Labour shortages risk stalling economic growth

Cyprus’ labour market is facing growing pressure as economic growth, low unemployment and the expansion of technology companies have increased demand for workers across key sectors, from construction and tourism to retail and ICT. 

The government is now seeking to address labour shortages on several fronts, aiming to support businesses while keeping the economy on a steady growth path. 

One of the latest steps came last week, when Labour Minister Marinos Mousiouttas travelled to Cairo for talks with his Egyptian counterpart on the employment of Egyptian workers in Cyprus, as part of efforts to review and expand the labour agreement with Egypt. 

The meeting focused on the Memorandum of Understanding (MoU) signed between Cyprus and Egypt in June 2024, which had been designed to facilitate the employment of Egyptian nationals in Cyprus but had not produced the expected results, partly because of limited interest from Cypriot employers. 

Mousiouttas said the two sides agreed to place the agreement on a new basis and expand it to cover more sectors, including tourism professions, construction, IT and recycling. 

The move comes as Cyprus continues to record solid growth, despite the uncertainty created by the crisis in the Middle East. 

According to updated data published by the Statistical Service last Monday, the Cypriot economy grew by 3.8 per cent in 2025, while GDP rose by 4.5 per cent in the fourth quarter. 

Growth was mainly supported by information and communication technologies, hotels and restaurants, trade and construction. 

Construction recorded a particularly strong performance, rising by 9.4 per cent, while the information and communications sector grew by 8 per cent and trade and tourism by 7.2 per cent. 

The International Monetary Fund, in its World Economic Outlook published on April 14, expects Cyprus’ growth to slow to 3 per cent in 2026, from 3.8 per cent in 2025, before stabilising at around 3 per cent in the following years. 

Against this backdrop, labour shortages remain one of the main risks for sectors that have supported the country’s recent growth. 

The construction sector is among the most exposed. During a recent discussion organised by the Federation of Associations of Building Contractors Cyprus (Oseok), its president Stelios Gavriil described labour shortages as one of the biggest challenges facing the industry. 

He said understaffing and the lack of specialised personnel were now creating a visible risk of lower productivity in construction, while also affecting the implementation of public projects and slowing the country’s broader development path. 

Gavriil had also said that serious shortages were being recorded among builders, foremen and machine operators, while difficulties were also being seen in finding scientific staff, including civil engineers. 

“Our estimates are that approximately another 5,000 or perhaps more workers will be needed to cover the needs of the sector,” he said. 

Tourism is also facing persistent staffing needs, after several years of record arrivals and revenues. 

The opening of new markets, including Poland and Germany, as well as strong growth from Israel before the current disruption, has increased demand for workers in hotels and related services. 

For the time being, the crisis in the Middle East has created concern, particularly as Israel had become Cyprus’ second-largest tourism market and has now effectively frozen. 

However, if conditions normalise, tourism activity is expected to recover, bringing labour needs back to the fore. 

The Council of Ministers approved a new “Framework for the Employment of Foreign Workers” on February 19, 2025, in an attempt to simplify procedures and support sectors facing shortages. 

Both the Cyprus Hotel Association (Pasyxe) and the Association of Cyprus Tourist Enterprises (Stek) have said the revised framework has helped, although they also stressed that the need for foreign workers remains. 

The sector’s staffing needs are estimated at around 4,000 employees. 

The technology sector presents a different but equally pressing challenge. 

Cyprus has attracted a significant number of technology companies in recent years, helping the ICT sector become one of the fastest-growing parts of the economy. Its contribution to GDP is now estimated at around 14 per cent, with further growth prospects. 

Cyprus is also among the three fastest-growing ICT markets in the EU since 2011, with the value of the sector rising by more than 200 per cent. 

However, this growth has exposed a shortage of specialised skills that the domestic labour market has struggled to meet. 

The issue has been raised in recent work by the Cyprus Economy and Competitiveness Council, PwC Cyprus’ 15th Annual CEO Survey and the 2026-2028 strategic plan of the Human Resource Development Authority (Anad). 

PwC Cyprus’ survey, which included 77 business leaders, found that the lack of human resources with the right skills was one of the main concerns for companies, with 43 per cent seeing it as a threat over the coming year. 

The survey also noted that attracting high-quality specialised talent with knowledge of artificial intelligence is becoming one of the most critical challenges for organisations in Cyprus. 

Retail is also under pressure, with shortages affecting both specialised and unskilled roles. 

Pasyle president Marios Antoniou recently said that, based on statistical service (Cystat) data, job vacancies in the sector currently stand at around 2,500. 

The pressure is expected to intensify in Limassol, where two new shopping centres are being prepared. 

Although it has not yet been clarified when Limassol Mall and The Mall of Limassol will begin operating, Antoniou said each is expected to host around 150 to 160 stores. 

This means that the two shopping centres alone could create immediate demand for around 1,000 employees.