In 2015, the Cyprus economy clambered out of recession, the long-awaited foreclosure law was finally passed and the government submitted its proposals for public-sector reform to the Attorney-General. The start-up scene has also been busy, with initiative such as the IDEA programme sponsored by Bank of Cyprus and Chrysalis Leap.
Yet somehow this was not enough to change business perceptions which form an important part of the Global Competitiveness rankings of the World Economic Forum (WEF).
Cyprus’ score dropped just 0.23 points to 4.0 from 4.23 in the previous year, but this was enough to knock it down 25 places in the global rankings to 83 in 2016-17, from 58 in 2015-16.
Cyprus scored worse in pretty much every category, from the quality of institutions to the state of the financial market.
A large part of the rankings comes from an annual survey of senior executives carried out in April each year. According to the rules, 75% of the executives must be the same each year.
Somehow they were more depressed about the general situation in April 2016 than in April 2015, despite the fact that Cyprus had just exited the bailout programme, they had lived a full year without capital controls and the economy had returned to growth.
This underlines the problems of surveys that rely on perceptions. More public officials have been prosecuted or jailed for corruption since the crisis than at any previous time. This is ultimately good for governance, but it also raises publicity for the crimes, which in turn could be affecting executives’ perceptions.
There is a lot of research these days about how our brains automatically give greater weight to more recent information (the ‘availability heuristic’).
More puzzlingly still, Cyprus’ absolute score was worse for the macroeconomy than in the previous year. The macroeconomic indicators are based on actual outcomes rather than...