Filenews 16 July 2025 - by Theano Thiopoulou
A lot of investments are made in Cyprus, but according to the European Commission, in its official document-report on Cyprus, evaluating Eurostat data, these are mainly supported by households and foreign buyers, through the real estate market. To a lesser extent, they come from productive business investments, which the Commission attributes to obstacles that exist for the development of such investments.
The European Commission's working document accompanying the Council Recommendation on the economic, social, labour, structural and fiscal policies of Cyprus on the economic, social, labour, structural and fiscal policies of Cyprus does not take place and what is to blame for the fact that Cyprus is among the tail end of such investments in Europe.
The technocrats who drafted the report state as a general conclusion that there are barriers to private and public investment. "Investment accounts for a large share of domestic demand, but is mainly focused on less productive activities. The economy has a significant overall investment rate, but this comes mainly from households and concerns real estate and housing. On the contrary, according to Eurostat data, the share of business investment in GDP is the third lowest in the EU after Luxembourg and Greece (8.4% compared to the EU average of 13% in 2023)," the document states.
But what are the structural obstacles that hinder corporate economic activity, according to the European Commission's document:
• Persistent obstacles to the financing of Cypriot businesses. Tight bank lending requirements, an underdeveloped capital market, low equity financing, limited access to alternative financing instruments (abroad) and limited institutional investment are stifling funding opportunities, especially for start-ups and scale-ups.
• Business environment. Cyprus has ineffective regulatory procedures that hinder simplification efforts and slow down private investment.
• Labour and skills shortages. The low number of ICT (Technology, Information and Communication) and engineering and mathematics graduates, combined with the limited number of enrolments in secondary vocational education and training in sectors such as healthcare and energy, lead to labour shortages, creating barriers to private investment.
The way the public administration works plays a negative role in investment, and as stated by the European technocrats in the document, "slow progress in the modernization of the public service is an additional obstacle to business growth. The modernisation of the public sector could make business-to-public transactions more efficient, but progress has been slow. This is partly due to Cyprus' public procurement system. Public investment projects are often subject to delays or reversals, creating negative spill-over effects and uncertainty for private investment."
As regards the obstacles arising from the public administration, the following are indicated:
• Administrative constraints: Bureaucratic delays, limited expertise within the public administration, weak administrative capacity of local authorities and slow procurement procedures prevent the timely execution of projects and the absorption of funds.
• Challenges in coordination and governance. Fragmented cooperation between stakeholders, inadequate monitoring mechanisms, delayed legislative amendments undermine the effective management of funds.
• Risks of project planning and implementation. Weak initial planning, shifting project priorities, and slow execution remain challenges.
These challenges, the technocrats point out, also act as an obstacle to the implementation of EU funds. The implementation of the Cyprus Resilience and Recovery Fund has been significantly delayed, they add. In the preparation phase of the report (June 2025), Cyprus fulfilled 24% of the Fund's milestones and targets.
