2023 POLICY ROADMAP

Economic growth in Cyprus was expected to slow down to just over 2% in 2023, having reached over 5% the year before. Domestic consumption was up, and tourists were returning.

Cypriot banks charge higher interest rates on business loans, and offer lower rates for deposits, than in most Eurozone countries, so the incentive to invest in new ventures persists.

2023 Framework Conditions Review1

The assessed quality of the overall Cypriot entrepreneurial environment declined in the COVID-19 pandemic, and what looked like the beginnings of recovery in 2022 was reversed in 2023, with the Cypriot National Entrepreneurial Context Index (NECI) score well below pre-pandemic levels. In 2023, the quality of the overall entrepreneurial environment placed Cyprus 40th of 49 economies.

In 2022, four of the 13 Entrepreneurial Framework Conditions (EFCs) in Cyprus were rated as sufficient
or better, with a score of ≥5.0. By 2023, this had fallen to just two: Ease of Entry: Market Dynamics and Commercial Infrastructure. In fact, 10 of 13 conditions scored lower in 2023 than the previous year. Most reductions were small, apart from Government Policy: Support and Relevance, which fell from 4.7 to 3.8, and Ease of Entry: Burdens and Regulation, which dropped from 4.6 to 3.8. The only EFC to improve was Physical Infrastructure, which continues to have the highest Cypriot score, just as Entrepreneurial Education at School continues to have the lowest, and which has declined further in 2023. Possibly of most concern was the fall in the assessed quality of Social and Cultural Norms in support of entrepreneurship, which by 2023 for Cyprus was ranked 43rd of 49 economies.

Additional questions in the National Expert Survey (NES) in 2023 enquired about the quality of social support for women, and about their access to resources compared to men. Cyprus rated very low for social support, with its score of 2.3 ranked 48th of 49 economies. Women entrepreneurs’ resource access relative to men scored better, at 5.1 and ranked 26th.

2023 Entrepreneurial Activity Review

In the GEM Adult Population Survey (APS), three in 10 adults reported that their household income had fallen in 2023, a significant rate, but down from four in 10 a year earlier.

Entrepreneurship has a high public profile in Cyprus, with two in three adults knowing someone who had recently started a business, three in five considering themselves to have the skills and experience to start their own, and two in five seeing good opportunities to do so locally. However, more than one in two of those seeing good opportunities would not start a business for fear it might fail, the second highest in Level B and seventh highest in GEM. Despite this, more than one

in five of those adults not already doing so expected to start their own business in the next three years.

The proportion of adults in Cyprus who were already starting or running a new business in 2023 was just over one in 10, up on the previous year and nearly back to pre-pandemic levels. Men were much more likely than women to be starting a business, with nearly two men starting a new business for every woman doing the same, perhaps reflecting the lack of social support for women entrepreneurs noted earlier. One in 12 adults in Cyprus owned an established business, up on the level in 2022.

The motivation of new entrepreneurs in Cyprus was firmly focused on the economic, with more than four in five agreeing with the motivations to build great wealth or very high income, or to earn a living because jobs are scarce. A high two in five new entrepreneurs had customers beyond Cyprus, and nearly one in
two expected to use more digital technologies in the next six months. Job growth expectations were high, with nearly three in five of those starting or running a new business expecting to employ another six or more people over the next five years, despite three in five being solo entrepreneurs, with one owner and no current employees.

1 A brief description of the GEM approach is given in the footnote on p. 107.