Cypriot businesses continue to invest, innovate and demonstrate resilience despite geopolitical tensions and global trade disruptions, according to the latest Investment Survey by the European Investment Bank (EIB).
Investment activity remains strong
The survey shows that investment activity in Cyprus remains robust, with nearly all companies continuing to invest, often with a focus on innovation. However, overall sentiment is more cautious compared with the EU average. Businesses are increasingly adopting advanced digital tools, including artificial intelligence, and are adjusting their supply chains to strengthen resilience.
Climate-related action is also increasing, mainly through waste reduction and recycling, while stricter environmental standards are more often perceived as a challenge rather than an opportunity.
Supply chain pressures ease
According to the EIB, Cypriot businesses remain optimistic about their future despite geopolitical instability and global trade disruptions. Supply chain pressures have eased significantly as companies increased inventories and diversified import sources, improving access to raw materials and essential goods.
The share of firms reporting supply difficulties fell from 41% to 20% compared with last year.
Investment levels above EU average
The survey found that 94% of Cypriot businesses invested during the previous financial year, a higher share than in 2024 and above the EU average of 86%. More companies also expect to increase investment in the current financial year, at 10%, compared with an EU average of 4%.
Investment levels remain high across all sectors, with at least 92% of firms investing. Most investment is directed towards replacing existing equipment, accounting for 54%, while fewer companies invest in expanding production capacity compared with the EU.
“Cypriot companies continue to invest, digitalise and strengthen their resilience, even in this challenging global environment,” said EIB Vice-President Marek Mora. “The growing use of artificial intelligence and the steady commitment to innovation are clear signs of a forward-looking private sector. The EIB stands ready to support Cypriot firms as they innovate, upgrade and contribute to Europe’s competitiveness.”
Strong international trade footprint
The survey also shows that Cypriot businesses are among the most internationally active traders in the EU. Around 81% engage in cross-border trade, with service-sector firms recording the highest level of international activity at 95%.
While supply pressures have eased, companies remain concerned about tariff changes, regulatory compliance and fluctuations in transport costs.
Digitalisation and AI adoption
Digitalisation and the adoption of artificial intelligence continue to expand. Around 23% of firms make systematic use of generative AI, mainly for internal processes (75%), product development (41%) and customer service (39%).
However, the use of multiple digital technologies remains below the EU average, at 32% compared with 51%. Despite this, Cyprus stands out in innovation, with one in two firms investing in new products, processes or services, well above the EU average of 32%.
“The Investment Survey offers a clear picture of how businesses in Cyprus and across Europe are adapting to technological, geopolitical and climate pressures,” said EIB Chief Economist Debora Revoltella. “For Cyprus, the challenge now is to turn the green transition from a perceived risk into a long-term opportunity for innovation and competitiveness.”
Climate action still limited in scope
On climate issues, Cypriot businesses are less concerned about physical climate risks than their EU counterparts, at 60% compared with 68%. More than half, at 52%, believe they will not be significantly affected by stricter environmental regulations.
While 69% have taken measures to reduce emissions, mainly through waste reduction and recycling, fewer firms have carried out energy audits (44%) or developed adaptation strategies (10%). The adoption of greenhouse gas emission targets remains limited, at 20% compared with 47% in the EU.
Barriers to investment persist
Key obstacles to investment remain shortages of skilled labour (89%), high energy costs (87%), uncertainty about the future (84%) and labour regulations (82%). Infrastructure challenges are more pronounced in Cyprus than in the EU, particularly in transport (74% versus 45%) and digital networks (70% versus 44%).
Despite these challenges, access to finance has improved significantly. The share of firms facing financial constraints fell to 6.8%, the lowest level since 2019, with businesses reporting better availability of external financing than the EU average. On gender equality, 42% of firms have at least 40% women in senior management, while 22% have women as majority owners, both figures well above EU averages. Overall, the findings point to a business sector that remains dynamic, adaptable and strongly oriented towards innovation, despite ongoing challenges.
Source: CNA