Sustainable Policies


Economic Policies

With considerable reform needs remaining despite its recent progress, Cyprus falls into the bottom ranks internationally (rank 37) with regard to economic policies. Its score in this area has improved by 1.1 point relative to 2014.

Growth has slowed somewhat from its 2018 rate, but remained strong at near 3%. While reforms have created a scaled-back financial sector governed by stricter rules, the sector remains fragile. Tourism, large construction projects and private consumption are driving growth.

The unemployment rate continued to decline to about 6.5%, with an overall employment rate of 62.8%. The youth unemployment rate remains high, though it has shown steep declines. Public-sector wage cuts have been gradually restored. The debt-to-GDP ratio has fallen to around 95%.

High taxable-income thresholds result in a low tax burden on labor, and a dependence on corporate and value-added taxes. However, the low flat rate of 12.5% for companies allows for aggressive tax planning. Tax evasion and tax avoidance are widespread. Developing effective financial-market oversight has proven difficult, and reports have exposed corruption in the citizenship program for investors.

Social Policies

With crisis-induced stress on its social system receding, Cyprus falls into the lower-middle ranks internationally (rank 28) with respect to social policies. Its score in this area has improved by 0.2 points relative to 2014.

While education expenditures are high by EU standards, and attainment rates high, outcomes are comparatively poor. The rate of those at risk of poverty and exclusion has continued to decline, approaching pre-crisis levels. A guaranteed minimum-income program assists vulnerable groups.

A new national health service is expected to improve access to high-quality services, eliminating the exclusion of various groups from the public system. Largely unregulated private-sector services will continue to be offered in parallel. Migrant workers form a significant share of the labor force, but no comprehensive integration policy is in place.

Although the labor-force participation rate for women is high, underdeveloped family policies make it difficult for women to combine work with parenthood. Family networks help fill serious gaps in child care. Public employees fare better than private-sector workers in the pension system. A new regulatory framework is expected to improve the currently weak oversight of pension and insurance programs.

Environmental Policies

With fragmented and badly coordinated strategies, Cyprus falls into the bottom ranks internationally (rank 38) with regard to environmental policies. Its score on this measure is unchanged relative to 2014.

Despite local and international pressures, the country has continued to prioritize financial interests over environmental protections, failing to meet EU obligations. Emissions and renewable-energy targets have not been met. Energy policy is largely defined by offshore fossil-fuel exploration.

Though water management is a serious issue, water-intensive projects continue to be approved. Waste generation is a serious problem, with the country generating three times the EU average in municipal waste, and recycling less than one-third of the EU average.

Building projects often violate planning rules, with construction wastewater dumped into the sea. Environmental protection rules are often relaxed in the interest of profit. Though the country has helped shape EU maritime policies, it is not an agenda setter.

Robust Democracy


Quality of Democracy

With corruption control becoming an increasing concern, Cyprus receives a comparatively low overall score (rank 32) for democracy quality. Its score in this area has declined by 0.4 points relative to 2014.

Voting is no longer mandatory, and electoral-participation rates have declined, particularly in local and European elections. A number of recently passed laws regulate political-party financing, but donation and spending caps are high, and party-subsidy criteria remain opaque.

Policies combatting human trafficking have improved. Treatment of asylum-seekers and economic and irregular migrants has drawn criticism. Government efforts to influence the media have intensified, and the media is increasingly dependent on financial interests, undermining critical reporting. Implementation of a new law regulating access to government information has been delayed.

Legal certainty is undermined by governmental and administrative delays, and by the frequency with which laws are judged unconstitutional. Court workloads make for very long case durations. Many of the officials recently convicted for corruption have been granted early release, diminishing the credibility of anticorruption efforts.

Good Governance


Executive Capacity

With numerous gaps in central planning and strategic powers, Cyprus receives the SGI 2020’s lowest overall score (rank 41) with regard to executive capacity. However, its score in this area has improved by 0.9 points since 2014.

Planning remains fragmented between ministries, but capacity levels have improved. As there is no central coordination body, planning is dominated by the Ministry of Finance’s budgetary considerations. In drafting laws, ministries are guided by government policies or general cabinet frameworks. Ministers have final decision-making powers within their area of authority.

A new RIA action plan seeks to rectify past deficiencies. The number of high-impact policies introduced without assessment remains a concern. Ex post assessment is not a part of government practice. Government communication relating to serious political issues has been contradictory or even confusing.

The government has largely restored economic growth and investment credibility, and has successfully consulted with parties and economic associations on key policies. A municipal reform effort entailing mergers and reorganizations is underway. Regulatory enforcement tends to be biased toward powerful groups and individuals.

Executive Accountability

With notable monitoring-mechanism gaps, Cyprus falls into the bottom ranks internationally (rank 38) in the area of executive accountability. Its score in this area has improved by 0.8 points since 2014.

Electoral-participation rates have fallen sharply, along with interest in politics more generally. The disengagement reflects plummeting trust in politicians and institutions. Data made available on key government policies and activities is not comprehensive, hampering citizens’ ability to evaluate the government’s work.

Parliamentarians have comparatively few resources, and their formal executive-oversight powers are quite limited. The auditor general has clashed with other public offices over the extent of his powers, damaging the institution’s credibility. Fines imposed by the data-protection commissioner have had little ability to deter repetition.

Media reporting is generally of low quality, with conflicts of interests often undisclosed. Polarizing coverage failed to provide citizens with needed information during the 2019 European elections. A past shift toward grassroots-level influence in parties has been reversed. Most economic interests focus narrowly on their sectoral demands. Civil-society groups have become increasingly sophisticated.
Back to Top