  ministries, 
remains 
stakeholder  groups. 
unclear  how  the  whole  government  approach  to 
implementing  the  new  NAS  will  be  organised  and 
how 
the  governance  system 
implementing the Climate Law. 

It  nevertheless 

relates 

to 

it 

the 

issued 

in  2025. 

strengthening  adaptation 
The  CSR  on 
governance  was 
It 
recommends  prioritising  modalities  and  resources 
and  raising  awareness  at  the  interinstitutional 
level  of 
importance  of  mainstreaming 
resilience  and  climate  adaptation  for  more 
effective  implementation.  Other  CSRs  tackle  the 
challenges  of  water  and  waste  management; 
strengthening  governance  and  mainstreaming 
level; 
climate  adaptation  at  the 
climate 
sustainable 
assessment; 
transport. 

institutional 
and 

risk 

limited 

protection, 

Sub‑national  actions  currently  focus  on 
nature‑based 
heat‑wave 
infrastructure  and 
infrastructure 
rehabilitation.  Broader  EU‑supported  projects 
promote  cross‑regional  learning  and  sector‑wide 
resilience. Local and regional authorities in Cyprus 
the  primary  beneficiaries  of  EU‑funded 
are 
the 
adaptation  programmes.  Only  2%  of 

(195) Coastal areas in Cyprus depend strongly on maritime 

activities, where fisheries and aquaculture play an important 
role for local livelihoods. Strengthening climate adaptation 
and preparedness in these sectors, together with improved 
monitoring, data collection and fisheries control, would 
support ecosystem protection and the resilience of coastal 
communities. 

 
 
 
 
population  is  covered  by  the  EU  Covenant  of 
(EU-27: 34%).  There  are 
Mayors  signatories 
13 signatories and 7 action plans. 

their 

impact 

The  Ministry  of  Finance  has  responded  to 
climate-related  challenges  by  starting  to 
integrate  climate  assessment  into  its  fiscal 
planning  with  the  aim  of  assessing  and 
on  Cyprus’s 
mitigating 
economy (196).  The  Cyprus  Fiscal  Council  has 
highlighted  the  urgent  need  to  address  climate-
related  fiscal  risks,  citing  the  devastating  wildfire 
in mountainous Limassol in July 2025. It has also 
criticised  the  slow  progress  being  made 
in 
implementing 
the  Cyprus’s  Green  Agenda 
(including  the  National  Energy  and  Climate  Plan, 
EU  Emissions  Trading  Scheme II  and  climate 
mitigation  spending).  The  Fiscal  Council  has  also 
called  on  the  government  to  begin  integrating 
climate adaptation and resilience spending into its 
fiscal  plans.  It  warns  that  the  lack  of  such 
preparation  may  jeopardise  both  the  meeting  of 
budgetary targets and broader economic stability.  

There  is  a  significant  gap  between  the 
amount  of  investment  that  is  needed  for 
climate  change  adaptation  and  the  amount 
is  currently  planned.  The  Cyprus 
that 
Institute (197)  has  estimated  that  Cyprus  needs 
additional  adaptation  investment  up  to  2050  of 
EUR 3.4 billion (0.4% of GDP per year until 2050). 
Cyprus’s  national  economy  can  sustain  this,  but 
less  than  30%  is  currently  planned.  To  put  the 
challenge in context, the total EU-wide adaptation 
investment need until 2050 has been estimated at 
the 
EUR 70 billion  per  year. 
economic impacts, the unmitigated climate crisis is 
undermining social justice – Cyprus is expected to 
have  one  of  the  most  severe 
impacts  on 
the  EU.  Cyprus’s 
vulnerable  households 
insurance protection gap for floods, coastal floods 
and  windstorms 
(i.e. the  difference 
is  small 
between  the  cost  of  natural  disasters  and 
insurance  coverage  is  considered  not  relevant). 
However,  this  gap  is  larger  for  wildfires  and 
earthquake  and  will  need  to  be  monitored  going 
forward. 

In  addition 

to 

in 

Climate-proofing 

has 

not 

been 

(196)See Cyprus Ministry of Finance (2026), Cyprus Medium-Term 
Fiscal-Structural Plan for the period 2025-2028. 

(197)See  The  Cyprus  Institute  (2025),  Investment  Needs  and 
Benefits from the Adaptation of Cyprus to Climate Change. 

78 

recent 

infrastructure.  A 

systematically  applied  across  sectors  and 
study (198) 
key 
commissioned by DG CLIMA estimates that Cyprus 
will  need  to  invest  almost  EUR 117 million  per 
year  up to  2050  (0.3%  of  annual  GDP  and  below 
in 
the  EU  average  of  0.5%)  –  primarily 
infrastructure  (42%  of  the  total),  ecosystems 
(31%) and food (15%). The Transport Vulnerability 
index  is  considered  medium  (0.4)  so  as  the 
adaptation investment needs on the TEN-T by mid-
century). All Cyprus’s TEN-T airports are vulnerable 
to wildfires (199). 

in 

The Cohesion Policy programme Thalia 2021-
2027  is  investing  EUR 61 million  from  the 
Cohesion  Fund 
implementing  climate 
change  adaptation.  It  supports  actions  such  as 
coastal  protection  against  erosion;  flood  risk 
mitigation 
risk 
management 
(including  measures 
addressing wildfire risks and integrated emergency 
coordination centres). 

infrastructure;  and  disaster 

systems 

Water resilience 

Cyprus  is  experiencing  severe  chronic  water 
scarcity,  and 
the  situation  has  been 
particularly  challenging  over  the  past  year. 
Agriculture and water utilities are among the most 
water-dependent  sectors (200).  The  national  water 
exploitation  index  (WEI+) (201),  a  measure  of  how 
much water is being used compared with the total 
renewable  freshwater  resources  available  for  a 
given  territory  and  period,  supports  this  evidence. 
The Joint Research Centre’s European Drought Risk 
Atlas indicates that Cyprus has one of the highest 
levels of risk of hydropower reduction and suffers 

(198)See  European  Commission 
(2026),  Assessment  of 
adaptation  investment  needs,  Table  25.  The  study  provides 
detailed estimates of adaptation investment needs at the level 
of the EU and individual Member States per type of measure. It 
relies  on  a  common  methodology  that  makes  estimates 
comparable  across  the  EU.  Four  accompanying  methodological 
reports  provide  a  detailed  description  of  how  the  results  were 
estimated to ensure full transparency. 

(199)See  European  Commission  (2024),  Support  study  on  the 
climate adaptation and cross-border investment needs to realise 
the TEN-T network – Publications Office of the EU. 

(200)See European Environment Agency (2025), Water abstraction 
by economic sector, 2000-2023. 

(201)See   Eurostat (2026), Water Exploitation Index, plus. 

 
 
 
one  of  the 
largest  average  annual  relative 
reductions  in  wheat  yield  due  to  drought (202). 
Water productivity in Cyprus (203) stood at EUR 118 
per m³ of abstracted water in 2022 (below the EU 
average of EUR 153 per m³). This indicates a high 
level  of  water  stress.  Demand  often  exceeds 
available  natural  resources,  despite  increasing 
supply.  In  2023,  agriculture,  public  water  supply 
and  energy  production  accounted  for  69.5%, 
23.9%  and  6.4%  of  total  water  abstraction 
respectively (204).  Abstraction  has  risen  by  4% 
since  2014  (from  216.8  million  cubic  metres  in 
2014  to  224.65  million  cubic  metres  in  2023), 
with  increased  reliance  on  surface  water  (40%  of 
abstraction in 2023) rather than groundwater.  

The  number  of  assessed  surface  water 
bodies  achieving  a  good  ecological  status  in 
Cyprus  remains  high.  Its  first,  second  and  third 
river  basin management plans  (RBMPs)  indicate  a 
to 
steady 
63.3% (205).  Persistent  pressures  include  acute 
water  scarcity,  extreme  climate  change  impacts 
and agricultural pollution.  

increase  from  50.5% 

to  59.2% 

Good  chemical  status  is  higher  than  the  EU 
average.  84.5%  of  water  bodies  have  good 
status (206)  according  to  Cyprus’s  third  RBMP. 
However, intensified and more targeted monitoring 
for  the  3rd  RBMP  led  to  a  significant  decrease 
compared with the previous RBMP cycle, when the 
percentage stood at 96.1%. 

Cyprus’s drinking water quality does not give 
rise  to  concern,  but  Cyprus  faces  significant 
challenges  with  ageing infrastructure,  losing 
significant  amounts  of  drinking  water  to 
leaks.  Cyprus  is  addressing  these  issues  by 

(202)Rossi, L., Wens, M., De Moel, H., Cotti, D., Sabino Siemons, A., 
Toreti,  A.,  Maetens,  W.,  Masante,  D.,  Van  Loon,  A., 
Hagenlocher,  M.,  Rudari,  R.,  Naumann,  G.,  Meroni,  M.,  Avanzi, 
F., Isabellon, M. and Barbosa, P.,  
European  Drought  Risk 
Atlas, Publications Office of the European Union, Luxembourg, 
2023. 

(203)Water  productivity  is  a  metric  that  is  calculated  by  dividing 
GDP  (in  chain-linked  volume)  by  total  water  abstraction.  It 
indicates the average economic value (GDP) a Member State 
creates for each unit of water it takes from nature. 

(204)See European Environment Agency (2025), Water abstraction 

by economic sector, 2000-2023. 

funding  several  water-related  actions  through  its 
recovery and resilience plan (RRP) and its cohesion 
policy funding. Key actions that are still in progress 
include  infrastructure  upgrades,  digitalisation  of 
water  networks,  improved  wastewater  treatment 
and  aligning  water  pricing  with  environmental 
costs. A levy on water has been introduced as part 
of the RRP green taxation reform. As stated in the 
green  tax  reform  section  of  the  Cyprus  Recovery 
and  Resilience  Plan,  the  carbon  tax  on  transport 
fuels and the landfill tax for municipal waste have 
not  been  introduced  as  legally  required.  In  the 
context of the EU cohesion policy mid-term review, 
the  Thalia  2021-2027  programme  was  amended 
to  include  an  increase  of  EUR 64 million  in  EU 
funding  for  water  resilience  actions  (more  than 
doubling the previously available funding). 

for 

The  Cyprus  Energy  Agency  (CEA)  has  sought 
technical  assistance  to  implement  nature-
risk 
(NbS) 
based  solutions 
management  projects.  The  first  sustainable 
energy  and  climate  action  plans  (SECAPs)  have 
highlighted  flooding  as  a  major  climate  risk  for 
municipalities  along  the  Pedieos  River,  which  is 
recognised  by  national  authorities  as  a  high-risk 
flood area. 

flood 

Cyprus’s  compliance  rate  with  the  Urban 
Waste  Water  Treatment  Directive(207) 
is 
100% for the waste water load, but 14.1% is 
treated  by 
still  neither  collected  nor 
individual  or  autonomous  systems  (IAS).  This 
is particularly significant as regards Cyprus’s total 
generated load. No change has occurred since the 
last  reporting  in  2022.  A  total  of  EUR 613 million 
needs  to  be 
in  urban  wastewater 
management  in  Cyprus  in  2024-2030  to  ensure 
compliance with the Directive (208). 

invested 

Nature restoration 

Cyprus’s  economy  is  structurally  exposed  to 
nature loss because it has one of the highest 
ecosystem 
levels 

dependency 

on 

of 

(205)See WISE (2024), Surface water bodies: ecological status or 

(207)Directive 91/271/EEC. 

potential. 

(208)Internal documents, implementation of Directive 91/271/EEC 

(206)See WISE (2024), Surface water bodies: chemical status. 

(UWWTD), 2022. 

79 

 
 
 
services in  the  EU (209).  50%  of  gross  value 
added depends directly on ecosystems (well above 
the  EU  average  of  44%).  This  vulnerability  is 
particularly significant in the tourism sector, which 
is vital for Cyprus and depends directly on healthy 
terrestrial 
aquatic 
ecosystems. 

(coastal,  marine) 

and 

Cyprus  has  rich  biodiversity,  but  habitat 
degradation  is  increasingly  widespread.  The 
main  pressures  on,  and  threats  for,  habitats  and 
species  in  Cyprus  are  related  to  agriculture; 
infrastructure  development;  the  development  and 
operation of transport systems; natural processes; 
and  the  illegal  trapping  of  migratory  birds (210)). 
37.5% (211) of its territory has been designated as 
protected area. 

Nature  degradation  is  further  amplified  by 
invasive alien species. Thirteen were recorded in 
Cyprus  in  2024,  inflicting  estimated  damage  of 
EUR 80 million  up  to  2020,  primarily  affecting 
agriculture and public health (212). Eutrophication (a 
threat  to  biodiversity  and  ecosystem  integrity) 
continues to give cause for concern, with the areas 
at  risk  remaining  at  100%  since  2005 (213). 
Nitrogen deposition from agriculture and industrial 
combustion  remains  a  critical  driver  of  this 
degradation. 

These  persistent  challenges  contrast  with  a 
persistent  biodiversity  finance  gap.  Cyprus 
faces  an  estimated  EUR 96 million  shortfall  in 
funding  for  measures  to  address  conservation 
priorities.  The  Cohesion  Policy’s 
investment 
contribution  of  EUR 10 million  underscores  the 
need to increase investment in habitat restoration. 

(209)See  Hirschbuehl  et  al.  (JRC),  2025,  The  EU  economy’s 
dependency  on  nature,  Vasilakopoulos, P.  editor(s),  European 
Commission. 

(210)See 
(2025), 
Implementation Review, Cyprus country report.  

Commission 

European 

Environmental 

Sustainable agriculture and land use 

Cyprus’s is on track to meet  its 2030 target 
for  land  use,  land-use  change  and  forestry 
(LULUCF).  To  meet  its  2030  LULUCF  target, 
additional  carbon  removals  of  0.06  MtCO2eq  are 
needed (214).  The 
latest  available  projections 
indicate  Cyprus  will  achieve  a  slight  surplus  of 
0.03 MtCO2eq in for 2030 (215).  

Achieving the national targets for increasing 
carbon  removals  is  an  important  element  of 
Cyprus’s  climate  neutrality  strategy.  A 
number of policies and measures aim at improving 
CO2  absorption  by  the  LULUCF  sector.  These 
include  planting 
trees  outside  forest  areas; 
increasing  the  number  of  urban  green  areas; 
afforestation;  and  applying  compost  in  arable 
soils.  Further  investments  in  healthy  forests  and 
soils are key to building resilient bio-based product 
value  chains  and  enabling  a  growing,  competitive 
EU 
continued 
improvements  in  the  system  for  monitoring  net 
removal data will play a crucial role in supporting 
timely and effective action in this sector. 

bioeconomy. 

particular, 

In 

Reporting  of  emissions  from  agriculture  is  being 
improved  through  better  data  collection  and 
promotion of emission reduction opportunities with 
the support of the common agricultural policy. The 
main  focus  is  on  sharing  best  practices  for 
innovative methane reduction technologies, animal 
nutrition  and  breeding  management.  Targeted 
research  on  technology,  nature-based  solutions 
and  nutritional  changes  is  also  being  promoted. 
The  use  of  organic  human  and  agricultural  waste 
as  well  as  residue  streams  for  the  production  of 
biogas,  biomaterials  and  biochemicals  is  also 
under consideration. 

The  agricultural  sector  is  challenged  by 
water  scarcity  and  heat  stress,  which  are 
impacting  crop  yields  and  food  security. 
Climate  risks  across  sectors  are  expected  to 
increase substantially. The agricultural sector is at 
risk of land loss and increased costs.  

(211) See Eurostat (2025), Protected Areas Indicator. 

(212)Neobiota  (2021),  Economic  Cost  of  invasive  alien  species 
across  Europe..  European  Commission,  2025, Environmental 
Implementation Review, Cyprus Country Report, Link. 

(214)See  European  Commission (2023),  National  LULUCF  targets 
of the Member States in line with Regulation (EU) 2023/839. 

(213)See  European  Environment  Agency  (2024),  Eutrophication 
caused by atmospheric nitrogen deposition in Europe. 

(215)See  European  Commission  (2025),  Climate  Action  Progress 
Report 2025. 

80 

 
 
 
Cyprus  has  one  of  the  lowest  levels  of 
pesticide  contamination  in  the  EU.  Only  2% 
and  5%  of  river  and  lake  water  bodies  exceed 
regulatory  thresholds  for  pesticide  residues (222) 
(EU:  27%  and  18%).  Pesticides  not  only  threaten 
aquatic ecosystems  but  also  pose  long-term  risks 
to  human  health  through  contaminated  drinking 
water  and  food  chains.  44%  of  the  soil  samples 
analysed  in  Cyprus  had  a  pesticide  concentration 
above  0.5  mg/Kg (223),  well  below  the  average  of 
27% for the EU.  

Cyprus  aims  to  increase  the  sustainability 
and  resilience  of  its  agricultural  sector  by 
expanding  the  production  of  high-quality 
agricultural  products  while  improving  the 
economic viability of small and medium-sized 
holdings. Agriculture and food manufacturing are 
also  priority  sectors 
for  circular  economy 
integration. 

Cyprus  faces  environmental  and  public 
health  risks  due  to  agricultural  pollution 
(particularly  from  nitrates)  and  this 
is 
exacerbating  the  effects  of  a  hot  and  dry 
climate.  In  Cyprus,  the  yearly  net  land  taken 
between 2018 and 2021 increased to 1 257 ppm 
of  total  urban  area,  nearly  double  the  646 
the  2012-2018 
ppm/year 
period (216).  Between  2012  and  2018,  land  use  in 
Cyprus  became  more  inefficient.  This  indicates 
pressures  on  ecosystems  within  and  surrounding 
the functional urban area (FUA) (217). 

recorded  during 

Water  quality  pressures  are  a  cause  of 
concern.  Under  the  EU  Nitrates  Directive,  28.6% 
of  Cyprus’s  groundwater  monitoring  stations 
recorded  average  nitrate  concentrations  above 
25 mg/l (and 17% above 50 mg/l, the EU threshold 
for  safe  drinking  water)  in  2016-2019 (218).  This 
trend  reflects  systemic  agricultural  pressures  as 
well as Cyprus’s high livestock density of 1.73 (219) 
(EU  average:  0.75).  A  2%  increase  (220)  reflects 
deterioration  in  emission  control.  Cyprus  needs  to 
reduce emissions by (221) in order to meet its 2030 
reduction 
nitrate 
pollution  indicates  gaps  in  nutrient  management 
strategies. 

commitments. 

