Cyprus has made significant progress in fiscal consolidation, investment credibility, and maintaining strong growth with low unemployment. However, experts warn that while macroeconomic stability is real, it is insufficient for true economic transformation. The Cypriot economy still largely depends on services, real estate, and foreign companies, leading to substantial outflows of income and limited domestic value retention.

The report highlights key challenges, including the need to deepen innovation, improve productive linkages between multinational corporations and local firms, and address energy costs which remain among the highest in the EU for businesses. Furthermore, housing affordability pressures risk undermining wage gains for the local workforce, necessitating integrated housing policies.

Looking ahead, Cyprus must move beyond attracting foreign investment to fostering a high-value economy by enhancing technological capacity, leveraging EU Recovery Fund investments effectively, and developing sectors like tourism to emphasize value over volume. A new productivity contract focusing on education, energy, technology transfer, and housing is essential to convert stability into sustainable social prosperity.