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Good news.
There is a healthy optimism among investors about Cyprus’s attractiveness over the next 3 years.
Every year, EY analyzes the trends and dynamics of international establishments and conducts interviews with thousands of foreign business leaders to identify the key indicators of European countries' attractiveness.
We are proud to present the 3rd edition of EY Cyprus Attractiveness Survey.
The 3rd EY Cyprus Attractiveness Survey report, offers valuable insights into how the international investor community perceives Cyprus' investment appeal. It highlights both the strengths of Cyprus and the areas that require further improvement. Moreover, in addition to presenting the survey results, this report puts forward a set of suggestions for further critical discussions, aiming ultimately at enhancing Cyprus’s FDI attractiveness and leading to increased investment activity.
FDI activity in Cyprus has been on a decline over the past three years due to rising geopolitical tensions, uncertainties and unfavorable macro environment during that period.
Investment sentiment for Cyprus has improved but there is still ground to cover
Based on the results of our EY Cyprus Attractiveness survey, there is a growing optimism among the investor community in relation to FDI activity in Cyprus going forward. Around 57% of investors (vs. 29% during our last survey in 2022), have plans to establish or expand their operations on the island over the next year. Albeit results still fall short of the European survey of 72%.
A similar trend persists in the attractiveness projections. More than half of investors (62%) expect Cyprus' attractiveness to improve over the next year, compared to the 75% average in the case of the European survey.
Cyprus has historically been adapting quickly to changing global dynamics, a key factor that allowed the local economy to maintain an ongoing healthy influx of foreign capital to support economic growth.
Investment activities under consideration expand to new areas such as manufacturing
Cyprus continues to attract investors interested in the traditional spectrum of operations (such as the setup of sales and marketing functions and broader headquartering). New activities however, such as manufacturing, training centers and R&D, are also growing in popularity.
The significant interest for establishing manufacturing operations in Cyprus is a trend consistent with the rest of Europe and potentially linked with shifts toward increased protectionism and re-shoring/near-shoring initiatives.
Drivers of FDI activity have changed
While factors that traditionally attracted FDI in Cyprus, such as the favorable tax regime, continue to remain important, there are new areas of interest emerging as a priority for investors. Sustainability matters and opportunities in new technologies for example currently feature higher on the investors' list. On the other hand, factors linked to cost reduction, even though they feature at the top of the list in our European survey, appear to be of less importance in the case of Cyprus.
Factors such as the quality of life, the favorable tax regime, and the robust legal regime continue to be positively evaluated by the investment community.
Geopolitical tension and political stability remain the number one threat for FDI attractiveness over the next three years
Given the recent geopolitical developments in both the immediate and wider region, it is not surprising that geopolitical tension and political stability are currently considered as the top threats for FDI.
High interest rates and tightening financial conditions along with increased regulatory burden also feature high on the list.
Areas for development
Factors linked to the areas of talent, technology and sustainability, continue to be important for Cyprus' FDI attractiveness.
In this regard, to further strengthen Cyprus's attractiveness in the specific areas, participants have identified certain areas for development as shown below:
Cyprus’ strong macroeconomic and fiscal performance is a reflection of the successive upgrades by international rating agencies, underscoring our country’s commitment to economic stability and growth.
Summary
The third edition of the EY Cyprus Attractiveness Survey, offers valuable insights into how the international investor community perceives Cyprus' investment appeal. It highlights both the strengths of Cyprus and the areas that require further improvement.
In addition to presenting the survey results, this report puts forward a set of suggestions for further critical discussions, aiming ultimately at enhancing Cyprus’s FDI attractiveness and leading to increased investment activity. Meanwhile, EY Cyprus will repeat this survey at regular intervals in the future, to monitor progress, changes in perceptions and new trends, and identify areas of improvement.