Persistent 

(216) See European Environment Agency (2025), Net land take in 

cities and commuting zones in Europe. 

(217)See  European  Environment  Agency  (2022),  Land  take  and 

land degradation in functional urban areas. 

(218)See  European  Environment  Agency 

(2025),  Nitrate 

in 

groundwater in Europe. 

(219)See Eurostat, Livestock density index. 

(220)See  European  Environment  Agency  (2026),  Air  pollutant 
emissions data viewer (Gothenburg Protocol, Air Convention) 
1990-2023. 

(221)See  European  Environment  Agency  (2025),  Magnitude  of 
emission  reductions  (percentage)  required  by  EU  Member 
States  to  meet  their  emission  reduction  commitments  for 
2030 onwards, based on 2023 data. 

(222)See  European  Environment  Agency  (2024),  Pesticides  in 

rivers, lakes, and groundwater in Europe. 

(223)See Vieira et al. (JRC), 2023, Pesticides residues in European 
agricultural  soils  –  Results  from  LUCAS  2018  soil  module, 
Publications Office of the European Union. 

81 

 
 
 
Table A10.1:Key Adaptation Indicators 

(1)  EFFIS (European Forest Fire Information System). Link. 
(2) The climate protection gap refers to the share of non-insured economic losses caused by climate-related disasters, based on modelling of the 
risk from floods, wildfires and windstorms, and on the insurance penetration rate. Scale: 0 (no protection gap) – 4 (very high gap). EIOPA, 2025, 
Dashboard on insurance protection gap for natural catastrophes. 
(3) This 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 to or greater than 40% indicate severe water 
scarcity. 
(4) European Commission, 2024, Seventh 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). 
(5) Indicator refers to concentrations of nitrate (NO3) in groundwater, measured as milligrams per litre (mgNO3/L). Nitrate 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 is limited to 50 mgNO3/L to avoid threats to human health. 
(6) Net removals are expressed in negative figures and net emissions are expressed in positive figures. Reported data are from the 2025 
greenhouse gas inventory submission. The 2030 value of net greenhouse gas removals is taken from Regulation (EU) 2023/839 – Annex IIa. 
Sources: Eurostat, EEA and the JRC. 

82 

Climate adaptation and preparedness:EU-27201920202021202220232024latest dataDrought impact on ecosystems00.026.252.740.68-2.76[area impacted by drought as % of total]Forest fires burned area (1)596          3 421       6 199       2 540       1 919       3 374       354 510     [burned area in ha. per year]Economic losses from extreme events-          -          6              -          1              2               40 452       [EUR million at constant 2022 prices]Insurance protection gap (2)---1              1              1               -[composite score between 0 and 4]Sub-national climate adaptation action3              3              3              3              21            22            34               [% of population covered by the EU Covenant of Mayors for Climate & Energy]Water resilience:EU-27201920202021202220232024latest dataWater Exploitation Index Plus, WEI+ (3)66.74       71.08       71.18       71.04       75.29       -4.53            [total water consumption as % of renewable freshwater resources]Water productivity112          95            104          118          120          -151[EUR per m3]Water abstractionWater abstraction by source (% from surface water)33.30%41.66%42.46%39.43%39.91%-Water abstraction by sectorAgricultureElectricity coolingManufactu-ringPublic water supplyMining and QuarryingConstru- ction 69.66%6.43%0.00%23.91%0.00%0.00%Status of water bodies (4)[% of water bodies in a good status]Surface water bodies (ecological)-----61%38%Groundwater bodies (quantitative)-----36%93%Nature restoration:EU-27201920202021202220232024latest dataEcosystem dependency---50%--44%[% of direct dependency]Protected area37.637.637.637.837.526.4[% of terrestrial protected areas]Invasive alien species (IAS)-----1329.2[number of IAS of Union concern]Damage cost of IAS----0.081.69[EUR billion]Eutrophication 335335295[AAE of area at risk of euthrophication]Sustainable agriculture and land use:EU-272012-20182018-2021latest dataYearly net land taken by Member State646          1 257       670            [ppm of total urban surface per Member State]Land conversion in functional urban area [% of total land taken from 2018-2021]Arable land58%Complex and mixed cultivation0%Forests0%Herbaceous vegetation associations30%Open spaces with little or no vegetation0%Pastures3%Permanent crops9%Water0%Wetlands0%201920202021202220232024latest dataNitrates in groundwater (5)-19.319.319.319.3[mgNO₃/l]Livestock density1.731.840.75(number of livestock units per hectare of utilised agricultural area)Ammonia emissions 98%99%98%98%98%-94%[% of total utilised agricultural area]Pesticide contamination on rivers and lakes water bodiesrivers2%27%[% of monitoring sites with pesticides exceeding thresholds, 2018-2023]lakes5%18%Pesticide contamination in soil 44%57%[% of samples with a concentration over 0.5 mg/Kg⁻¹]Net greenhouse gas removals from LULUCF (6)-297.0-298.5-235.3-299.4-310.6--198 421 [ktCO₂-eq] 
 
       
 
FAIRNESS 
ANNEX 11: LABOUR MARKET 

In 

line  with 

its  upward  trajectory.  However, 

Cyprus’s  labour  market  is  set  to  remain 
strong,  but  persistent  challenges  related  to 
the  labour  market  integration  of  young 
people, women and under-represented groups 
remain. 
the  growth  outlook, 
unemployment is expected to continue falling, job 
creation  to  remain  solid  and  employment  to 
maintain 
job 
quality  challenges  remain,  including  falling  real 
wages.  Furthermore,  the  effectiveness  of  active 
labour  market  policies  and  public  employment 
services  in  supporting  under-represented  groups 
has  been  limited.  Challenges  for  young  people 
persist, while the employment rate among women 
lags behind that of men. Migrant workers continue 
to  support  employment  growth  and  help  alleviate 
labour  shortages,  but  sector-specific  challenges 
remain. 
country-specific 
recommendations for Cyprus highlighted the need 
to address labour shortages and skills mismatches 
by  strengthening  young  people’s  labour  market 
participation. 

2025, 

the 

In 

Labour  market  conditions  have  continued  to 
improve.  Supported  by  the  economy’s  continued 
robust  growth,  the  employment  rate  rose  further 
to 82.1% in Q4-2025, well  above the EU average 
(76.3%),  while  the  unemployment  rate  fell  to 
4.1%, also below the EU average (6%). The annual 
unemployment and long-term unemployment  rate 
fell  to  4.4%  and  0.9%,  respectively,  in  2025. 
Unemployment  is  forecast  to  continue  decreasing 
and employment to continue increasing over 2026 
and 2027, albeit both at a more gradual pace (224). 
Taken  together,  these  developments  suggest  that 
Cyprus  is  very  likely  to  remain  above  its  2030 
employment target of 80%. 

Employment  challenges  ease  for  young 
people.  The  share  of  young  people  neither  in 
employment nor in education and training (NEETs) 
decreased from 12.9% in 2024 to 10.6% in 2025, 
slightly  below  the  EU  average  (11%).  Youth 
unemployment  for  the  same  age  group  (15-29) 
decreased  from  10.0%  to  9.3%  in  2025,  but  the 
share  of  those  outside  the  labour  force  among 
them  saw  an  increase  from  38.3%  to  39.2%  (vs 
EU: from 44.2% to 44.4%). These outcomes reflect 
the  traction  of  a  strong  labour  market  despite 

In 

the  young  people’s 

structural  challenges,  such  as  limited  quality  job 
experience  opportunities,  skills  mismatches  and 
insufficient  outreach  measures. 
response, 
several EU-funded projects have been launched to 
support 
labour  market 
integration (225).  The  Department  of  Labour  and 
Public  Employment  Service  has  received  funding 
under the Recovery and Resilience Facility to boost 
support  for  young  people  and  hire  at  least  450 
young  NEETs  (15-29)  for  a  minimum  of  six 
months.  Additionally,  training  programmes,  an 
entrepreneurship plan, incentive schemes for hiring 
young  people,  and  outreach  to  NEETs  have  been 
approved  and  supported  by  the  European  Social 
Fund Plus (ESF+). 

Women  remain  under-represented  in  the 
labour  market.  The  gender  employment  gap 
widened  slightly  to  10.1 pps  in  2025,  now  wider 
than  the  EU  average  that  has  narrowed  to  9.6%. 
This  due  to  the  employment  rate  for  women 
increasing  slightly  less  that  that  of  men  (by 
1.3 pps vs 1.4 pps). A barrier for Cypriot women is 
the impact of having children on their employment 
rate,  at  -6.8 pps  (vs  EU  6.5 pps),  related  to  the 
limited  access  to  early  childhood  education  and 
care (see Annex 13), compounded by gender gaps 
in  care (226).  Career  advancement  prospects  are 
also  limited:  the  share  of  women  in  managerial 
positions  was  the  lowest  among  Member  States, 
at 26.9% in 2024 (vs EU: 35.6%). Reflecting these 
patterns,  women  in  Cyprus  are  more  likely  than 
men to remain in low-paid jobs. 

The 

barriers. 

Persons  with  disabilities  continue  to  face 
labour  market 
disability 
employment  gap,  after  a  decrease  of  0.6 pps,  is 
now slightly below the EU average at 23.95 pps in 
2024  (EU:  24.2 pps)  Cyprus  has  not  yet  set  a 
specific  employment  target  for  persons  with 
disabilities.  It  could  be  beneficial  to  strengthen 
employer  support  schemes  to  sectors  offering 
sustainable  career  progression  paths  and  to 
extend the  existing disability  quota  system  to  the 
private  sector.  Social  entrepreneurship  new 
incentives approved by the Council  of Ministers in 

(225) 2025 country-specific recommendations for Cyprus (5.1): 
Address labour shortages and skills mismatches by 
strengthening labour market participation of young people. 

(224) European Commission: European Economic Forecast 2025, 

(226) See: European Institute for Gender Equality: Gender gaps in 

Publication Office of the European Union. 

care 2022. 

83 

 
 
 
 
 
 
 
reported  shortages  in  industry  were  relatively 
limited (8.3% vs EU: 17.5%). Persistent gaps linked 
to  the  twin  transitions  and  climate  adaptation 
were  reported  in  2025  for  system  analysts,  air 
conditioning and refrigeration mechanics and other 
construction  professions,  including  plumbers  and 
pipe fitters. According to Cedefop-EURES data (228), 
the  occupations  most  in  demand  in  the  country 
were  handicraft  and  printing  workers,  personal 
service workers, office associate professionals and 
health  associate  professionals.  Rising  vacancies 
and  decreasing  unemployment  highlight  growing 
difficulties  for  employers  in  sourcing  suitable 
labour,  particularly 
job 
creation potential,  such as wind and solar energy, 
relevant  for  the  green  and  digital  transition.  The 
share of jobs in environmental goods and services 
increased  to  2.8%  among  all  jobs  but  remain 
below the EU average (3.3%). The uptake of digital 
technologies is rising in all sectors, but the number 
of  ICT  specialists  in  employment  is  stagnating  at 
5%  in  2022,  pointing  to  labour  shortages  in  ICT 
professions. 

in  sectors  with  high 

Graph A11.1: Labour shortages (%) and the job 
vacancy rate (%) 

July  2025  are  expected  to  increase  employment 
opportunities for persons with disabilities. 

Active  labour  market  policies  and  the  public 
employment  service  remain  constrained  by 
limited  coverage,  weak  effectiveness  and 
insufficient  outreach.  Active 
labour  market 
policy  (ALMP)  outcomes  are  modest,  remaining 
insufficient  to  tackle  structural  mismatches  and 
reduce the gaps in outreach targeting women and 
vulnerable groups, especially non-EU nationals and 
persons with disabilities. This reflects both the low 
share  of  GDP  devoted  to  such  measures  and  low 
uptake. 
Increasing  the  effectiveness  of  such 
measures  would  require  better  skills  alignment, 
increased programme uptake and tailored support 
strategies.  The  public  employment  service  would 
benefit from improved monitoring, evaluation and 
proactive  outreach  and  integration  capabilities, 
including  upgraded  software  and  hardware. 
Employer  engagement  could  also  be  improved  by 
integrated 
developing  and 
outreach, 
employer 
segmentation, 
and  matching 
approaches.  Cyprus  updated  its  ALMP  strategy  in 
December  2025  with  actions  to  be  implemented 
and  further  strengthened to  tackle  the  challenges 
described  above.  Outreach  and  activation 
remain 
vulnerable 
measures 
underdeveloped and insufficiently tailored to their 
needs.  Monitoring  is  not  outcome-driven,  and 
concrete 
stakeholder 
implementation mechanisms. 

implementing  an 
encompassing 

cooperation 

counselling 

strategy 

groups 

lacks 

for 

The  labour market  remains tight,  and  labour 
shortages  continue  to  be  a  challenge, 
especially  in  certain  sectors.  The  job  vacancy 
rate is among the highest in the EU, well above the 
EU average (3.0 % vs 2.1% in Q4-2025) and pre-
pandemic  levels  (1.7%  in  Q4-2019),  but  lower 
than  a  year  earlier  (3.1%  in  Q4-2024).  Acute 
shortages  are  reported  in  accommodation  and 
food  services  (4.6%),  wholesale  and  retail  trade, 
(3.9%),  administrative  and  support 
transport 
services  (4%)  and  wholesale  and  retail  trade, 
repair  of  motor  vehicles  (3.8%).  This  is  partly 
reflected in employers’ perceptions (227): in October 
labour 
2025,  the  share  of  them  expecting 
shortages to limit their production was particularly 
high  in  the  construction  sector  (41.4%  vs  EU: 
27.5%)  and  in  services  (22.6%)  but below the  EU 
level  across  all  sectors  (23.1%).  By  contrast, 

Seasonally adjusted data, not calendar adjusted data for the 
job vacancy rate. 
Source: Directorate-General for Economic and Financial 
Affairs (DG ECFIN) business and consumer survey data and 
Eurostat [jvs_q_nace2]. 

Migrant  workers  contribute  to  alleviating 
labour  shortages  and  skills  mismatches. 
Employment  growth  has  been  supported  by 
significant  inflows  of  foreign  workers.  However, 
these inflows are expected to gradually  moderate 

(227) Source: DG ECFIN European Business and Consumer Surveys. 

1 June 2024 to 30 July 2025. 

(228) EURES - Demand for occupations, latest available data from 

84 

0.0.51.1.52.2.53.3.54.051015202530354045Job vacancy rate (%)Labour shortages (%)IndustryConstructionServicesJob vacancy rate (rhs) 
 
   
 
international  companies  to  Cyprus, 

as  the  initial  wave  of  corporate  relocations  under 
the country’s ‘headquartering policies’, designed to 
attract 
is 
coming  to  an  end.  In  2025,  despite  a  reduction, 
first-time asylum applicants per thousand persons 
was  2.93,  the  second  highest  in the  EU.  A project 
co-funded  by  the  ESF+  (EUR 1.8  million),  the 
Information  and  Training  Centre  for  Employment 
and 
provides 
information,  training  and  support  services  to 
vulnerable  groups,  helping  their  labour  market 
integration and  to meet the demand for labour in 
selected sectors. 

