cyprus credit — Berlin-based credit rating agency Scope has upgraded Cyprus’ long-term credit rating from ‘A-’ to ‘A’, marking a significant milestone for the island’s economy.
- cyprus credit — Berlin-based credit rating agency Scope has upgraded Cyprus’ long-term credit rating from ‘A-’ to ‘A’, marking a significant milestone for the island's economy.
- However, Scope warned that possible impacts may arise mainly from weaker demand from European economies, which could affect growth trajectories.
- Keravnos stated, “This allows for the development of important initiatives to substantially support the public, especially underprivileged social classes, through sensitive economic policies.”
In its announcement, Scope attributed the upgrade to a significant reduction in Cyprus’ public debt, alongside factors such as sustainable financial surpluses and an improved banking sector resilience. The agency noted that Cyprus’ public debt had decreased to 55.4 per cent of the country’s gross domestic product (GDP) last year, down from a peak of 113.6 per cent in 2020.
Looking ahead, Scope forecasts that this figure could fall below 40 per cent of GDP by the end of the decade. This positive trend is bolstered by the island’s strong fiscal performance and economic growth, which have played a crucial role in reducing public debt levels.
Cyprus credit: Strengthening Financial Indicators
Scope highlighted that Cyprus’ banking sector is on the path to strengthening, with a continued reduction in non-performing loans. The report also underscored the strength of the island’s corporate tax revenues, which have been significantly bolstered by an influx of technology companies relocating to Cyprus.
The government’s financial management has resulted in notable budget surpluses, recording 4.1 per cent in 2024 and 3.3 per cent the previous year, even amidst expenditures related to the wildfires that affected Limassol last July.
Future Fiscal Considerations
While the agency expressed confidence in the sustainability of Cyprus’ budget surpluses through 2030, it did caution that recent sweeping tax reforms could create uncertainty regarding the medium-term fiscal impact. The government must navigate potential fiscal risks, including increased spending needs due to climate adaptation, infrastructure, defence, and an ageing population.
Despite these challenges, the report noted that Cyprus maintains strong GDP growth rates, which reached 3.5 per cent last year, largely driven by private consumption that is boosting real wages and investment. The unemployment rate is currently at 4.3 per cent, the lowest in two decades, while inflation remains low at 0.8 per cent.
Economic Resilience Amid External Risks
Scope acknowledged that while the outlook for medium-term growth is estimated to remain close to three per cent annually, external risks persist. The small and open nature of Cyprus’ economy, paired with structural vulnerabilities in its banking sector, poses challenges. Nonetheless, the economy has exhibited only limited impact from tariffs imposed by the United States, since most imports in Cyprus are services.
However, Scope warned that possible impacts may arise mainly from weaker demand from European economies, which could affect growth trajectories.
Government Reactions to the Upgrade
Following the announcement of the credit rating upgrade, President Nikos Christodoulides expressed his commitment to responsible governance in a social media post. Finance Minister Makis Keravnos highlighted that the upgrade reflects the Republic of Cyprus’ creditworthiness in international markets and the dynamism of the Cypriot economy. He reaffirmed the government’s intention to maintain consistency in its economic policies, emphasising fiscal discipline and financial stability.
Keravnos stated, “This allows for the development of important initiatives to substantially support the public, especially underprivileged social classes, through sensitive economic policies.”
