Cyprus's business community has identified pension reform, labour costs, bureaucracy and workforce shortages as the four most pressing challenges facing the economy, following a meeting between the executive committee of the Cyprus Employers and Industrialists Federation (OEV) and President Nikos Christodoulides.
The delegation, led by OEV president George Pantelides, met the President and members of the government on Monday, leaving with what it described as the strong impression that its concerns had been understood.
Concerns over pension reform
One of the main issues raised was the ongoing pension reform debate.
OEV expressed concern that proposed increases in pension benefits could eventually result in higher social insurance contributions.
The federation called for no increases beyond those already provided for under existing legislation until 2039. Under current plans, three further contribution increases of approximately 1.2% are scheduled for 2029, 2034 and 2039.
A new actuarial study of the Social Insurance Fund is due in 2030. If that study finds higher contributions are necessary, increases would become unavoidable.
OEV's concern is that the pension improvements currently under discussion could ultimately push contribution rates higher.
The federation also argued that reform should, at this stage, focus on Pillars 0 and 1 of the pension system and that discussion of Provident Funds should be postponed.
OEV maintains that provident funds, the second pillar of retirement provision, should remain voluntary.
Reducing labour costs
Business representatives also sought a reduction in employers' contributions to the Redundancy Fund.
Specifically, OEV proposed cutting the contribution rate from 1.2% to 0.6%.
The argument is based on the fund's financial position. According to OEV, the fund has accumulated reserves of approximately €1.2 billion, while annual inflows exceed payouts.
The federation argued that reducing contributions would ease non-wage labour costs without threatening the fund's sustainability.
Bureaucracy and administrative burden
OEV also highlighted concerns about growing administrative costs and bureaucracy.
Business leaders called for the rationalisation of procedures, noting that new requirements such as the Ergani employment management system have increased compliance obligations for employers.
Labour shortages remain the most urgent issue
The federation described the shortage of workers as the most immediate challenge facing businesses.
Employment levels are at historic highs and unemployment remains below 3%, yet many companies still struggle to recruit staff.
According to OEV, the economy retains significant growth potential but is unable to fully exploit it because businesses cannot find enough workers.
Among the sectors facing the most acute shortages are:
- Nursing and healthcare.
- Professional drivers.
A range of short- and long-term solutions was discussed.
According to information obtained by Politis, attracting workers from abroad emerged as the most practical immediate measure for addressing labour shortages.
Industrial zone restrictions
The meeting also touched on issues arising from the designation of industrial areas in Geri, Dali and Tseri as "white zones", where further development is not permitted.
The issue was not discussed in depth because a broader meeting has already been scheduled for 16 September.
Positive response from government
Following the meeting, Pantelides described the discussions as "substantive and constructive", adding that the federation had received a positive response on all issues raised.
"We agreed with the President of the Republic to maintain an open channel of communication," he said.
A broader meeting involving the business community and the entire Council of Ministers is scheduled for November, with the aim of exchanging views and identifying practical solutions to current economic challenges.
"Our concern is the continuous support of Cyprus's competitiveness," Pantelides said.
Growth forecast of 3.5%
Welcoming the OEV delegation, President Christodoulides highlighted the positive performance of the economy and said economic growth is expected to reach 3.5% in 2026.
He stressed, however, that economic growth must translate into benefits for society.
"It is important that this growth reaches society, that we return the benefits of growth to our society. That is why we support families, strengthen disposable income, improve citizens' daily lives and are able to invest in education, health, housing and the welfare state," the President said.
