Nicosia: Labour productivity in Cyprus increased by an average annual rate of 1.70% in the period 2022-2025, while real labour compensation rose by 1.30% based on sectoral output prices and by 1.95% based on the Consumer Price Index (CPI), according to a new Bulletin by the University of Cyprus Centre for Economic Research (CER).
According to Cyprus News Agency, the Information and Communication sector, which includes ICT, showed particularly strong performance with labour productivity increasing by an average annual rate of 6.51% during 2022-2025. In the same period, real labour compensation in this sector increased by 10.37% based on sectoral output prices and by 9.93% based on the CPI.
Conversely, the Agriculture sector recorded an average annual decline of 4.06% in labour productivity, while real labour compensation decreased by 1.83% based on sectoral output prices and by 0.74% based on the CPI.
Over the full period from 1996 to 2025, labour productivity in Cyprus increased by an average annual rate of 1.44%, with significant variations across different economic sectors. The Information and Communication sector led the growth with an average annual labour productivity increase of 5.27%, followed by Financial and Insurance Activities at 2.33% and Wholesale and Retail Trade at 1.61%.
Several sectors, including Agriculture, Forestry and Fishing (-0.90%), Real Estate Activities (-0.84%), Arts and Other Services (-0.82%), and Construction (-0.10%), experienced negative productivity growth rates.
Estimates of Total Factor Productivity (TFP) through 2024 indicate similar trends. Overall, TFP across the economy increased by an average annual rate of 0.99%, with the Information and Communication sector recording a rate of 4.38%. Negative rates were observed in Agriculture, Construction, Manufacturing, and Arts and Other Services.
The analysis also highlights the relationship between labour compensation and labour productivity. From 1996 to 2025, real labour compensation rose by an average annual rate of 1.10% when measured against sectoral output prices and by 1.12% when adjusted using the CPI, while labour productivity grew by 1.44%.
The CER notes that productivity improvements have been concentrated in a limited number of sectors, and there is significant variation in the relationship between productivity and labour compensation across different economic sectors. It emphasizes that sustained productivity growth is crucial for enhancing Cyprus' competitiveness, achieving long-term increases in labour income, and improving living standards.
The findings suggest that horizontal policy measures may not suffice, and interventions tailored to the specific characteristics and performance of each sector may be necessary.