Entrepreneurship 

(KEEAED), 

Labour  shortages  are  driven  in  part  by 
several job quality challenges, many of which 
disproportionately  affect  women.  The  Cypriot 
labour market is flexible and dynamic. In 2025, the 
temporary  employment  rate  was  14.6%  (vs  EU 
12.7%,  20.1%  for  women  vs  EU:  13.5%),  with  an 
average  transition  rate  to  permanent  contracts 
(30.4%  vs  EU:  34.0%,  22.9%  for  women  vs  EU 
33.6%). But such flexibility is not always voluntary 
or  conducive  to  workers’  well-being.  At  13.3%  in 
2024  (EU:  6.4%),  Cyprus  has  one  of  the  largest 
involuntary  temporary  employment  rates  in  the 
EU,  much  higher  for  women  than  for  men  (at 
10.2%  and  8.7%  vs  EU  7.0%  and  5.7%, 
respectively).  Part-time  employment  is  relatively 
uncommon (7.3% vs EU: 17% in 2025, 10.1% for 
women vs EU: 27.5%), yet more than a third of it 
(35.2%) is involuntary, which is one of the highest 
rates  in  the  EU  (EU:  178.8%).  The  proportion  of 
low-wage  earners  at  20%  is  well  above  the  EU 
average  (14.7%).  Working  conditions  are  also  a 
concern:  Cyprus  has  one  of  the  largest  shares  of 
workers reporting long working hours in their main 
job,  at  9.0%  (EU:  6.2%,  6.9%  for  women  vs  EU: 
3.4%). Moreover, 14 Cypriot workers lost their lives 
in 2023 in work-related incidents, resulting in one 
of  the  highest  incidence  rates  in  the  EU  (3.24  vs 
EU 1.63 per 100 000 employed people, all of them 
men).  Many  of 
issues 
disproportionately  affect  women,  pointing  to  the 
importance of supporting their career planning and 
progression.  They  are  also  compounded  by 
workers’ vulnerabilities to adverse weather events, 
particularly  in  construction  and  other  outdoor 
professions. This underscores the need to prioritise 
decent  working  conditions  in  climate  adaptation 
planning.  

job  quality 

these 

Wage  growth  significantly  slowed  after  a 
strong  rebound  in  2023.  Having  reached  9.4% 
in 2023, wage growth slowed to 3.3% in 2024 and 

85 

is projected rise to 4.2% in 2025 before falling to 
4.0%  in  2026.  Real  wages  grew  by  a  moderate 
1.0%  in  2024  after  increasing  by  6.8%  in  2023. 
They are set to rise by 3.4% in 2025. In 2023, over 
10%  of  workers  remained  in  low-paid  jobs  for  at 
least  four  consecutive  years (229),  with  third-
country  nationals  and  women  disproportionately 
affected.  In  recent  years,  unit  labour  costs  (ULC) 
have  increased  more  slowly  than  in  most  other 
Member  States.  ULC  growth  is  set  to  decrease 
from 8.6% in 2023 to 1.6% in 2024 and to 2.1 in 
2025. However, productivity growth exceeding the 
EU  average  and  wage  moderation  leaves  some 
room 
increases.  Cyprus 
introduced a national statutory minimum wage of 
EUR 940  in  January  2023  (replacing  its  previous 
mixed system). It has since been updated twice (to 
EUR 1 000 in 2024 and EUR 1 088 in 2026). A tax 
reform,  adopted in December  2025, improved tax 
deductions  and  raised  non-taxable  income  from 
EUR 19 500 to EUR 22 000 starting in 2026.  

further  wage 

for 

Actively  involving  social  partners  is  crucial 
for  a  fairer 
labour  market  and  more 
effective  social  dialogue.  Cyprus  signed  the 
Permanent  Agreement  on 
the  Cost-of-Living 
Allowance  (COLA)  in  2025.  This  agreement  builds 
on  the  good  level  of  tripartite  social  dialogue  in 
the  country,  providing  for  a  stable  labour  market 
environment  and  a  gradual  increase  in  indexation 
coverage  to  100%  by  1  July  2027.  Furthermore, 
the  minimum  wage  is  linked  to  the  COLA.  The 
Ministry  of  Labour  is  currently  developing  a 
roadmap  in  consultation  with  social  partners  to 
adopt  and  implement  an  action  plan  to  improve 
collective bargaining coverage. Coverage, reported 
at  32.1%,  is  significantly  lower  than  the  80% 
threshold  set  out  in  the  Directive  on  Adequate 
Minimum  Wages (230).  Collective  bargaining  takes 
place  at  sectoral  and  company  levels  with  many 
sectors, particularly retail and services, still largely 
uncovered.  In  2022,  trade  union  density  was 
32.1%, while  employer organisation density stood 
at 64.9% in 2018 (231). 

(229) Labour market and wage developments in Europe - 

Publications Office of the EU, 2025. 

(230) Based on cross-country comparable OECD data. According to 
the data transmitted by Cyprus under Article 10(2) of the 
Directive on Adequate Minimum Wages, coverge is 24.94%. 

(231) OECD/AIAS database on Institutional Characteristics of Trade 
Unions, Wage Setting, State Intervention and Social Pacts 
v2.0. 

 
 
ANNEX 12: SOCIAL POLICIES 

The  social  situation  in  Cyprus  is  generally 
positive,  but  challenges  remain  regarding 
social  protection  and  inclusion,  particularly 
for  certain  groups.  Older  people  and  persons 
with disabilities remain disproportionately affected 
by poverty, and their situation has been worsening 
in  recent  years.  At  the  same  time,  the  expected 
increase  in  demand  for  long-term  care  (LTC)  is 
placing  sustained  pressure  on  the  LTC  system. 
Deinstitutionalisation  services  and  the  related 
social  housing that is offered in Cyprus is limited, 
and there is no comprehensive national strategy to 
living.  Access  to  social 
support 
protection  remains  uneven,  with  gaps  affecting 
certain  categories  of  workers.  Energy  poverty 
continues  to  be  a  concern,  particularly  for  people 
at  risk  of  poverty.  The  social  economy  in  Cyprus 
develops  slowly,  despite  its  potential  to  address 
social  challenges. By addressing these challenges, 
Cyprus could improve quality  of life and boost  its 
competitiveness and sustainable growth. The 2025 
country-specific 
called  on 
Cyprus to address energy poverty and improve LTC 
availability  and  access  by  introducing  a  modern, 
adequately funded, integrated LTC model.  

recommendations 

independent 

Cyprus has achieved robust social outcomes, 
helped by improved economic conditions.  The 
at-risk-of-poverty or social exclusion (AROPE) rate 
was  17.1%  overall  and  14%  for  children  in  2025 
(vs  20.9%  overall  and  24.3%  for  children  in  the 
EU).  Ιn  2025  the  AROPE  rate  increased,  with  the 
same people people affected compared with 2019. 
Cyprus  thus  remains  far  from  its  national  2030 
target of reducing its AROPE population by at least 
10 000  people.  However,  with  a  decrease  of 
12 000  by  2025,  the  country  had  exceeded  its 
2030  complementary  target  of  reducing  child 
poverty  by  6 000.  A  comprehensive  approach,  as 
set out in the EU anti-poverty strategy, could help 
address  the  multiple  dimensions  of  poverty  and 
achieve the national anti-poverty target. 

Poverty  risks  are  still  high  for  some  groups 
in  vulnerable  situations.  In  2025,  the  AROPE 
rate  of  persons  with  disabilities  increased  to 
33.8% (by 2.8 pps), persistently high for a decade. 
The  AROPE  gap  compared  to  persons  without 
disabilities grew over time and is now among the 
widest  in  the  EU  (21.0 percentage  points  (pps)  vs 
EU  11.1 pps).  Older  people  (65  and  over)  also 
experienced  high  risks  of  poverty  or  social 
exclusion, well above the EU average (33.7% vs EU 
18.8%). This rate has been growing steadily since 
2021,  by  as  much  as  10 pps.  Older  persons  with 

disabilities are experiencing an even higher rate of 
poverty and social exclusions risks, having reached 
42%  in  2025,  up  by  4.1 pps  in  a  single  year.  The 
percentage  of  women  aged  65  and  over  who  are 
at risk of poverty or social exclusion is higher than 
that of men (37.1% vs 29.8%). Rising poverty risks 
among  older  people  and  persons  with  disabilities 
reflect  insufficient  adequacy,  mainly  in  terms  of 
state-provided  and  supplementary  pensions.  The 
level  of  old-age  pensions relative to  income  from 
work before retirement is among the lowest in the 
EU,  and  falling  steadily.  This  is  reflected  in  an 
aggregate replacement ratio of 41% in Cyprus as 
compared  to  60%  in  the  EU  on  average  in  2024. 
The  gender  pension  gap  is  still  wide,  at  29.0%  in 
2025 
recent 
23.9%), 
improvements.  In  2025,  the  AROPE  rate  for  non-
EU citizens was at 34.4% (vs EU 45.3%) compared 
with  16.0%  for  Cypriots.  The  in-work  poverty  risk 
for  the  non-EU-born  is  one  of  the  highest  in  the 
EU, as is the gap with native-born people (19.3 pps 
vs EU 12.4 pps). 

despite 

EU: 

(vs 

Graph A12.1: At-risk-of-poverty or social exclusion 
rate, by old age and disability status (%) 

Source: Eurostat, EU-SILC [ilc_peps01n] and [hlth_dpe10]. 

The  impact  of  social  transfers  on  poverty 
reduction is relatively low. In 2025, this impact 
(excluding  pensions)  was  31.3%,  below  the  EU 
average  of  33.2%.  This  has  an  especially  severe 
impact  on  disability-specific  benefits,  which  are 
not  aligned  with  the  cost  of  living.  Disability 
benefits  only  accounted  for  3.3%  of  the  total 
expenditure on social protection benefits for 2024, 
among  the  lowest  in  the  EU.  The  new    law    on 
Social  Participation,  Inclusion  and  Independent 

86 

101520253035404520152016201720182019202020212022202320242025% of respective populationsCYTotalOlder people (65+)Persons with disabilities (16+)Older persons with disabilities (65+) 
 
   
 
Living of Persons with Disabilities will upgrade and 
increase  social  services  and  benefits  for  persons 
with 
disabilities 
allowances from GMI.  

disconnecting 

disabilities, 

in 

and 

poverty 

Coverage,  adequacy  and  effective  access  to 
social  protection  is  still  a  concern.  At  60% 
compared  with  the  EU  average  of  83%,  the 
guaranteed  minimum  income  of  Cyprus  recorded 
the lowest benefit recipient rate (measured as the 
share of the population aged 18-64 that is at risk 
of 
(quasi-)jobless 
living 
households).  The  amount  of  the  guaranteed 
minimum  income,  established  10  years  ago,  has 
not  been  adjusted  to  inflation.  It  is  therefore  no 
longer aligned with current living costs, leading to 
a  progressive  erosion  of  its  adequacy  –  from 
83.4% in 2020 to 69.9% in 2024 (measured for a 
single  person as a share of the at-risk-of-poverty 
threshold). This poses significant risks for effective 
poverty alleviation. Currently, Cyprus is considering 
reforming 
the  disability  benefit  system  by 
decoupling disability benefits from the guaranteed 
minimum  income.  In  terms  of  access  to  social 
protection  for  workers,  there  are  gaps  for  some 
categories,  both  in  terms  of  formal  and  effective 
coverage  and in  terms  of adequacy. Coverage  for 
accidents at work and parental leave for the self-
employed  (such  as  farmers)  has  been  extended 
but  does  not  include  unemployment  benefits.  The 
impact of social  benefits on poverty  reduction for 
the  self-employed  is  significantly  lower  in  Cyprus 
than in the EU (at 12.0% in 2025 vs EU 225.4%). 
Access  to  social  benefits  is  limited  for  temporary 
contract workers, who make up a significant share 
of  the  workforce  (14,5%  of  employees  in  2025, 
3.8 pps  lower  than  it  was  10  years  ago).  Only 
around  8.4%  of  temporary  workers  at  risk  of 
poverty  before  social  transfers  receive  any  social 
rate  among 
benefits.  The  at-risk-of-poverty 
temporary  contract  workers  (25.3%)  was  almost 
twice  the  level  in  the  EU  (12.9%)  in  2025,  much 
more than among permanent contract  workers. In 
addition,  less  than  one  quarter  of  unemployed 
people received benefits.  

Long-term  care  remains  a  key  challenge  for 
Cyprus.  The  percentage  of  people  aged  65+  has 
increased  gradually  in  the  past  ten  years  (from 
14.5%  in  2015  to  18.3%  in  2025).  The  life 
expectancy of the Cypriot population is forecast to 
increase too (from 81 years in 2025 to 84.4 years 
in  2050).  At  the  same  time,  with  very  high  LTC 
needs  (34.3%  vs  EU  26.6%),  Cyprus  still  has  one 
of the EU’s lowest levels of public expenditure on 

87 

LTC  (0.2%  of  GDP  vs  EU  1.7%).  Out-of-pocket 
expenditure on LTC is among the highest in the EU, 
and  the  resulting  poverty  risks  remain  well  above 
the  EU  average.  Access  to  home  care  services  is 
below  the  EU  average  (19.3%  vs  EU  28.6%;  EHIS 
2019).  Staff  shortages  further  restrict  adequate 
LTC  access  (with  only  0.8  LTC  workers  for  every 
100  people  aged  65+,  vs  EU  3.3).  Very  low 
coverage  of  collective  bargaining  (31.8%  vs  EU 
82.4%)  and  lower  pay  in  LTC  compared  to  other 
sectors 
its 
attractiveness. LTC is thus still a key challenge for 
Cyprus (see the 2025 country report for details). 

vs  EU  89.2%) 

(74.4% 

limit 

Efforts  to  improve  long-term  care  have 
remained  mainly  at  the  planning  stage  and 
are  yet  to  be  implemented  in  practice (232). 
Cyprus plans to update its 1990 legislation to set 
clear standards and accountability mechanisms for 
consistent,  high-quality  LTC  services.  However, 
progress  has  been  slow,  with  delays  in  passing 
critical  legislative  updates.  The  national  strategy 
for  active  ageing  (2025-2030)  aims  to  address 
systemic  LTC  challenges.  It  aims  to  boost  LTC 
public  investment,  expand  regional  access  and 
availability  of  services,  and  support  formal  and 
informal 
and 
sustainable  workforce  planning.  However,  there  is 
still no detailed, dedicated action plan on LTC, with 
all LTC-related measures, including LTC design and 
governance with milestones and targets.  

caregivers 

through 

training 

There is limited supply of social housing and 
community-based  services  with  plans  to 
expand  supported-living  homes  to  promote 
independent  living.  However,  an  independent 
scrutiny  body  to  supervise  the  implementation  of 
supported/independent-living  projects, 
in  close 
cooperation  with  advocacy  bodies,  particularly  for 
those  living  in  or  moving  to  supported-living 
settings,  and  data  collection  mechanisms  are  yet 
to  be  established (233).  Overall,  a  comprehensive, 
coordinated  and  sustainable  national  strategy  for 
targets  and 
deinstitutionalisation,  with  clear 
timelines, is missing (234). 

(232) CSR 2025.5.7: Improve the availability of and access to long-
term care services by introducing a modern, adequately 
funded, integrated long-term care model. 

(233) European Semester 2025-2026 country fiche on disability 

equality: Cyprus. 

(234) European Parliament's Committee on Employment and Social 
Affairs, Independent living of persons with disabilities in the 
European Union. 

 
 
Projects  and 
reforms  have  promoted 
community-based and family-based services. 
The Thalia 2021–2027 project supports a network 
of  independent  living  services  for  persons  with 
disabilities. 
In  2024,  supported-living  services 
expanded to 12 residences and eight programmes 
with  two  new  residences  and  seven  tenders, 
alongside  funding  four  LTC  homes  under  the 
recovery  and  resilience  plan.  While  independent- 
and  supported-living  services  are  expanding, 
concerns  remain  about  institutionalisation  and 
insufficient  oversight (235).  A  new  housing  subsidy 
scheme  for  older  people  and  persons  with 
disabilities (2025) increased funding to EUR 1 300, 
expanded  eligibility,  and  strengthened  quality 
criteria.  Income  support  for  older  people  was 
increases 
strengthened 
(implemented  in  January  2025).  Other  projects 
include a scheme to incentivise the employment of 
persons  with  disabilities,  the  establishment  of  a 
new network of social integration services and the 
construction  of  two  model  special  education 
schools.  However,  supporting  mainstream  teacher 
training  and 
inclusive  education  would  be 
(see  Annex  13).  Overall,  greater 
beneficial 
involvement  of  local  authorities  could  strengthen 
Cyprus’s social welfare system. 

through 

pension 

slowly. 

is  progressing 

The  development  of  the  social  economy 
sector 
Financial 
incentives  have  been  introduced  to  make  social 
enterprises  more  attractive,  such  as  those  that 
employ  persons  with  disabilities.  Yet,  the  number 
of new registrations remains low and Cyprus faces 
long  administrative  delays  and  a 
lack  of 
administrative  support.  Cyprus  could  use  the 
potential  of  social  economy  entities 
(work 
integration social enterprises – WISE), in particular 
social  enterprises,  to  integrate  vulnerable  people 
into  the  labour  market.  By  improving  support  and 
cooperation  between  public  authorities  and  social 
economy  entities,  Cyprus  could  tap 
into  the 
potential of the social economy in the provision of 
care  and  thus  enable  the  provision  of  services, 
including home care and personal assistance. 

unable  to  keep  their  home  adequately  warm  was 
11.3% in 2025. Despite having dropped by 7.7 pps 
compared  with  2022,  it  remains  significantly 
higher  than  the  EU  average  (8.8%).  Among  those 
at  risk  of  poverty,  the  share  was  34.6%,  the 
second  highest  in  the  EU.  The  cost  of  cooling 
houses  accounted  for  10.6%  of  households’  final 
energy  consumption  in  2021,  one  of  the  highest 
values in the EU (vs EU 0.5%).  Moreover, 8.2% of 
the population had arrears on utility bills in 2025, 
above  the  EU  average  of  7%,  despite  an 
improvement  of  0.5%  compared  with  2021. 
Housing  issues  present  further  challenges  (see 
Annex  16).  Cyprus  implemented  protective  rules 
against  grid  disconnections  and  applied  special 
electricity  tariffs  for  vulnerable  consumers  during 
critical  periods,  with  a  need  to  further  upscale 
energy-efficiency 
investments  for  energy-poor 
households. To tackle this issue, the RRP supports 
a grant scheme for the encouragement of the use 
of  renewable  energy  sources (236).  The  ‘Saving  – 
Upgrading Houses’ programme, financed under the 
RRP  and  the  European  Regional  Development 
Fund,  focuses  on  the  extensive  energy  upgrading 
of existing residential buildings across the country. 

Transport poverty is high in Cyprus. The use of 
public transport in Cyprus is the lowest in the EU. 
Difficult physical access was reported by 10.5% of 
the  population  as  a  reason  for  not  using  public 
transport  regularly  (vs  EU  3.3%),  while  59.5% 
referred  to  schedule  reasons  (vs  EU  13.3%) (237). 
This is especially true for persons with disabilities. 
Approximately 55% of the population cannot reach 
a  healthcare  facility  within  45  minutes  by  public 
transport (238).  The  stagnation  in  public  transport 
use  highlights  the  need  to  expand  sustainable, 
inclusive,  and  accessible  systems,  including  for 
people with disabilities The new emissions trading 
system  (ETS2)  is  projected  to  raise  transport  fuel 
and heating costs but the upcoming social climate 
plan  would  provide  supportive  investments  in  the 
above areas.  

Energy  poverty  remains  a  pressing  issue  in 
Cyprus  and,  together  with  environmental 
inequalities, poses challenges to a fair green 
transition.  The  percentage  of  the  population 

(235) See Mavrou, K. et al. European Semester 2025-2026 

country fiche on disability equality – Cyprus, Publications 
Office of the European Union, 2025. 

