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As we move further into 2025, governments around the world, including Cyprus, are facing a range of challenges. From rising debt and labor shortages to cybersecurity threats and climate change, these aren’t just distant problems—they’re risks Cyprus must prepare for as well. A new report from EY shines a light on the key issues governments globally will deal with this year, and many of these challenges are just as relevant for Cyprus.
Governments worldwide have spent heavily in recent years to support their economies. Cyprus is no different, with public spending rising over time. But as national debts grow and borrowing costs increase, tough choices will need to be made about where to allocate funds—without cutting essential services. This could mean rethinking public projects and ensuring that taxpayer money is spent wisely for long-term benefit.
Economic growth is also slowing globally, and Cyprus is feeling the effects. While sectors like tourism have seen growth, rising costs and an aging population are holding back significant progress. The government needs to think beyond traditional economic indicators like GDP and focus on sustainable growth, especially through investments in green energy.
A major issue facing many countries, including Cyprus, is the shortage of skilled workers. With more people working in informal jobs or leaving for better opportunities abroad, the workforce is shrinking. Cyprus needs to prioritize education, training, and job formalization to keep its economy strong.
In today’s digital age, cybersecurity is a growing concern. Cyprus’ public sector systems are very vulnerable to cyberattacks. The government must invest in new technology and cybersecurity infrastructure to keep everything safe and efficient—ultimately making public services more accessible to citizens.
Cyprus’ geopolitical position at the crossroads of Europe, the Middle East, and Africa makes it uniquely vulnerable to global political tensions. The report warns that governments need to adapt to a more complex and unpredictable international landscape, and for Cyprus, this could mean staying ahead of potential conflicts and strengthening relationships with neighboring countries and of course global key stakeholders.
Supply chain disruptions have also become a global concern, and Cyprus isn’t immune. The island depends on imports for everything from food to medicine, so any disruptions—like shipping delays or shortages—could cause major issues. Cyprus needs better systems for tracking and managing its supply chains to avoid disruptions that could harm its economy and public services or even more strategically strive to become part of the international supply chain routes.
In the public sector, workers worldwide are feeling the strain. With long hours, low pay compared to the private sector, and high demands, keeping skilled employees is a constant challenge. In Cyprus, the public sector is set to grow, potentially consuming 70% of government spending. This could become a strain, and Cyprus will need to act quickly to find solutions to address this mounting issue.
Climate change is another pressing concern. Cyprus, like many parts of the world, has seen more extreme weather in recent years. While the government has made some efforts to tackle climate change, the report stresses that more needs to be done. Cyprus must increase its climate adaptation actions—such as promoting green energy and investing in sustainable infrastructure— to further avoid increasing potential of an economic and social impact, or face even worse consequences down the line.
Cyprus is particularly vulnerable to climate-related disasters like heatwaves, wildfires, and floods. The government needs to invest in better preparedness and response systems to protect public safety and safeguard the economy in the face of extreme weather.
At the heart of these challenges lies a broader reality: the race for national success isn’t just about managing risks—it’s about staying ahead. As EY's George Tziortzis states, "The race to success at a national level is not one of just ensuring we address risks. That is needed to barely survive. The real challenge is to address risks faster and better than competitors. To do so, bold decision-making is needed now, without hesitation and without considering the short-term impacts. We need to be bold but careful, and we need to shed away the pathogens of the past that render us slower in responding. The national collective benefit must be the first and only objective."
Finally, public trust in government is an issue around the globe. People are frustrated with slow responses to crises, and trust in leadership is declining. In Cyprus, as elsewhere, the government will need to be more transparent, engage with citizens, and rebuild trust through clear and honest leadership.
While 2025 brings many risks, it also offers Cyprus a chance to build a stronger, more resilient government. By making smart decisions now—investing in education, technology, and climate action—Cyprus can rise to meet these challenges and set itself up for a better future.
*You can read the full report here on EY's website.
