Cyprus is moving through the digital transition in second gear, just as artificial intelligence is changing the European economy and the competitiveness of businesses. Just 9.3 per cent of Cypriot businesses use AI, compared with 20 per cent across the European Union, and labour productivity stands at 80 per cent of the EU average, according to the Cyprus Fiscal Council’s interim report.
The council finds that Cypriot businesses lag significantly behind their European counterparts, both in using new technologies and in labour productivity. Training employees is necessary but not enough, it says. Incentives for technology investment are also needed, along with upgraded business models and the removal of barriers that limit AI adoption, with priority given to supporting smaller businesses.
A gap at every level
The picture is even more worrying when businesses are broken down by size. Among small businesses with 10 to 49 employees, AI use stands at 7.7 per cent, against an EU figure of 17 per cent. Medium-sized businesses reach 15.3 per cent, compared with 30.4 per cent in the EU, and even large businesses with more than 250 employees reach only 35.1 per cent, against 55 per cent. The problem is not confined to small businesses but runs through the entire business structure.
Nor does the argument that Cyprus’s digital weakness stems from the small size of its businesses hold up against the figures. Of the 95,377 businesses in Cyprus, 89,171, or 93.5 per cent, are very small, close to the EU’s 94.4 per cent. Cyprus’s business make-up does not, on its own, justify the technology gap.
Skills are not the main obstacle
The lag is not simply a matter of skills. According to Eurostat data analysed by the council, 55.8 per cent of Cyprus’s population has at least basic digital skills, compared with 60.4 per cent in the EU. That gap is noticeably smaller than the one in business use of AI, which points to a deeper problem in integrating technology into the production process.
Countries with stronger digital skills generally make greater use of AI and have higher productivity, the council notes, although the correlation does not prove that higher productivity results from using the technology.