(236) CSR 2025.4.5: Address energy poverty. 

(237) Eurostat [ilc_atst01] and [ilc_atst02]. 

(238) Data from the Commission’s Transport Poverty Hub. 

88 

 
 
 
ANNEX 13: EDUCATION AND SKILLS 

faces  significant  challenges 

Cyprus 
in 
education  and  skills  development.  These 
challenges emerge early in life, as participation in 
early childhood education and care (ECEC) remains 
below EU benchmarks, undermining the foundation 
for  skills  development.  Persistently  low  levels  of 
basic skills, weak educational outcomes and rising 
early  leaving  from  education  and  training  reduce 
the effectiveness of further learning and constrain 
labour  productivity.  Low  participation  in  adult 
learning  and  vocational 
training,  particularly 
among those with low educational attainment and 
older  adults,  are  exacerbating  skills  mismatches 
and  labour  shortages.  The  small  size  of  the 
vocational  education  and  training  (VET)  sector, 
coupled  with  low  digital  literacy  rates  and  early 
leaving,  contribute  to  persistent  skills 
school 
in  science,  technology, 
shortages,  particularly 
engineering  and  mathematics 
(STEM)  and 
information and communications technology (ICT). 
This  hinders  the  green  and  digital  transitions  as 
well  as  the  country’s  innovation.  Persons  with 
disabilities 
in 
education and training. Investing in human capital 
and  skills  can  further  boost  productivity  growth, 
strengthen  competitiveness  and  the  resilience  of 
the country’s economy. The 2025 country-specific 
recommendations (CSRs) call on Cyprus to address 
the 
skills  mismatches  by  further 
capacity  and  attractiveness  of  VET  as  well  as 
promoting adult learning. They also covered green 
and digital skills, participation in ECEC, basic skills, 
and students’ participation in STEM fields.  

to  participation 

face  barriers 

increasing 

Weaknesses in skills development start at an 
early  age.  According  to  the  most  recent  data, 
participation  in  ECEC  for  children  over  the  age  of 
three stood at 89.2% in 2024, below the EU target 
for 2030 of 96% and the EU average of 95%. The 
lowering  of  compulsory  entry  age  to  four  years, 
which is part of the ECEC reform supported by the 
Recovery  and  Resilience  Facility  (RRF),  aims  to 
increase participation. However, this change is set 
to  be implemented  gradually, extending up to  the 
2031/2032  school  year.  In  2025,  the  share  of 
children under the age of three in formal childcare 
exceeded  the  national  target  for  2030  (42.4%  vs 
38.8%),  but  it  is  still  below  the  EU  Barcelona 
target  of  45%  by  2030.  Better  accessibility  and 
affordability  of  high-quality  ECEC  services  would 
contribute  to  early  childhood  development  with 
for  skills  development 
long-lasting  benefits 
throughout  life,  in  particular  for  disadvantaged 
children.  Efforts  are  under  way  to 
increase 
participation  and  enhance  inclusiveness  in  ECEC 

89 

(239)  such  as  the  implementation  of  Cyprus’s  first 
National  Strategy  and  Action  Plan  on  ECEC, 
adopted  in  December  2025.  Also,  to  meet  the 
demand,  the  ECEC  reform  supported  by  the  RRF 
involves  expanding 
the  capacity  of  public 
implementing  a  tuition-fee 
kindergartens  and 
subsidy scheme for children up to the compulsory 
age who attend private or community settings.  

Graph A13.1: Low achievement and top 
performance in mathematics of 15-year-olds in 
Cyprus, 2012, 2018 and 2022 (%) 

Source: PISA 2022, OECD 

Persistently low basic skills levels and a high 
level  of  early  leaving  from  education  and 
training  are  constraining 
lifelong  skills 
acquisition.  Results  from  the  recent  PISA  survey 
show  that  the  basic  skills  of  Cypriot  students  are 
among  the  lowest  in  the  EU  and  show  an  overall 
decline  that  concerns  all  socio-economic  groups 
(see Country Report 2025). Moreover, the share of 
students  who  demonstrated  top  performance  in 
basic skill levels is below the EU average: 1.4% in 
reading (EU average: 6.5%), 3.9% in mathematics 
(EU average: 7.9%) and 2% in science (EU average: 
6.9%). Related to this, early school leaving stands 
above  the  EU  target  for  2030,  9%.  In  2025,  the 
share  of  18–24-year-olds  leaving  education  and 
training  early  although  slightly  decreased  by 
1.5 percentage  points  (pps)  to  9.8%  compared  to 
the  previous  year,  it  stands  still  above  the  EU 
average:  9.1%. 
In  2023,  young  adults  with 
disabilities (aged 18–24 years) were more likely to 
leave  school  early  (36.8%,  compared  to  3.3%  for 
young  adults  without  disabilities;  EU  average: 
19.1%  and  9.3%,  respectively).  This  points  to  one 

(239) CSR 2025.5.4: ‘Further increase participation in early 

childhood education and care’. 

0102030405060CYEUCYEULow-performing students Top-performing students(%)201220182022EU 2030 target 
 
  
 
 
system 

towards 

knowledge-based 

of  the  widest  gaps  in  the  EU  (240).  To  improve 
educational outcomes, Cyprus is transitioning from 
a 
a 
competence-based school model (241). Curricula are 
being modernised to focus on critical thinking and 
practical  skills.  The  EU  Technical  Support 
Instrument  supports  Cyprus  to:  (i) design  system-
level  policies  to  strengthen  basic  skills  among 
secondary  school  students;  and  (ii) pilot  all-day 
schooling in lower secondary education as part of 
efforts to improve the quality and inclusiveness of 
education. 

as  well 

comparatively 

Strengthening  teacher  evaluation  is  central 
to  Cyprus’  efforts  to  address  declining 
student 
improve 
learning  outcomes  and 
teaching  quality.  TALIS  2024  data  (242)  show 
that  the  teaching  profession  remains  attractive, 
supported  by  favourable  working  conditions  and 
high salary satisfaction (73% in 2024; EU average: 
low 
as 
37.3%), 
administrative stress (29.8%; EU average: 54.8%). 
However,  teaching  conditions  are  becoming  more 
complex.  Stress  related  to  maintaining  classroom 
teachers,  while 
discipline  affects  43.9%  of 
classroom  diversity  has  increased  markedly,  with 
47.3%  of  teachers  working  in  schools  with  more 
than  10%  of  students  with  special  educational 
needs (SEN) (up significantly from 15.6% in 2018) 
and  42.4%  teaching  in  schools  with  a  high  share 
of  non-native  speakers  (EU  average:  24.4%). 
in  selecting 
Teachers 
teaching methods than the EU average (81.4% vs 
93.7%).  While  the  use  of  artificial  intelligence  in 
teaching  is  in  line  with  the  EU  average  (31.5%), 
this  area  are 
reported 
comparatively high (37.8% vs 25.2%). Against this 
background, 
teacher 
evaluation  framework,  together  with  a  reformed 
recruitment  system,  is  expected  to  support  merit-
based  progression,  strengthen  pedagogical  skills 
and help improve learning outcomes. 

recently  adopted 

learning  needs 

less  autonomy 

report 

the 

in 

Inclusive  education  remains  a  significant 
challenge 
in  Cyprus  and  the  education 
system  relies  on  outdated  special  education 
legislation.  The  TALIS  report  provides  important 

(240) Mavrou, K., Liasidou, A. and Tsakiri, M., European Semester 
2025-2026 country fiche on disability equality – Cyprus, 
Publications Office of the European Union, 2025. 

(241) CSR 2025.5.5: ‘improve basic skills’. 

(242) OECD (2025), Results from TALIS 2024: The State of 

Teaching. 

information  on  SEN  students 
(see  previous 
paragraph).  Supporting  the  academic  and  social 
development  of  pupils  and  students  with 
disabilities or  SEN  would help them integrate into 
mainstream  classes.  Increasing  the  resources  for 
special  needs  education  will  help  reduce  the 
overall basic skills gap. The proposed amendment 
to  the  existing  Law  on  Education  and  Training  of 
Children  with  Special  Needs  is  under  consultation. 
Despite the persistently low basic skills levels and 
the  high  shares  of  early  school  leaving,  policy 
responses  remain  focused  on  special  education 
solutions  for  individual  disabilities,  while  less 
attention  is  given  to  reforming  schools,  teaching 
and  learning  as  the  foundation  for  eliminating 
disabling  barriers  and  ensuring  inclusion.  Cyprus 
could  develop  differentiated  learning  objectives, 
adapted  teaching  methods,  modified  educational 
materials and alternative assessment methods for 
pupils  and  students  with  disabilities  or  SEN.  In 
addition,  supporting  the  training  of  mainstream 
teachers (not only school assistants) in promoting 
inclusive education would be beneficial. In Cyprus, 
no formalised disability-related support is provided 
for  students  with 
in  secondary  education 
disabilities  or  SEN  studying 
the  general 
classroom  or  in  special  units  (243).  In  Cyprus, 
inclusive 
to  advancing 
is 
living, 
deinstitutionalisation  and 
especially  as  29.6%  of  persons  with  disabilities 
remained  at  risk  of  poverty  or  social  exclusion  in 
20245, a persistently high rate for over a decade. 
Strengthening  inclusive  education  can  enhance 
skills, 
improve  employment  prospects,  reduce 
poverty risks, and promote greater autonomy and 
social and economic participation. 

key 
independent 

education 

in 

in 

is 

in  secondary  VET 
low, 
Participation 
contributing 
to  skills  mismatches  and 
impeding  employability.  Cyprus  is  among  the 
best  performing  EU  countries 
terms  of 
employability of VET graduates, indicating the high 
demand for such professions, but also low supply. 
Yet  in  2024,  only  18.2%  of  pupils  in  upper 
secondary education attended programmes with a 
vocational focus, much lower than the EU average 
(52.9%  of  pupils  in  upper  secondary  or  post-
secondary  non-tertiary  education).  In  2023,  of  all 
people  aged  20-34  who  had  recently  completed 
VET,  only  a  relatively  small  proportion  had 

(243) Mavrou, K., Liasidou, A. and Tsakiri, M., European Semester 
2025-2026 country fiche on disability equality – Cyprus, 
Publications Office of the European Union, 2025. 

90 

 
 
 
is  being  developed,  and 

experienced  work-based  learning  during  their  VET 
studies, which could be a major contributing factor 
(25%;  EU  average:  66%).  The  limited  learning 
opportunities may have an adverse impact on the 
labour-market  relevance  of  VET. 
quality  and 
recovery  and 
the 
Projects  supported  under 
resilience plan (RRP) and the European Social Fund 
Plus  (ESF+)  have  been  developed  to  improve 
participation  in  VET  (‘Development  of  Technical 
Vocational  Education  and  Training’  (TVET))  (244).  A 
VET  strategy 
its 
implementation  will  be  key  for  increasing  the 
attractiveness  and  capacity  of  the  sector.  For 
instance, developing new infrastructure, taking into 
account the digital dimension, would help meet the 
rising  demand  for  such  skills,  especially  for 
persons  with  disabilities.  The  use  of  assistive 
technology  (AT)  is  not  yet  developed,  nor  is  an 
accessibility  service  delivery  system,  including 
support 
competence 
and 
digital 
for  persons  with  disabilities. 
development 
Enrolment  in  the  Post-secondary  Institutes  of 
Vocational  Education  and  Training  (MIEEK)  has 
increased by 37% within just two academic years. 
The recent increase in VET participation is positive, 
but  still  some  students  are  not  admitted  due  to 
capacity  constraints.  Overall, 
the 
capacity  and  attractiveness  of  VET  remains 
important  for  addressing  skills  shortages  and 
improving productivity. 

increasing 

for  AT 

Promoting  STEM  in  the  VET  sector  is  key  to 
meeting  forecast  skills  demand  in  Cyprus, 
but  STEM  output  is  still  small.  The  upper 
secondary VET sector in Cyprus is strongly focused 
on  STEM  fields,  with  60.3%  of  pupils  in  medium-
level  VET  enrolled  in  STEM  fields  in  2024. Yet,  its 
overall  size  is  relatively  small  compared  to  the 
country’s total medium-level education. The share 
of  women  enrolled  in  VET  in  STEM  is  among  the 
lowest  in  the  EU  (9.5%  vs  EU  15.1%).  Meanwhile, 
the  Human  Resource  Development  Authority  of 
Cyprus  (HRDA)  skills  forecast  for  2022-2032 
predicts a shortage of STEM specialists, with 40% 
of  total  employment  demand  expected  to  be  in 
this field, while only 25% of the active population 
(aged 25-34) have pursued related education. The 
forecast  also  highlights  the  largest  skill  needs  in 
sectors such as retail trade, education, healthcare, 
construction,  and  IT.  To  address  skills  shortages, 

there  is  significant  potential  to  expand  the  VET 
subjects  and 
sector  by  promoting  STEM 
encouraging  early  enrolment  of  female  students. 
In 2025/2026, Cyprus launched a pilot initiative to 
introduce  technical  and  vocational  orientation  at 
lower  secondary  level  by  establishing  technical 
gymnasiums (245).  The  pilot  is  currently  running  in 
two schools, aiming to make technical professions 
more  attractive,  address  skill  mismatches,  and 
offer  learners  an  alternative  educational  pathway 
from an earlier age. Learners can choose between 
two  specialisations  –  Engineering  Science  and 
Design  &  Construction  –  and  follow  an  enriched 
curriculum  combining  general  education  with 
practical, technology-enhanced learning. 

Framework 

Skills mismatches and low enrolment in STEM 
continue  to  pose  challenges  for  the  Cypriot 
the  European 
labour  market.  As  part  of 
Qualifications 
Recommendation’s 
implementation,  Cyprus  has  yet  to  connect  the 
national  qualifications  database  to  Europass. 
Against the backdrop of the challenges for Cypriot 
education  mentioned  in  the  previous  paragraphs, 
significant.  Over-
are 
skills  mismatches 
qualification  remains  a  structural  issue  in  Cyprus. 
In  2025,  27.5%  of  employed  people  were  over-
qualified  for  their  job,  6.1 pps  above  the  EU 
average.  In  2024,  the  share  of  tertiary  students 
enrolled in STEM programmes stood at 14.7% (vs 
EU  26.9%).  This  is  below  the  proposed  EU-level 
target  for  2030  of  32%  and  shows  a  very 
different pattern compared to VET. On the positive 
side,  in  2024,  41.5%  of  PhD  students  enrolled  in 
ICT  were  women,  which  exceeds  the  EU-level 
target  for  2030  of  33%.  To  expand  the  pool  of 
potential  STEM  students,  a  EUR 13.8 million 
project has been launched under the RRP focusing 
on  the  digital  transformation  of  school  units.  The 
project  aims  to  enhance  digital  skills  and  skills 
related  to  STEM  education.  The  Ministry  of 
Education has been running a STEM programme in 
primary schools, which has been extended to more 
schools  since  2019.  As  part  of  the  programme, 
sixth  graders  engage  in  project-based  learning 
combining  science,  technology,  engineering  and 
mathematics 
real-world  problems. 
Teachers  selected  for  this  receive  training  from 
the Cyprus Pedagogical Institute. 

to  solve 

(244) CSR 2025.5.2: ‘further increasing the capacity and 

attractiveness of vocational education and training as well 
as promoting adult learning’. 

(245) CSR 2025.5.6: ‘increase students’ participation in science, 
technology, engineering and mathematics (STEM) fields’. 

91 

 
 
 
to 

tackle 

recent 

improvements, 

Despite 
further 
progress  on  digital  and  green  skills  remains 
essential 
skills 
effectively 
shortages. In 2025, after an increase in line with 
the  EU  average,  55.8%  of  Cypriot  adults  had  at 
least a basic level of digital skills (up from 49.5% 
in  2023,  compared  with  an  EU  average  of  60.4% 
in 2025 and 55.6% in 2023). Nevertheless, despite 
recent improvements, people with no or low skills, 
including  young  people  and  persons  with 
disabilities,  still  fall  significantly  behind 
the 
average,  also  in  terms  of  digital  skills.  Skills 
shortages persist, especially in sectors key for the 
green  and  digital  transitions.  In  2025,  shortages 
were  reported  in  several  occupations  relevant  to 
the  digital  and  green  transitions,  such  as  system 
refrigeration 
conditioning  and 
analysts,  air 
mechanicals  and  other  construction  professions, 
including  plumbers  and  pipe  fitters.  The  demand 
for digital and green skills can be expected to grow 
in  the  future:  Cyprus  is  among  the  EU  countries 
with  the  highest  job  creation  potential  in  the 
renewable  energy  sectors  of  wind  and  solar  (246). 
RRP investments are being put in place to support 
Cyprus’  National  Action  Plan  for  Digital  Skills 
2021-2025  (‘e-skills  Action  Plan’)  to  improve  the 
digital skills of all, including vulnerable groups (247). 
Yet,  further  efforts  to  improve  digital  and  green 
skills are needed to meet current and future labour 
market demand.  

the  three-year  target  of  issuing  1 800  ILAs (248). 
Developing  ILAs  more  largely,  across  the  full 
working  age  population,  beyond  their  pilot  phase 
ending  in  2027,  could  substantially  contribute  to 
this aim. 

Graph A13.2: Individuals with basic or above basic 
overall digital skills by education (%) 

Source: Eurostat [isoc_sk_dskl_i21] 

Cyprus  still  faces  difficulties  to  increase 
adults’  participation  in  learning.  In  2022, 
28.3%  of  Cypriot  adults  had  participated 
in 
education  and  training  (during  the  previous  12 
months  (excluding  guided  on-the-job  training). 
Participation  rates  were  even  lower  for  women 
(20.4%),  people  aged  55-64  (10.3%)  and  people 
with low  education  attainment (10.9%). Despite  a 
small  overall  increase  of  3.5 pps  from  2022  to 
2024  (as  indicated  by  EU  labour  force  survey 
data), the situation has not changed substantially. 
To  boost  adults’  participation  in  learning,  an 
individual  learning  accounts  (ILAs)  pilot  project 
was  launched  in  March  2025.  During  2025,  802 
applications  for  acquiring  an 
ILA  had  been 
submitted and  579 ILAs had been issued, against 

(246) Fulvimari A. et al.: Estimating labour market transitions and 
skills investment needs of the green transition – A new 
approach, Publications Office of the European Union, 2025. 

(247) CSR 2025.5.3: ‘Step up policy efforts to strengthen green 

and digital skills.’ 

(248) CSR 2025.5.2: ‘further increasing the capacity and 

attractiveness of vocational education and training as well 
as promoting adult learning’. 

92 

010203040506070CYAll individualsCYIndividuals with no orlow formal educationEU  All individualsEU  Individuals withno or low formaleducation202120232025 
 
   
 
ANNEX 14: SOCIAL SCOREBOARD 

Table A14.1:Social Scoreboard for Cyprus 

Update of 4 May 2026. 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 2026 for details on the methodology 
(https://employment-social-affairs.ec.europa.eu/joint-employment-report-2026_en). 
Source: Eurostat 

93 

28.39.855.810.610.14.6081.34.40.9107.817.114.031.323.92.442.40.1Critical situationTo watchWeak but improvingGood but to monitorOn averageDynamic 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, 2025)Impact of social transfers (other than pensions) on poverty reduction(% reduction of AROP, 2025)Children aged less than 3 years in formal childcare (% of the under 3-years-old population, 2025)Self-reported unmet need for medical care (% of the population aged 16+, 2025)Disability employment gap (percentage points, population aged 20-64, 2025)Housing cost overburden (% of the total population, 2025)Adult 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 marketBest performersBetter than averageEarly leavers from education and training(% of  the population aged 18-24, 2025)Young people not in employment, education or training(% of the population aged 15-29, 2025)Gender employment gap(percentage points, population aged 20-64, 2025)Income quintile ratio (S80/S20, 2025)At risk of poverty or social exclusion (AROPE) rate (% of the total population, 2025)Employment rate(% of the population aged 20-64, 2025)Unemployment rate(% of the active population aged 15-74, 2025)Long term unemployment(% of the active population aged 15-74, 2025)Gross disposable household income (GDHI) per capita growth(index, 2008=100, 2024)At risk of poverty or social exclusion (AROPE) rate for children(% of the population aged 0-17, 2025) 
 
 
 
  
 
 
ANNEX 15: HEALTH AND HEALTH SYSTEMS 

health 

system 

performs 
Cyprus’ 
life 
comparatively  well,  with  a  high 
expectancy  at  birth  and 
low  rate  of 
avoidable  mortality.  However,  Cyprus  faces 
shortages  of  nurses,  high  consumption  of 
antibacterials, 
of 
healthcare  resources  and  e-health  uptake  by 
individuals.  Several  measures  are  underway  to 
address  these  issues  and  could  place  the  country 
in  a  better  position  to  ensure  the  health  of  its 
population, social fairness and productivity. 

distribution 

uneven 

and 

Graph A15.1: Life expectancy at birth, in years 

Source: Eurostat (indicator: demo_mlexpec) 

as  was 

Life expectancy at birth in Cyprus was higher 
than  the  EU  average  in  2024,  linked  to  low 
levels  of  avoidable  mortality.  Life  expectancy 
at  birth  continues  to  increase  since  the  2023 
rebound  above  its  pre-COVID-19  level.  Women  in 
2023  could  expect  to  live  about  4  years  longer 
than  men,  but  they  could  only  expect  to  live  1.3 
year  longer  than  men  in  good  health.  In  2023, 
treatable  mortality  was  also  well  below  the  EU 
preventable  mortality. 
average, 
Cardiovascular  diseases 
(CVDs)  and  cancers 
remain the leading causes of death, accounting for 
above 46% of all deaths, and respiratory diseases 
were  the  diagnosed  cause  for  about  10%  of  all 
deaths. Lung, breast, colorectal and then pancreas 
cancers  were  the  leading  causes  of  cancer  death 
in  Cyprus in  2023.  Recent  evidence  suggests that 
Cyprus is one of the few EU countries where lung 
cancer  incidence  rates  continue  to  increase  (249). 
This suggests that there is room for improvement 
in  primary  prevention  and  public  health 
interventions to reduce smoking and its impacts on 
adults and adolescents. 

(249) OECD/European Commission (2025), EU Country Cancer 

Profile: Cyprus 2025, EU Country Cancer Profiles. 

investment 

Cyprus 
is  developing  cancer  prevention 
in  disease 
programmes  but 
prevention remains below the EU average.  In 
2023, the share of health spending on prevention 
in Cyprus was one of the lowest in the EU (1.5% vs 
3.7%  for  the  EU  average),  despite  a  significant 
increase  over  the  previous  decade.  It  was  only 
slightly over the pre-COVID-19 budget share, with 
more  than  half  of  it  spent  on  immunisation, 
implying  a  substantial  decrease  in  the  health 
promotion share. As part of the Cypriot measures 
to  tackle  the  cancer  mortality  increase,  a  new 
national  screening  programme  for  colorectal 
cancer has been launched in May 2025 for people 
aged  50-74  who  are  registered  with  the  General 
Healthcare  System  (GeSY)  (250).  The  launch  of  a 
prostate  cancer  screening  programme  for  men 
aged  50-69  is  scheduled  for  2026,  as  well  as  a 
cervical  cancer  screening  programme  for  women. 
However,  a  screening  programme  for  lung  cancer 
is  still  at the  exploratory stage.  Under  EU4Health, 
Cyprus  participates 
joint  actions 
targeted at cancer treatment and prevention, such 
as  EUnetCCC,  EUCanScreen  and  JANE-2  (251).  In 
law 
April  2026,  the  Parliament  approved  a 
governing  the  establishment  of  the  National 
Cancer  Institute.  The  Institute  will  serve  as  a 
central  reference  point  for  diagnosis,  treatment, 
research and training in the field of cancer, in line 
with the National Cancer Strategy. The Ministry of 
Health  has  also  developed  a  national  strategy  on 
cardio-vascular  diseases,  aimed  at  prevention, 
diagnosis,  treatment  and  rehabilitation,  while 
improving  coordination  and  efficient  use  of 
resources.  A  National  Committee  has  also  been 
established to design and implement a population-
wide prevention program. 

in  several 

and 

risk 

factors 

Mortality  in  Cyprus  is  significantly  linked  to 
to 
behavioural 
environmental factors  (such  as  air  pollution, 
see  Annex  8).  As  demonstrated  by  the  incidence 
rates  of  lung  cancer,  smoking  remains  a  major 
public  health  concern  in  Cyprus,  especially  men’s 
smoking.  About  22.5%  of  adults  reported  daily 
smoking  in  2019,  but  more  recent  data  are 

(250) OECD/European Observatory on Health Systems and Policies 
(2025), Country Health Profile 2025: Cyprus. State of Health 
in the EU. 

(251) EUnetCCC: European Network of Comprehensive Cancer 

Centres; EUCanScreen: Implementation of cancer screening 
programmes; JANE-2: Shaping the EU Networks of Expertise 
on cancer!. 

94 

82.481.381.682.983.5808080.681.481.520202021202220232024CyprusEU 
 
       
 
 
 
 
missing.  As  a  result,  potential  impacts  of  existing 
tobacco  control  policies  remain  to  be  seen. 
Tobacco consumption patterns among adolescents 
are changing, and are also of concern. In 2022, the 
proportion  of  15-year-olds  reporting  smoking 
cigarettes (11%) was lower in Cyprus than in most 
EU countries in 2022, but the use of e-cigarettes is 
on  the  rise.  More  than  one  in  four  15-year-olds 
reported  smoking  e-cigarettes  in  the  previous  30 
days,  which  is  among  the  highest  rates in  Europe 
(252). 
face 
In  Cyprus,  24%  of  adolescents 
overweight  or  obesity,  rates  that  are  higher  than 
the  EU  average.  It  can  be  related  to  their  lack  of 
physical activity and relatively unhealthy diet, with 
too few consuming fruit and vegetables daily (253). 
The  National  Strategy  on  Healthy  Nutrition  and 
Physical  Activity  2025–2030  aims  to  prevent 
obesity  and  chronic  non-communicable  diseases, 
for  instance  by  strengthening  health  literacy  and 
reducing  children’s  exposure  to  unhealthy  food 
marketing. 

Another  public  health  challenge  is  the  high 
consumption  of  antibacterials  in  Cyprus.  It 
raises  concerns  about  antimicrobial  resistance 
(AMR)  caused  by  over-  and  misuse  of  antibiotics 
and  related  multi-resistant  infections.  In  2024, 
Cypriot consumption remained higher than the EU 
average. Since it has fluctuated over recent years, 
it is unclear whether Cyprus will meet and sustain 
its  recommended  national  target  by  2030  (254). 
Cyprus’ recovery and resilience plan (RRP) includes 
a  measure  to  set  up  an  electronic  platform  for 
monitoring nosocomial antibiotic consumption and 
healthcare-related infections, with mandatory data 
reporting for all  hospitals. The 2018 antimicrobial 
resistance plan has been updated in a 2025-2030 
strategy. Since November 2025, all hospitals must 
operate  ‘Local  Infection  Control  Committees’  and 
‘Antibiotic  Stewardship  Teams’.  Cyprus  also 
participates  in  the  EU4Health-funded  joint  action 
EU-JAMRAI 2 (255), which  has allowed  the country, 
in  2025,  to  provide  specialised  AMR  training  to 
teams  from  eight  major  public  and  private 
hospitals. 

(252) Health Behaviour in School-aged Children study (2023), Data 

browser: https://data-browser.hbsc.org. 

(253) Country Health Profile 2025: Cyprus – see earlier footnote. 

(254) National target set by the Council Recommendation on 

stepping up EU actions to combat antimicrobial resistance in 
a One Health approach, 2023/C 220/01. 

(255) EU-JAMRAI 2 - Joint Action Antimicrobial Resistance and 

Healthcare-Associated Infections 2. 

Graph A15.2: Healthcare infrastructure investment 
by year 

Source: Country Health Profiles - Dashboard 

low 

the  2019 

Even though the public share has risen since 
2019,  health  spending  in  Cyprus  is  still 
relatively  low,  and  investment  in  health 
infrastructure remains modest. In 2023, health 
spending  per  inhabitant  in  Cyprus  (adjusted  for 
differences  in  purchasing  power)  was  well  below 
the  EU  average,  with  the  largest  share  going  to 
inpatient  and  outpatient  care  (around  two  fifths 
and  about  a  third  of  total  health  expenditure, 
respectively).  With 
reform,  public 
spending  as  a  proportion  of  total  healthcare 
expenditure  increased  from  around  54%  in  2019 
to  76.8%  in  2023,  closer  to  the  EU  average  of 
80.6%.  However,  Cyprus  displays  a  10-year  trend 
in  health 
of  comparatively 
infrastructure,  although  it  has  increased  steadily, 
especially  since  2023  (see  Graph  A15.2).  This 
raises concerns about the continuity and quality of 
service  delivery.  For  example,  the  number  of 
hospital  beds  (281  per  100 000  population  in 
2023)  was  well  below  the  EU  average  of  440), 
though  with  a  low  occupancy  rate  (58%,  having 
sharply fallen over the previous decade). Access to 
hospital is markedly low in rural areas (see Annex 
18). Under its RRP, Cyprus has allocated over EUR 
100 million to healthcare investments, notably on 
modernising state hospitals, purchasing equipment 
and  rolling  out  digital  and  interoperable  e-health 
services. In addition, Cyprus’ strategic planning for 
the  coming  years  would 
include  additional 
investments  in  enhancing  hospital  infrastructure 
and medical equipment and technology. 

investment 

Cyprus’  pharmaceutical  sector  also  plays  a 
relatively modest role. In 2024, employment in 
pharmaceutical  manufacturing  was  below  the  EU 
average,  and  recent  data  on 
industry  R&D 
investment  is  missing.  The  absolute  number  of 
(new)  clinical  trials  varies  between  0  and  4  over 

95 

2.83.03.94.64.55.78.37.410.719.619.519.720.421.521.421.921.922.9201520162017201820192020202120222023EUR million per 100 000 populationCyprusEU 
 
      
Table A15.1: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 2023 data (or latest available). 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 Portugal (licensed to practice) and Slovakia (professionally active). Latest data 
update on nurses for Belgium and Sweden: 2022; for France: 2021; for Luxembourg: 2017. 
** latest available 10-year trend: ratio 2023/2014 or 2024/2013; a factor of 2.00 means that it has doubled in 10 years. 
***‘Available hospital beds’ covers somatic care, not psychiatric care. 
Source: Eurostat 

the last 10 years (4 being the 2024 peak) (256). But 
the  number  of  patents  granted  per  million 
population  is  slightly  over  the  EU  average  (257), 
while the industry shows a modest share of extra-
EU  exports  in  2024  (3.5%  in  2025  vs  13.9%  for 
the  EU  average),  having  experienced  a  downward 
turn since reaching a peak of 10.7% in 2020. 

Out-of-pocket  payments  and  voluntary 
health 
insurance  decreased  significantly 
following  the  2019  reform,  yet  access  to 
dental  care  seems  more  affected  by  income 
inequalities.  In  2023,  out-of-pocket  payments, 
which  decreased  significantly  following  the  2019 
reform,  accounted  for  about  18%  of  health 
spending  in  Cyprus  (vs  an  EU  average  of  15%). 
About  26%  of  these  payments  went  on  (retail) 
pharmaceuticals,  23%  on outpatient  services,  and 
20%  on  dental  care  (258).  Public  coverage  for 
dental  care  is  lower  than  the  EU  average  (less 
than 15% vs about 35% for the EU). In 2025, this 
has  led  to  a  relatively  high  proportion  of  people 
below  the  poverty  threshold  reporting  that  they 
have forgone dental care needs (5.7% vs 1.3% of 
those  above 
threshold).  This 
underscores  the  role  of  healthcare  coverage  as  a 
tool  against  poverty  and  inequality,  beyond  its 

the  poverty 

direct  impact  on  health  status  (259).  As  for  long-
term  care,  it  is  not  yet  fully  integrated  with  the 
health system (see Annex 12). 

In  Cyprus,  health  workforce  challenges 
primarily  concern  nurse  shortages,  and  the 
distribution  of  medical  professionals.  The 
healthcare  sector  faces  critical  labour  shortages 
(see 2025 Country Report). Cyprus has among the 
lowest numbers of nurses per 1 000 population in 
the  EU.  Moreover,  while  nurses  are  comparatively 
young  (58%  under  35-years-old  in  2023),  the 
number of nursing graduates has fallen sharply in 
recent  years,  despite  a  slight  rise  between  2022 
and  2023. 
launched  a 
In  2024,  Cyprus 
communication campaign to promote nursing as a 
career  choice,  which  was  repeated  in  2025.  As  a 
result, Cyprus reports a siginificant increase in the 
number of nursing students (first-year enrolment) 
for the academic years 2024 and 2025. Under the 
EU4Health 
also 
participated  since  January  2025  in  the  ‘Nursing 
Action’  coordinated  by  WHO,  which  aims  to 
develop  recruitment  and  retention  policies  for 
nurses  and  support  and  empower  nursing 
professionals across the EU. That said, the number 
of medical graduates has improved annually since 
2019  (no  data  available  before)  to  reach  24.1 
medical  graduates  per  100  000  population  in 
2023,  well  above  the  EU  average  (15.2  per 

programme, 

Cyprus 

has 

(256) US National Library of Medicine, https://clinicaltrials.gov. 

(257) European Patent Office: Statistics & Trends Centre | epo.org. 

(258) OECD Data Explorer (DF_SHA). 

(259) European Commission: Directorate-General for Health and 
Food Safety, Cruces et al. (2025), The role of healthcare in 
reducing inequalities and poverty in the EU. 

96 

2020202120222023202410-year change**EU average* (latest year) Cancer mortality per 100 000 population205.5213.2188.8181.2n.a.0.90233.1 (2023)Mortality due to circulatory diseases per 100 000 population 287.7 280.8 257.8 215.2n.a.0.61313.0 (2023)Current expenditure on health, purchasing power standards, per capita2 2702 5942 7112 795n.a.1.903834.9 (2023)Public share of health expenditure, % of current health expenditure 71.6 79.0 77.0 76.8n.a.1.7980.6 (2023)Spending on prevention, % of current health expenditure 1.63.42.81.5n.a.2.363.7 (2023)Available hospital beds per 100 000 population*** 298 293 290 281n.a.n.a.440 (2023)Doctors per 1 000 population*4.64.95.15.3n.a.1.654.3 (2023)*Nurses per 1 000 population* 5.2 5.2 5.1 5.2n.a.1.127.6 (2023)*Mortality at working age (20-64 years), % of total mortality15.315.213.513.912.90.8614.3 (2023)Consumption of antibiotics in the community and hospital sectors,      defined daily doses per 1 000 inhabitants 28.9 25.0 33.5n.a. 23.50.8820.3 (2024) 
 
 
 
 
 
  
 
100 000)  (260).  In  addition,  over  the  same  period 
there has been a significant increase in the density 
of  general  practitioners  (GPs),  and  in  their  share 
among physicians.  

A  structured  strategic  planning  of  health 
resources would help address the unbalanced 
distribution  and  working  conditions  of 
healthcare  professionals.  The  unbalanced 
development has led to a nearly 1:1 ratio between 
nurses  and  doctors.  However,  doctors  are 
concentrated  in  the  capital  region  and  in  other 
major cities, with shortfalls in remote and sparsely 
populated 
regions.  Additionally,  doctors  are 
primarily  employed  in  the  private  sector  and 
nurses  in  the  public  sector.  Moreover,  in  Cyprus, 
the  prevalence  of  probable  major  depressive 
disorders  is  comparatively  low  in  the  general 
population (3%), but more than 10 times higher in 
the  medical  workforce  (33%)  (261).  This  huge  gap 
points  to  the  need  to  improve  working  conditions 
for  medical  staff.  There  has  also  been  a  rise  in 
complaints  by  patients.  The  objects  of  the 
complaints  include  waiting  times  and  referral 
quotas (by GP for specialist care) that are deemed 
insufficient  (262).  Cyprus  is  developing  a  ‘Capacity 
Master  Plan’  to  set  up  a  systematic  and  coherent 
strategic  planning.  The  plan  will 
include  an 
assessment  of  the  health  system’s  capacities 
(GeSY  and  private  sector)  and  an  annual 
assessment of health needs. This approach would 
enable a systematic mapping of human resources, 
infrastructure, and equipment alongside assessing 
them against future demand for health needs. The 
RRP  also  includes  upskilling  opportunities  for 
health  workers,  and  the  establishment  of  a 
National  Centre  for  Clinical  Evidence  and  Quality 
Improvement, which will also help to improve data 
availability on quality of healthcare services, which 
is still limited. 

Cyprus’  e-health  maturity  score  (263)  has 
improved,  although  still  lagging  behind,  and 
uptake  among  individuals  is  uneven.  Uptake 
levels  are  more 
gaps  between  education 

(260) Country Health Profile 2025: Cyprus – see earlier footnote. 

(261) WHO Regional Office for Europe (2025), Mental Health of 
Nurses and Doctors survey in the European Union, Iceland 
and Norway. 

(262) Country Health Profile 2025: Cyprus – see earlier footnote. 

(263) Digital Decade 2025: eHealth Indicator Study | Shaping 

Europe’s digital future. 

pronounced  in  Cyprus  than  the  EU  averages  (264). 
People  with  higher  education  levels  were  more 
than  twice  as  likely  to  seek  health  information 
online  than  people  with  lower  levels  of  education 
in  2024.  They  were  also  more  likely  to  make 
appointments online and to access personal health 
records  digitally.  Since  GeSY  implementation,  all 
GeSY  medical  services  have  been  delivered 
through  a  centralised 
information  technology 
system.  Clinical  and  administrative  information  is 
captured  in  a  structured  and  codified  format, 
generated by nearly 90% of healthcare providers. 
To  access  the  information,  the  system  includes  a 
dedicated  Providers’  Portal  for  all  authorised 
providers,  and  a  Beneficiaries’  Portal  for  citizens, 
both  with  predefined  access  rules.  Parents  have 
access  to  the  medical  records  of  their  dependent 
children.  The  system  provides  the  electronic 
patient  history,  and  the  patient  profile,  i.e.  history 
together  with  key  health  information  such  as 
allergies and vaccinations. In addition, in 2023, the 
e-Prescriptions  system  has  been  expanded  to 
include all pharmacies in Cyprus. This system aims 
to ensure access across the country. However, the 
development  of  a  mobile  application  for  patients 
to  access  their  electronic  health  records  has  only 
just  started.  The  RRP 
includes  measures  to 
strengthen  digital  solutions  in  the  healthcare 
sector, although these are more targeted at public 
health overall. Among these measures, Cyprus has 
launched  in  May  2025  electronic  cross-border 
health  services  under  the  eHealth  Digital  Service 
Infrastructure  (eHDSI).  It  allows  for  the  digital 
exchange  of  patient  summaries  and  prescriptions 
with  other  EU  countries.  Additionally,  all  funds 
allocated to health under the 2021-2027 cohesion 
policy  funds  are  earmarked  for  e-health  services 
and applications. 

(264) Country Health Profile 2025: Cyprus – see earlier footnote. 

97 

 
 
 
Housing market developments 

House  prices  in  Cyprus  are  on  the  rise.  The 
COVID-19  pandemic  interrupted  a  period  of  rising 
house  prices,  but  nominal  house  prices  increased 
again  between  2020  and  2025,  by  around  28%. 
This is broadly on par with the EU average of 27% 
(Graph  A16.1).  Although  the  phase-out  of  an 
investor citizenship scheme in 2020 (267) may have 
dampened  interest  from  foreigners,  this  was 
swiftly  offset  by  the  introduction  of  the  so  called 
‘headquartering  policies’ (268),  which  sustained 
housing  demand.  Regional  geopolitical  tensions 
may  have  also  generated  positive  spillovers (269). 
At  the  same  time,  although  the  pace  of  new 
residential  construction  has  picked  up  (Graph 
A16.2),  the  pass-through  of  higher  construction 
costs has contributed to further price increases. On 
affordability,  robust  income  growth  has  helped to 
improve the price-to-income ratio since 2015.  

Graph A16.1: House prices, rents and price-to-
income evolution in CY and EU27 

ANNEX 16: HOUSING 

In the past, Cyprus gave limited attention to 
developing  a  robust  social  rental  housing 
sector. A dedicated social rental housing policy is 
just  starting  to  emerge  to  address  the  rising 
demand for affordable housing.  

Housing  affordability  has  improved  over  the 
last  decade  for  buyers  but  worsened  for 
renters.  Over  the  last  decade,  buyers’  capacity 
has strengthened, but affordability for renters has 
worsened  (see  below).  At  the  same  time,  housing 
and  energy  poverty  disproportionally  affect 
vulnerable populations. The rental market remains 
relatively 
conditions, 
insecure  contracts, 
lack  of  tenant  protection 
against  evictions),  posing  difficulties  for  those 
unable to purchase homes.  

unregulated 

(dwelling 

Housing  quality  is  very  precarious,  affecting 
the  poorest  40%  of  the  population (265). 
Housing  deprivation  was  fuelled  by  a  lack  of 
renovations.  Thus,  most  of  the  existing  buildings 
have  a low  energy  efficiency  rating,  which  is  also 
reflected  in  the  final  energy  consumption.  No 
energy-saving  measures  have  been  taken in  49% 
of homes, and only 12% of the housing stock has 
undergone some form of thermal insulation on the 
building envelope (266).  

In  the  construction  sector,  labour  and  skills 
shortages  remain  high,  especially  linked  to 
the  twin  transition  or  climate  adaptation.  In 
October  2025,  the  share  of  Cypriot  employers 
their 
shortages 
expecting 
labour 
production  was 
the 
particularly 
construction  sector  (41.4%)  compared  to  EU  level 
(27.5%).  

limit 
in 

to 
high 

Homelessness  is  a  persistent  phenomenon 
and there is a lack of housing-led approaches 
to  tackle  it.  Homeless  people  are  offered 
emergency  shelters,  but  the  long-term  structural 
solutions need to be built up.  

(265)  Source: EU SILC 2023.  

(266)  Long-term Strategy for Building Renovation, 2020.  

98 

Source: Eurostat  

(267)  The Citizenship-by-Investment Program was a scheme that 
awarded Cypriot citizenship to investors and their families, 
upon undertaking investments of €2.2 million and above.  

(268)  Studies  find  a  positive  relationship  between  refugee 
inflows  and  house  prices,  suggesting  stronger  demand  at 
times  of  regional  tensions.  See  A.A.  Alola  &  U.V.  Alola 
(2019),  ‘The  dynamics  of  tourism  –  refugeeism  on  house 
prices in Cyprus and Malta’.  

(269)  Studies  find  a  positive  relationship  between  refugee 
inflows  and  house  prices,  suggesting  stronger  demand  in 
periods  of  regional  tensions.  See  A.A.  Alola  &  U.V.  Alola 
(2019),  ‘The  dynamics  of  tourism  –  refugeeism  on  house 
prices in Cyprus and Malta’.  

751001251501752000507091113151719212325Index (2005 = 100)Nominal prices CYNominal prices EU27Rental prices CYRental prices EU27Price-to-income ratio CYPrice-to-income ratio EU27 
 
 
   
 
 
 
House  prices  vary  significantly  across 
regions.  Coastal  areas  with  tourism  and  foreign 
enterprises, such as Limassol, Paphos and Larnaca 
face  high  demand  for  properties,  including  short-
term rental use. As a result, house prices there are 
39% higher than the national average (270).  

Rents  have  been  growing  faster  than  house 
prices  (see  Graph  A16.1).  This  trend  reflects 
strong  pressures  stemming  from  the  inflow  of 
foreign  residents,  as  well  as  the  limited  rental 
supply. Nevertheless, income growth has outpaced 
rental  increases  overall.  As  a  result,  at  the 
aggregate  level,  the  rental  market  does  not  show 
affordability pressure issues, with rents accounting 
for 22% of household income in 2025, in line with 
the  EU  average,  while  some  areas,  like  Limassol, 
far exceed this amount.  

Cyprus  has  the  highest  proportion  of  under-
occupied  dwellings  in  the  EU.  Around  70%  of 
the population - more than double the EU average 
of  33%  -  lives  in  a  dwelling  considered  too  large 
for the household’s needs. This largely reflects the 
increasing  use  of  housing  as  an  investment  or  as 
vacation  property.  Demographic  factors  also 
contribute,  as  evidenced  by  the  declining  average 
household  size  in  the  last  census  (2.57  people  in 
the  2021  census,  against  2.76  in  2011).  This 
pattern  is  not  uniform  across  regions,  with  a 
notable  example  being  the  city  of  Famagusta.  It 
has the second-largest proportion of empty homes 
(46% of the total housing stock), at the same time 
as the highest average household size.  

(270)  Data  compiled  at  the  level  of  local  administrative  units. 

Source: ESPON 2030 cooperation programme.  

99 

Graph A16.2: House supply indicators in CY 

(1) 4-quarters moving sums (averages for prices)  
Source: Eurostat  

The 

steadily. 

percentage 

The  construction  of  new  dwellings  has  been 
of 
expanding 
investment  in  dwellings  is  the  highest  in  the  EU, 
amounting  to  around  8%  of  GDP  in  2024.  This 
partly  reflects  the  distinct  saving  behaviour  of 
domestic  households  and  their  preference  for 
dwellings as a store of value (271). Another factor is 
that  residential  housing  investment  in  Cyprus  is 
comparatively 
inexpensive  relative  to  the  EU 
average  (investment  in  dwellings  in  purchasing 
power  parities  was  63.1%  of  the  EU  average  in 
2024). Nevertheless, the productivity in the sector 
is  rather  weak,  as  real  gross  value  added  per 
employee amounts to around 67% of the EU level. 
This reflects limited investment activity in research 
and  innovation  and  significant  underutilisation  of 
the  labour  input (272).  In  2023,  the  housing  stock 
increased  to  8.3  dwellings  per  1000  inhabitants, 
still  below  the  13  dwellings  recorded  on  average 
between  2000  and  2018.  The  rise  in  the  number 
of  residential  building  permits 
issued  (Graph 
A16.2)  suggests  that  housing  supply  growth  is 
likely  to  continue  in  the  coming  years,  albeit  at 
levels  below  the  record  highs  before  the  Cypriot 
2012-3013  financial  crisis.  Despite  this  progress, 
the  housing  supply  gap  still  amounts  to  39 000 
dwellings (273).  

(271)  Domestic  households  invest  large  fractions  of  their  gross 
savings in real estate, suggesting that that the purchase of 
dwellings  is  considered  an  alternative  to  deposits.  See 
‘2025 In-depth review – Cyprus’.  

(272)  See ‘2021 EU construction sector observatory – Cyprus’.  

(273)  Balouktsi  et  al.  (2026)  Housing  investment  needs  in  the 
(link: 

Technical 

144419 

Report 

JRC 

EU. 

024681012140204060801001201401601800507091113151719212325% of GDPIndex (2005 = 100)Residential building permits in m2, indexResidential buildings producer prices, indexInvestment in dwellings (right-hand side axis) 
 
   
 
 
There  has  been  rapid  growth  in  short-term 
rentals  in  Cyprus,  especially  in  coastal  and 
tourist areas (274). Registered short-term listings 
almost  doubled  between  2023  and  2026.  There 
are  over  9 000  registered  properties  offering 
nearly  40 000 beds,  but  authorities estimate  that 
the actual total supply is even higher. These rental 
properties reduce the supply of long-term housing 
residents  and  often  operate  without 
for 
registration  or  oversight.  More  than  half  of  the 
14 446  short-term  rental  properties  (over  7 000) 
were unregistered as of mid-2024 (275).  

There  is  an  ongoing  shortage  of  workers  in 
some  housing-related  sectors  and  labour 
shortages  remain  a  challenge.  In  October 
2025,  the  proportion  of  employers  expecting 
labour  shortages  to  limit  their  production  was 
particularly high in the construction sector (41.4%) 
compared  with  the  EU  level  (27.5%).  Persistent 
labour  and  skills  shortages  linked  to  the  twin 
transition  or  climate  adaptation  were  reported  in 
2025  for  system  analysts,  air  conditioning  and 
refrigeration  mechanics  and  other  construction 
professions,  including  plumbers  and  pipe  fitters. 
Job  creation  potential  is  high  in  some  sectors, 
particularly  those  relevant  to  the  green  transition 
(see also Annexes 11 and 13).  

Rising housing demand, driven in part by non-
resident buyers, is likely to push house prices 
up  moderately  amid  stable  supply  growth. 
Housing  transactions  have  more  than  doubled 
since 2020, reflecting an increase in purchases by 
non-residents  thanks  to  government  initiatives  to 
attract  foreign  workers.  Stable  housing  supply 
growth  coupled  with  strengthening  demand  - 
driven  by  projected  growth  in  real  incomes (276), 
improving household capacity and stable financing 
conditions  –  indicate  potential,  but  contained 
upward house price pressures in the future.  

https://publications.jrc.ec.europa.eu/repository/handle/JRC1
44419).  

(274)  Ministry of Tourism, 2026.  

(275)  Association of Cyprus Tourist Enterprises, 2024.  

Structural policies  

Housing policy in Cyprus has been historically 
oriented towards homeownership. Since 1974, 
the government has implemented several housing 
schemes to help various social groups, focusing on 
low-  to  middle-income  families  buying  a  home 
interest 
(long-term  housing 
rates).  In  the  wake  of  the  2008  financial  crisis, 
to 
Cyprus 
stabilise 
support 
issues  such  as 
homeownership  and  address 
mortgage arrears and non-performing loans.  

implemented  strategic  measures 

housing  market, 

loans  with 

lower 

the 

Cyprus  lacks  social  rental  housing  policy. 
Today,  data  on  the  proportion  of  social  and 
affordable housing are incomplete. Social  housing 
for  home  ownership  exists,  however  there  are  no 
data about the proportion of the stock concerned. 
Social  rental  housing  represents (277)  close  to  0% 
of the total housing stock (278), while EU average is 
8%. The Statistical Service of Cyprus’s public data 
do  not  currently  provide  an  official  breakdown 
showing the percentage of total housing stock that 
is  social  housing  (rental  or  ownership),  nor  the 
number of social housing units managed by state 
entities like CLDC. Dedicated  social rental housing 
policy  is  just  starting,  but  efforts  should  be 
upscaled to address the rising demand.  

Since 2024, several steps have been taken to 
provide  affordable  housing  for  low-income 
populations.  These  measures  include:  (i)  the 
‘Renovate–Rent’ scheme (279) that aims to increase 
the  supply  of  affordable  housing  by  integrating 
housing  units  into  the  rental  market;  (ii)  the 
‘Housing  grant  scheme  for  young  couples  and/or 
young people up to 41 years of age’ (280) that aims 
to  help  young  people  buy  a  home;  and  (iii)  the 
CLDC’s  revised  housing  incentives  taxes (281)  that 
aim to produce affordable housing for sale and/or 

(277)  Pittini, A. (2026). Cyprus. In Social and public housing in the 
EU and UK. Dublin: Ministry for Housing, Local Government 
and Heritage.  

(278)  OECD Affordable Housing Database 2026.  

(279)  See Renovate-Rent scheme guide (in Greek).  

(280)  Housing  grant  scheme  for  young  couples  and/or  young 

people up to 41 years of age (in Greek).  

(281)  Details  can  be  found  on  the  Cyprus  Land  Development 

(276)  See ‘European Commission 2026 spring forecast – Cyprus’.  

Corporation announcements (in Greek).  

100 

 
 
 
rent. Launched in 2025, the new housing strategy 
called (282),  tackles  the  housing  supply  issue  by 
improving  affordability,  with  the  focus  being 
particularly  on  young  people  and  families.  The 
government  aims  to  increase  the  housing  stock 
with over 1 900 new housing units expected (with 
almost 200 designated as affordable housing) (283) 
and  to  add  approximately  EUR 9  million  to  a 
special  affordable  housing  fund  through  planning 
incentives.  In December 2025,  the construction of 
500 affordable housing units in Nicosia, Limassol, 
Larnaca  and  Paphos  was  announced,  at  a  total 
cost of EUR 70 million. A new housing scheme for 
building collective accommodation units to support 
the  industry,  tourism  and  trade  sectors  was  also 
announced. The plan enables housing solutions to 
be  created  for  personnel  employed  in  these 
sectors.  At  the  same  time,  a  grant  scheme  for 
student  dormitories  in  Nicosia  was  set  up,  with  a 
total  budget  of  EUR 8.3  million.  In  terms  of 
tackling  short-term  rental  challenges,  several 
measures,  such  as  on-site  inspections  and  digital 
monitoring,  were  adopted,  however  further  legal 
adjustments  are  needed  to  ensure  registered 
operation  and  a  fairer  housing  market  for 
residents.  

Since 2014, extensive EU funding has helped 
Cyprus  to  tackle  some  housing-related 
challenges.  A  significant  number  of  households 
have  benefited  from  energy-efficient  renovations: 
at least 1 770 via the structural funds and at least 
17 000  via  the  Recovery  and  Resilience  Facility. 
These  renovations  enabled  Cyprus  to  address  the 
2019  country-specific  recommendation  (CSR)  4 
and the 2020 CSR 3 to increase the proportion of 
renewable  energy,  thereby  improving  the  energy 
efficiency  of  homes  and  reducing  energy  poverty. 
In 2024, Cyprus also signed its first loan with the 

European  Investment  Bank  (EIB) (284)  to  build 
affordable  student  housing  and  upgrade  campus 
facilities in the cities of Paphos and Limassol. The 
EUR 125  million  loan  covers  70%  of  the  project’s 
total  cost  to  tackle  the  lack  of  sustainable  and 
affordable  housing  for  young  people.  Since  2025, 
a  Technical  Support 
Instrument  multi-country 
project,  has  been  helping  the  Cypriot  authorities 
with  recommendations  and  tools  to:  (i)  increase 
levels  of  investment  in  affordable  and  social 
housing; 
institutional  and 
(ii) 
administrative 
for  housing  policy 
implementation  at  national  and/or  subnational 
level;  and  (iii)  develop  targeted  policies  to  make 
housing more affordable.  

improve 
capacity 

the 

Vulnerable groups  

Despite  recent  improvements,  there  are  still 
issues with housing quality. Structural issues in 
housing,  such  as  leaks,  damp  or  rot,  affected 
32.1%  of  the  population  in  2023.  While  this  has 
improved  by  7.9 percentage  points  since  2020,  it 
is  still  much  higher  than  the  EU  average  of 
15.5% (285).  Energy  poverty  remains  a  pressing 
issue in Cyprus, also posing challenges to the  fair 
green transition (see Annex 12).  

persist 

Affordability 
for 
challenges 
vulnerable  households.  While  only  2.4%  of  the 
population  lived  in  households  overburdened  with 
housing costs, this percentage was more than two 
times higher in 2025, at 6.5%, among those in the 
poorest  tenth  of  the  population  and  more  than 
three times higher at 7.6% among those at risk of 
poverty (286).  Rents  accounted  for  28.3%  of  these 
latter  households’  income  in  2025  (above  the 
national  aggregate  level  of  22.0%) (287)  although 
this  is  well  below  the  EU  average  of  33.5%.  The 

(282)  This is the first affordable rental scheme implemented by 
the  CLDC  in  Cyprus.  The  EUR 12  million  project  aims  to 
ease  rental  pressures  and  expand  access  to  reasonably 
priced accommodation in Strovolos (in total 54 dwellings). 
The  EUR 16  million  project  in  Limassol  is  supporting  the 
construction  of  138  affordable  apartments 
the 
municipality.  

in 

(283)  This is the first affordable rental scheme implemented by 
CLDC in Cyprus. The €12 million project aims to ease rental 
pressures  and  expand  access  to 
reasonably  priced 
accommodation  in  Strovolos  (in  total  54  dwellings).  The 
the 
€16  million  project 
in  Limassol 
construction  of  138  affordable  apartments 
the 
municipality.  

is  supporting 
in 

(284)  See ‘Cyprus University of Technology gets EUR 125 million 

in EIB support for campus upgrades’.  

(285) 

(286) 

[ilc_mdho01]  Total  population  living  in  a  dwelling  with  a 
leaking  roof,  damp  walls,  floors  or  foundation,  or  rot  in 
window frames or floor.  

[ilc_lvho7a]  and  [ilc_lvho07b],  housing  cost  overburden 
rate  by  risk  of  poverty  and  income  deciles.  This  indicator 
should  be 
read  together  with  the  tenure  structure 
(homeowners, tenants), that may differ across country and 
regions. 

(287)  Refers to households with incomes below 60% of national 

median.  

101 

 
 
 
Graph A16.3: Housing affordability selected indicators 

Source: Eurostat and European Commission calculations.  

combination of record under-occupation and rising 
inequality  in  access  to  housing  reveal  hidden 
challenges  for  vulnerable  groups.  The  share  of 
people  having  experienced  housing  difficulties  in 
their  lifetime  was  12% (288),  well  above  the  EU 
average of 4.9%. The reason for this high figure is 
that  ‘other’  was  reported as  a  reason  for  housing 
difficulties,  attributable  to  the  1974  Turkish 
invasion  of  Cyprus  and  to  the  financial  crisis  in 
2012-2013. The rate is higher for those at risk of 
poverty  or  social  exclusion  at  16.3%  but  also 
rather  high  at  11.1%  and  well  above  the  EU 
average (3.9%) for those not at risk mainly due to 
the  Turkish  invasion  in  Cyprus (289)  At  the  same 
time,  in  2024  Cyprus  exhibits  one  of  the  largest 
gaps  in  perceived  housing  discrimination  across 
individuals at risk of poverty or social exclusion, at 
20.3%  (vs  EU  average  of  10.5%) (290).  Cyprus  is 
among 
the 
percentage  of  people  living  in  households  with 
arrears on mortgage, rent or utility bills, at 12.0% 
vs EU of 9.2%) (291).  

the  worst  performers 

regarding 

There  has  been  relatively  low  homelessness 
in  Cyprus  although  the  phenomenon 
is 
persistent.  According 
to  unpublished  data 
collected by the Deputy Ministry of Social Welfare, 
the  number  of  homeless  people  who  sought 
assistance  from  social  services  was  225 in  2024, 

(288)  Persons  having  experienced  housing  difficulties  in  their 
lifetime  by  sex  and  current  risk  of  poverty  or  social 
exclusion situation.  

(289) 

[ilc_lvhd05] Persons having experienced housing difficulties 
in their lifetime by sex and reason.  

(290)  [ilc_atsd01]  Persons  feeling  discriminated  against  by  life 
situation, sex, age, disability (activity limitation), and risk of 
poverty  or  social  exclusion  [ilc_atsd01]  Persons  feeling 
discriminated  against  by  life  situation,  sex,  age,  disability 
(activity limitation), and risk of poverty or social exclusion.  

(291)  Eurostat 2025.  

383 in 2023 and 206 in 2022. Available evidence 
indicates  that  EU  and  non-EU  nationals  are 
consistently  overrepresented 
in  the  registered 
cases of homelessness that do not include asylum 
seekers. However, in the absence of a coordinated 
and integrated responses, NGOs offer them mostly 
temporary  and  ad  hoc  solutions  in  cooperation 
with public authorities.  

limited  mechanisms 

People  with  disabilities  suffer  from  the  lack 
of accessible housing. Apart from increasing the 
allowances  for  this  target  group,  Cyprus  has  not 
scaled  up  investments  in  accessible  housing  for 
them.  Slow  and 
for 
monitoring  and  enforcing  the  implementation  of 
the 
accessibility 
issue (292).  The 
forthcoming  Law  on  Social 
Participation,  Inclusion  and  Independent  Living  of 
Persons  with  Disabilities  lacks  a  housing  element 
and  therefore  could  miss  the  opportunity  to 
strengthen independent living frameworks.  

requirements  contribute 

to 

and 

explicit 

comprehensive 

The  LGBTIQ+  community  suffers from  a  lack 
of 
legal 
protections  against  discrimination  in  access 
to housing. This legal gap leaves LGBTIQ+ people 
particularly  vulnerable  to  unequal  treatment  by 
landlords, real estate agents and service providers, 
making  it  more  difficult  for  them  to  secure 
affordable, safe and stable accommodation (293).  

(292)  Persons  with  Disabilities  Law  (No.  127(I)/2000)  and 
Regulation 61H (Annex III) of the Roads and Buildings Law 
sets  technical  specifications  for  accessible  design  but 
applies  mandatorily  only  to  housing  complexes  of  five  or 
more units.  

(293)  European Union Agency for Fundamental Rights. (2024, 
May 14). LGBTIQ equality at a crossroads: progress and 
challenges. FRA. 
https://fra.europa.eu/sites/default/files/fra_uploads/fra-
2024-lgbtiq-equality_en.pdf. 

102 

 
 
 
 
HORIZONTAL 
ANNEX 17: 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  the  EU  average  for  all  of  them.  On 

Graph A17.1: Progress towards the SDGs in Cyprus 

low-achievers 

larger  percentage  of 

education  (SDG 4),  Cyprus  has  higher  attainment 
in  tertiary  education  than  the  EU  average,  but  a 
much 
in 
mathematics,  a  lower  percentage  of  participation 
in  early  education,  a  higher  percentage  of  early-
school  leavers,  and  a  lower  percentage  of  basic 
digital  skills  in  adults  than  the  EU  average.  The 
country  is  not  making  progress  on  SDG 8  (Decent 
work and economic growth)  compared with 2024. 
Fatal accidents at work are above the EU average. 
Investments, as a share of GDP, are still below the 
EU average, and the country’s material footprint is 
above the EU average. 

It  is  particularly  lagging  behind  on  SDG 9 
(Industry, innovation and infrastructure).  The 
country  needs  to  catch  up  on  R&D  expenditure, 
which remains low at 0.65% of GDP in 2024 – one 
of  the  lowest  in  the  EU  (where  the  average  is 
2.24%).  On  sustainable  infrastructure,  Cyprus  is 
lagging  behind  the  EU  average  on  the  share  of 
buses  in  passenger  transport.  Its  recovery  and 

For a detailed progress assessment towards the various SDGs, see the annual Eurostat report ‘Sustainable development in the 
European Union’; for extensive data on the short-term SDG progress of EU countries, see Key findings – Sustainable development 
indicators; for an interactive visualization of SDG progress of EU countries, see SDG country overview. 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 or six 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 29 April 2026. Data refer mainly to the period 2019-2024 or 2019-2025. Data on SDGs may 
vary across the report and its annexes due to different cut-off dates. 

103 

 
 
 
 
 
 
resilience  plan  (RRP)  is  targeting  bottlenecks, 
especially  in  the  diversification  of  the  economy 
and  investing  in  R&D,  as  well  as  in  sustainable 
infrastructure,  to  facilitate  further  progress  on 
these SDGs. 

Cyprus  is  improving  on  some  SDG  indicators 
related  to  sustainability  and  is  well  above 
the  EU  average  for  SDG 14  (Life  under 
water).  However,  it  is  moving  away  from 
SDG 11 (Sustainable cities and communities), 
SDG 13  (Climate  action).  Per  capita  energy 
consumption in Cyprus is much lower than the EU 
average,  and  the  country  has  made  progress  on 
energy  consumption  indicators.  The percentage  of 
renewable 
energy 
consumption  increased  from  13.8%  in  2018  to 
21.9% 
in  2024.  On  affordable  energy,  the 
percentage  of  the  Cypriot  population  unable  to 
keep  their  homes  adequately  warm  was  down  to 
14.6%  in  2024  (but  still  higher  than  the  EU 
average of 9.2%). 

in  gross 

energy 

final 

and 

production). 

It needs to catch up with the EU average on 
SDG 2 (Zero hunger), SDG 6 (Clean water and 
sanitation)  SDG 7  (Affordable  and  clean 
energy),  SDG 9  (Industry,  Innovation  and 
(Responsible 
Infrastructure),  and  SDG 12 
consumption 
The 
concentration  of  nitrates  in  groundwater  was 
slightly above the EU average (19.3 mg/litre vs EU 
18.1 mg/litre  in  2023)  and  ammonia  emissions 
from  agriculture  were  much  higher  (55 kg/ha  vs 
EU 19.1 kg/ha). This, combined with a low recycling 
rate  for  municipal  waste  (16.0%  vs  EU  47.7%  in 
2023)  and  a  high  material  footprint  (in  2024, 
22.1 tonnes per inhabitant, vs 13.7 tonnes for the 
EU)  are  challenges  for  meeting  the  environment 
goals.  The  average  CO2  emissions  per  km  from 
new  passenger  cars  were  95.9 g  CO2  per  km  in 
2024,  below  the  EU  average  of  107.9  per  km. 
Measures in the recovery and resilience plan (RRP), 
renovations  and 
such  as  energy  efficiency 
investments  in  sustainable  water  management, 
will  help  achieve  further  progress  on  these  SDGs. 
The percentage of coastal water bathing sites with 
excellent  water  quality  is  99.26%  (vs  88.8%  EU 
average)  and 
terrestrial 
protected area is at 37.5% (vs 26.4 EU average). 

the  percentage  of 

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  15.7 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). 

students 

in  mathematics 

However, it still needs to catch up on SDGs 4, 
5, 7, 8 (294). The high share of low achievement of 
(see 
15-year-old 
Annex 13)  limits  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  11.1%  in  2024).  On 
gender equality, while the gender employment gap 
is  at  par  with  the  EU  average  (10.0 pps  in  2024), 
the  percentage  of  senior  management  positions 
held  by  women  was  much  lower  than  in  the  EU 
(11.4%  vs  EU  32.6%  in  2024.  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  on  SDGs  related  to 
macroeconomic stability (SDGs 8, 16, 17). The 
real  GDP per capita was below the EU  average in 
2024  (EUR 29 870  in  Cyprus  vs  EUR 33 650). 
Cyprus is moving  away  on  SDG 16  (Peace,  justice 
and  strong  institutions),  with  a  higher  death  rate 
due  to  homicide  and  more  victims  of  human 
trafficking than the EU average. Also, government 
expenditure on the law courts is well below the EU 
average. The perceived independence of the justice 
system  needs  to  catch  up  with  the  EU  average 
(42%  in  Cyprus  vs  54%  EU  average),  while  the 
Corruption  Perceptions  Index  scores  are  worse  in 
Cyprus 
(56  vs  62). 
the  EU  average 
Component  3.4  (Modernising  public  and  local 
authorities,  making  justice  more  efficient  and 
fighting corruption)  of the RRP contains measures 
to  address  long-standing  challenges  in  the  areas 
of justice and the fight against corruption. 

than 

Cyprus  is  improving  on  almost  all  SDGs 
(except  SDGs 3  and  5)  related  to  social 
fairness.  Cyprus  outperforms  the  EU  average  on 
most  indicators  related  to  poverty,  health  and 

(294) For more information, see Annex 12. 

104 

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

105 

 
productivity  per  hour  worked  in  Cyprus  remains 
below the EU  average (80% of the EU average in 
2024).  However,  the  trend  remains  positive  with 
1.6%  annual  growth  of  labour  productivity  over 
last decade.  

Economic  growth  is  largely  driven  by  the 
services  sector  which  is  concentrated  in  the 
main  urban  areas  of  the  island.    Nicosia  and 
Limassol  are  the  main  urban  centres  where  the 
pharmaceutical industry and the fintech sector are 
steadily growing, with almost 30% of Gross Value 
(296)  and  21%  of 
Added 
employment in these sectors (297) in 2024. 

(GVA)  contribution 

Map A18.1:  GDP per head compared with the EU 
average 

ANNEX 18: COMPETITIVE REGIONS 

Regional development trends 

Cyprus  has  maintained  a  relatively  steady 
convergence  trajectory  towards  the  EU 
average  in  GDP  per  head,  although  there 
have been setbacks caused by crisis periods. 
Before  the  2008  financial  crisis,  Cyprus  made 
substantial  progress  in  catching  up  to  the  EU  in 
terms  of  GDP  per  head  (PPS),  increasing  from 
100%  of  the  EU  average  in  2004  to  106.7%  in 
2008.  The  financial  crisis  was  followed  by  a 
decline in Cyprus’s relative position which dropped 
to 79.8% in 2014. Despite the disruptions caused 
by the COVID-19 pandemic in 2020, which led to a 
drop  in  relative  position  and  negative  growth, 
Cyprus resumed its upward trajectory and reached 
99% of the EU average in 2024 reflecting a period 
of  relatively  dynamic  economic  performance. 
Based on the current data, Cyprus is classified as a 
single  transition  region  (see  Map  A18.1).  Between 
2014  and  2024,  GDP  per  head  registered  an 
average  annual  growth  rate  of  3.8%,  compared 
with 1.4% in the EU, indicating a sustained pace of 
real convergence. Population growth contributed to 
this  trend.  The  population  increased  by  13.3  per 
1000 inhabitants between 2015 and 2024, a level 
well  above  the  EU  average  (1.8  per  1  000 
inhabitants),  with  growth  recorded  in  both  urban 
and rural areas (295). 

with 

Rural  areas  face  higher  gender  employment 
gap  while  employment  rates  exceed  the  EU 
figure  across  all  territories.  Employment  in 
Cyprus expanded more rapidly than in the EU (see 
Annex  11)  and  consistently  exceeded  the  EU 
figures  across  all  types  of  territories.  However,  in 
2025  this  was  lower  in  rural  areas  (79.1%) 
(81.6%). 
urban 
compared 
areas 
Unemployment 
rates  also  dropped  across 
territories in relation to the EU figure. In 2025, the 
unemployment  rate  in  cities  was  below  the  EU 
average  (4.4%  vs  6.8%),  as  were  the  rates  in 
towns and suburbs (4.2% vs 5.6%). Likewise, rural 
territories saw lower unemployment rates than the 
EU  rate 
(4.5%.  vs  5.3%).  However,  gender 
employment  gap  remains  higher  in  rural  areas 
compared  with  urban  areas  (9  pp.  vs  13.7  pp.). 
Despite  relatively  strong  growth  in  GDP  per  head 
of 3.8% between 2014 and 2024, and a declining 
labour 
unemployment 

rate  across 

territories, 

(295) Source: ARDECO.  

2021-2023 average GDP per head in purchasing power 
standard compared with the EU average. 
Source: Commission calculations based on Eurostat 16 July 
2025 data. 

Key challenges for regional 
competitiveness 

R&D  expenditure  are  well  below  the  EU 
challenges 
average  while 

structural 

(296) Eurostat, GVA in financial and other service activities as % of 

total GVA in 2024. 

(297) Eurostat, Share of employment in ICT, Financial and 

professional activities in 2024. 

106 

 
 
 
 
 
 
 
 
 
Table A18.1:Main development trends, challenges and the concentration of resources 

Source: European Commission based on Eurostat data; categories of regions based on Map A18.1. 

constrain  overall 
competitiveness.  R&D 
spending amounted to only 0.65% of GDP in 2024 
(see Annex 4). The Regional Competitiveness Index 
confirms  overall  structural  constraints.  Cyprus 
scored  86  in  2022  (EU=100)  with  comparatively 
weak performance in basic skills (score of 27) (see 
Annex  13)  and 
infrastructure  (score  of  62). 
Research  and  innovation  activities  are  primarily 
concentrated in the main urban centres while firms 
located  in  suburbs  and  rural  areas  tend  to  have 
more  limited interaction  with  research  institutions 
and  innovation  support  structures.  The  smart 
specialisation strategy adopted in 2023, has been 
a  good  starting  point  in  providing  a  strategic 
framework to improve the innovation performance 
of  the  economy.  However,  its  impact  has  not  yet 
innovation  capacity  partly 
led 
reflecting 
the 
monitoring mechanism (see Annex 4). 

to  further  develop 

the  need 

improved 

to 

Rural  areas  appear  less  well  equipped  to 
tackle productivity gaps.  Differences in human 
resources  endowment  may  present  specific 
challenges  in  this  regard.  The  share  of  highly 
educated  people  was  at  57%  in  cities,  47%  in 
towns  and  suburbs,  and  39%  in  rural  areas  in 
2025  (298).  Despite  the  shares  exceeding  EU 

(298) Eurostat, Share of population from 25 to 64 years with 

tertiary education in 2025 (edat_lfs_9913). 

averages  across  all  types  of  territories,  the 
significantly  higher  share  of  highly  educated 
people 
in  cities  compared  with  rural  areas, 
indicates  uneven  access  to  skilled  labour  across 
the  island  These  differences  may  affect  the 
capacity  of  rural  areas  to  benefit  from  higher-
value economic activities and innovation. The lack 
for 
of 
entrepreneurial  activities  in  rural  regions  further 
limits local development (299). 

support  mechanism 

dedicated 

Broader  indicators  of  territorial  well-being 
point  to  weaker  outcomes  in  rural  areas.  In 
2025,  the  share  of  people  at  risk  of  poverty  or 
social exclusion (AROPE) was below the EU rate in 
cities  and  towns  and  suburbs,  while  it  exceeded 
the EU figure in rural  areas (see Annex  12). Rural 
areas have also significantly higher shares: 15.2% 
in cities, 17.3% in towns and suburbs, and 22.3% 
in  rural  areas.  The  EU  Social  Progress  Index 
reflects  gaps 
to  services  and 
opportunities,  with 
rural  areas  performing 
significantly worse than cities, particularly in water 
and  sanitation  (41  vs  58),  housing  (48  vs  61), 

in  access 

(299) OECD (2025), Reinforcing Rural Resilience, OECD Rural 

Studies, OECD Publishing, 
Paris, https://doi.org/10.1787/7cd485e3-en. 

107 

Transition region (population 966 365)Following the economic disruptions caused by the COVID-19 pandemic, Cyprus resumed its upward trajectory and reached 99% of EU GDP per capita (PPS) in 2024. Cyprus showed a strong convergence trend with the EU-27, registering annual average growth of GDP per capita of 3.8%. Specific territoriesUrban and rural areas, as well as coastal and inland regions have different challenges. The level of human capital in Cyprus exceeds the EU average but territorial disparities persist, with higher shares of tertiary-educated population in urban areas. The labour market also faces territorial disparities, with higher unemployment rates and a greater gender employment gap in rural areas compared with urban areas. Access to primary education and healthcare is limited in rural areas. Furthermore, water scarcity remains a pressing issue amid growing tourism pressures especially in coastal/urban areas. National cohesion aspects in line with Article 177 TFEU (second indent)Significant challenges remain in water treatment and waste management. Ageing water infrastructure combined with limited investments contribute to high leakage rates. Low recycling rates of municipal waste remain a weak point in environmental governance. Main development trends 
 
 
 
  
 
health (70 vs 83), inclusive society (29 vs 45) (300). 
long-term 
These  disparities  can  affect 
attractiveness and competitiveness of the island.  

the 

The  future  development  prospects  of  rural 
areas  depend  on  the  quality  of  education. 
Students  in  rural  areas  perform  considerably 
worse in basic skills than their peers in cities with 
a gap of 39 score points according to 2022 OECD 
Programme  for  International  Student  Assessment 
(PISA). Furthermore,  Cyprus  recorded  the  highest 
severe underachievement rate, with over 40.3% of 
in  all 
students  underachieving  simultaneously 
three  tested  subjects  all  over  the  country  (see 
Annex 13). The EU Social Progress Index 2025 also 
shows  lower  scores  in  basic  education  in  rural 
areas  (47)  compared  with  cities  (49).  However, 
towns  and  suburbs  scored  the  lowest  (45)  (301). 
However, there is potential to improve educational 
outcomes  and  labour  market  prospects  of  young 
people, especially in rural areas.  

gaps 

affect 

business 

Territorial gaps emerge in access to services 
while  gigabit 
infrastructure  has  rapidly 
improved  in  sparsely  populated  areas.  On 
average,  it  takes  people  more  time  to  reach 
primary schools and hospitals in the country’s rural 
areas than in the EUs rural areas (see Table A18.2. 
development 
These 
prospects,  quality  of  life  and  may  influence 
settlement  patterns  and  labour  supply  outside 
urban  centres.  Better  match  of  public  transport 
with 
local  population  needs  such  as  work, 
healthcare  and  education  could  enhance  the 
attractiveness  of  these  areas.  Although,  in  terms 
(VHCN), 
of  fixed  very  high-capacity  network 
sparsely  populated  areas  have  yet  to  reach  the 
level  of  coverage  enjoyed  in  the  rest  of  the 
country,  they  show  significant  progress.  The 
implementation of Cyprus’s recovery and resilience 
plan  (RRP)  investment  measure  to  expand  the 
VHCN in underserved areas has contributed to this 
positive  trend.  In  2024,  78%  of  households  in 
these  areas  had  access  to  VHCN,  compared  with 
the  national  coverage  of  89% 
(EU  average 
coverage in sparsely populated areas is 62%) (see 
Annex  5).  This  offers  the  potential  to  roll  out 

digital technologies and productivity improvements 
outside cities. 

the 

but 

activity 

Cyprus’s  blue  economy  has  experienced 
growth, 
remains 
concentrated  in  coastal  areas.  In  2022,  the 
blue  economy  constituted  6.8%  of  the  national 
GVA  (up  from  4.4% in  2021)  and  generated 12% 
of  national  employment  (up  from  8.8%  in  2021). 
As  an  island  nation,  Cyprus’s  economy  is  heavily 
reliant  on  tourism  (80%  of  the  blue  economy-
related  GVA,  87%  of  blue  economy-related  jobs), 
with  marine  living  resources  (6%  of  jobs)  and 
shipbuilding/repair (3% of jobs) also contributing.  

is 

and 

highly 

leading 

seasonal, 

community 

The growing popularity of Cyprus as a tourist 
destination  puts  more  pressure  on  coastal 
urban  infrastructure.  Cyprus  observed  a  record 
number  of  tourist  arrivals  in  2024  (more  than  4 
million  international  visitors),  with  9  out  of  10 
tourists opting for coastal urban areas, and almost 
1  in  3  tourists  choosing  Paphos  (302).  Coastal 
tourism 
to 
environmental  degradation,  water  stress,  and 
infrastructure overload during peak months, which 
goes against the objectives for sustainable coastal 
development 
well-being 
underlined  in  the  Ocean  Pact.  Seasonal  peaks  in 
tourism  overwhelms  coastal  areas  while  less 
crowded  rural  and  mountainous  areas  offer  an 
opportunity  to  diversify  tourism  flows  and  boost 
the local economy. Coastal areas with high tourism 
and  foreign  businesses  also  note  higher  house 
prices that are exacerbated by higher demand (see 
Annex 16). Tourism density in Cyprus is one of the 
highest in the EU, exceeding 1 700 nights per km². 
High  density  creates  significant  pressure  on  the 
both the island and the environment, especially in 
the 
coastal  areas  where  most  of 
tourism 
Encouraging 
concentrated. 
is 
infrastructure 
destinations  to  diversify  their  tourism  offers  and 
better distribute tourism flows could help manage 
seasonal  peaks  and  promote  wider  territorial 
distribution.  

(300) Inforegio - Social progress in cities and rural areas of the EU. 

Values on a 0-100 scale. 

(301) Indicators included in the basic education score that are 
measured by the degree of urbanisation level are: lower-
secondary completion only, and early school leavers. Source: 
Inforegio - Social progress in cities and rural areas of the EU. 

(302) Tourism Statistics 2024 - Cyprus Employers and 

Industrialists Federation. 

108 

 
 
 
 
Table A18.2:Key regional indicators (at NUTS2 level) for Cyprus 

Dark green - the indicator is 120% or more of the EU average. 
Light Green - the indicator is 100% or more, but less than 120% of the EU average. 
Yellow - the indicator is 90% or more, but less than 100% of the EU average. 
Light red – the indicator is 75% or more, but less than 90% of the EU average. 
Dark red – the indicator is below 75% of the EU average. 
This colour scale applies to ‘positive’ indicators, where higher values are favourable. 
For ‘negative’ indicators (where higher values are unfavourable), the colours are reversed. 
Source: Eurostat and JRC 

and 

water 

recent 

others, 

administrative 

in  2024,  has 

The 
reform, 
implemented 
transferred 
significant 
responsibilities 
to 
district 
district-level 
enabling 
authorities, 
coordination  and  investment  planning  in, 
among 
waste 
management (303).  However,  the  administrative 
reform  still  needs  to  be  accompanied  by  an 
increase  in  administrative  capacity  sufficient  to 
fully  absorb  and  operationalise 
these  new 
responsibilities. Given the recent entry into force of 
the  reform,  newly  formed  municipalities,  district-
level  local  government  organisations  and  inter-
municipal  structures  are 
the  process  of 
adjusting  their  organisational  arrangements  and 
cover 
human 
their  broader 
competences.  Newly 
formed  municipalities 
encounter  operational  challenges  such  as  staff 
limited  managerial  experience. 
shortages  and 
These  challenges  are  particularly  relevant  in  a 
multi-layered  governance  setting,  where  effective 
coordination 
inter-
municipal  groupings  and  district-level  bodies  is 
essential,  notably  in  technically  demanding  areas 

between  municipalities, 

resources 

to 

in 

(303) Government of Cyprus 2024, National Reform Programme: 

https://www.mof.gov.cy/mof/dggrowth/dggrowth.nsf/all/B770
610290F2DC54C22588F4003255F 
9/$file/NRP%202024.docx (Accessed on 19/01/2026). 

this 

reform  and  ensure 

such  as  water  and  waste  management. 
Strengthening  local  capacity  is  essential  to  fully 
benefit  from 
local 
governance  thrives.  Further  targeted  support  for 
administrative  modernisation,  skills  development 
and  coordination  across 
local  and 
regional  government  would  facilitate  effective 
implementation and help ensure consistent service 
delivery across territories, contributing to territorial 
cohesion. 

levels  of 

Coordination efforts can play a crucial role in 
leveraging the insularity of Cyprus. The island 
has  significant  potential  for  offshore  wind  and 
is  currently 
wave  energy,  although  progress 
hindered  by  regulatory  barriers,  grid  limitations, 
and  limited  local  supply  chains.  In  2023,  Cyprus 
established  its  first  Maritime  Spatial  Plan,  aiming 
to facilitate the sustainable exploitation of marine 
waters, 
fisheries, 
aquaculture,  renewable  energy,  and  shipping.  The 
plan  provides  a  stable  zoning  framework  to 
promote  investments  and  legal  certainty  for  blue 
economy sectors. As an island with limited marine 
space,  Cyprus  faces  a  high  concentration  of 
maritime  activities,  increasing  the  importance  of 
effective  spatial  coordination  between  tourism, 
aquaculture, fisheries, shipping and environmental 
protection. 

focusing  on  sectors 

like 

109 

GDP per head (PPS, index)Population growthReal GDP per head growthProductivity: GDP (PPS) per hour worked (index)Unemployment rateAt-risk-of-poverty or social exclusion rate (AROPE)Energy povertyAccess to healthcare - Rural areasAccess to primary schools  - Rural areasEU27=100Average annual change per 1000 residentsAverage annual % changeEU27=100% of labour force% of population% of total populationPopulation within 10 minutes by car from nearest hospital  (%)Children under 15 within 15-minute walk to primary school (%)20242015-20242014-2024202420252025202520232023EU100.01.81.4100.06.021.09.229.933.7Cyprus99.013.33.880.14.417.111.35.619.9  
 
 
   
 
ANNEX 19: TRANSPORT 

This  Transport  Annex  presents  the  state  of  play, 
and 
the 
the  challenges  Cyprus  faces  with 
implementation  of  the  trans-European  transport 
network (TEN-T) and road safety. 

Cyprus  is  connected  to  the  trans-European 
transport  network  through  two  European 
transport  corridors,  the  Baltic  Sea  –  Black 
Sea  –  Aegean  Sea  (BBA)  corridor  and  the 
Western  Balkans  –  Eastern  Mediterranean 
(WBEM)  corridor.  Both  play  a  crucial  role  in 
facilitating the exchange of goods and passengers 
between the EU and its external borders.  

The  TEN-T  in  Cyprus  comprises  492 km  of 
road (156 of which are on the core network). 
Cyprus has no inland waterways or rail network. It 
has two airports, one of which is a core airport, as 
well  as  two  ports  (including  one  core  port)  and 
three urban nodes on the TEN-T (304). 

These  interventions  will  have  a  positive 
impact on the performance and resilience of 
port-to-hinterland  connections  and  overall 
network  connectivity.  At  the  same  time,  they 
will contribute to achieving EU objectives, including 
reducing greenhouse gas emissions and improving 
road  safety,  which  will  have  a  positive  impact  on 
Cyprus’s competitiveness.  

lengthy 

Infrastructure  projects  face  delays  mainly 
land  acquisition  and 
linked  to 
procurement  procedures.  The  administrative 
capacity  of  the  authorities  in  charge  of  project 
preparation  and 
limited, 
in  overly  optimistic  planning  and 
resulting 
insufficient  project  maturity.  Delayed  feedback 
from  the  utilities  service  companies  for  existing 
and  planned  networks  also  affects  the  timely 
delivery of infrastructure projects.  

implementation 

is 

of 

alternative 

Being  an  island,  the  country's  connection  to 
the  TEN-T  network  is  by  sea  and  by  air, 
rendering  the  upgrading  of  ports  and  the 
development 
fuel 
infrastructure essential for the greening and 
development  of  intra-EU  transport.  In  this 
context,  projects  enhancing  the  competitiveness 
and sustainability of the maritime sector, such as 
upgrading the basic infrastructure of the ports and 
the  deployment  of  alternative  fuel  technologies, 
are  key.    In  addition  and  in  the  absence  of  a  rail 
network, 
the 
development of a ring road south of Nicosia which 
will contribute to alleviating congestion issues and 
improving 
fuel 
safety, 
deployment,  and  resilience  in  response  to  military 
mobility,  as  well  as  the  upgrade  of  a  key  port 
facility in the Port of Limassol, which will enhance 
the efficiency and reliability of maritime transport.  

the  priority  projects 

alternative 

include 

road 

(304) TENtec Information System, according to Reg. 2024/1679. 

110 

 
 
 
 
 
Map A19.1:  TEN-T Cross-Border & National Priority Sections in Cyprus. 

111 

 
 
 
 
 
Graph A19.1: Cyprus' road fatalities per million, 
2024 

Source: Report at the Mid-Point - Cyprus, SWD(2026) 37 
final. 

Map A19.2:  Cyprus' road safety map 

Source: TENtec Information System and TEN-T map library – 
European Commission 

Road  crashes  impose  an  enormous  social, 
economic  and  health  burden  on  the  EU 
economy.  The  external  socio-economic  costs  of 
fatal,  serious  and  minor  injuries  have  remained 
persistently  high  despite  the  progress  made  in 
reducing  crash  frequency  and  severity.  These 
innovation, 
resources 
education,  healthcare  and  other  crucial  public 
investments(305). 

could  otherwise 

fuel 

In  2024,  Cyprus  performed  slightly  better 
than  the  EU  average  (45)  with  44  road 
fatalities  per  million  inhabitants.  Compared 
with  the  EU  average,  the  distribution  of  fatalities 
in  Cyprus  showed  a  relatively  high  proportion  of 
powered  two-wheelers  and  18-  to  24-year-olds. 
The  vast  majority  of  road  fatalities  and  serious 
injuries  occur  within  urban  areas.  Based  on  the 
latest available data, Cyprus appears to be almost 
on track to meet the 2030 target of halving road 
fatalities, with a 21% decrease between 2019 and 
2024.   

due 

plan 

action 

safety 

Nevertheless,  significant  delays  have  been 
met  in  the  implementation  of  the  national 
to 
road 
organisational,  budget  and  staff-related 
issues. This means there is a need to remove the 
obstacles  preventing  or  delaying  implementation 
of  the  road  safety  strategy  and  to  speed  up  the 
setting of the planned road safety measures, with 
emphasis 
urban 
infrastructure,  vulnerable  road  users,  and  safe 
speeds(306).  

on  measures 

covering 

(305) Report on the implementation of the EU Road Safety Policy 

framework at the Mid-Point, COM(2026) 77 final. 

(306) More details in Report on the implementation of the EU Road 

Safety Policy framework at the Mid-Point – Cyprus, 
SWD(2026) 37 final. 

112