Cyprus has achieved a credit rating upgrade to ‘A’ from DBRS Morningstar, reflecting its strong finances and improving economic outlook. The international agency elevated the country’s rating from ‘A (low)’ to ‘A’ with a stable outlook, highlighting significant advancements in public finances.
Credit rating: Significant Improvements in Public Finances
The upgrade, announced on Saturday, is attributed to a sharp reduction in public debt. According to the finance ministry, general government debt fell from 96.5 per cent of GDP in December 2021 to 64.3 per cent in March 2025. This decline is supported by large budget surpluses, alongside robust growth in domestic demand and exports from the service sector.
Positive Economic Indicators
The DBRS evaluation indicates an optimistic trajectory for government debt, forecasting a continued decrease. The ministry projects that by 2025, the general government deficit will yield a surplus of 3.5 per cent of GDP, which is expected to rise to 3.7 per cent between 2026 and 2028. By 2028, the debt-to-GDP ratio is anticipated to drop to 43.3 per cent.
Factors Contributing to the Upgrade
Several contributing factors underlined the upgrade, including a stable political environment, a resilient banking sector, and prudent government policies. The finance ministry also noted that ongoing structural improvements, such as increased income tax revenues from companies relocating to Cyprus, played a significant role.
Vulnerabilities Remain
Despite these advancements, the ministry cautioned that Cyprus’ small, service-based economy is still susceptible to external shocks. Low labour productivity and a substantial current account deficit, excluding special-purpose entities, remain concerns. Furthermore, governance indicators have weakened in recent years, although EU membership continues to offer institutional support.
Strategic International Engagement
The announcement of the credit rating upgrade coincided with President Christodoulides’ visit to Toronto, aimed at reinforcing Cyprus’ international image as a reliable investment destination. During this visit, President Christodoulides met with Prem Watsa, the founder and CEO of Fairfax, who is a prominent international investor with vested interests in Cyprus.
Building Investor Confidence
The president’s discussions included roundtable meetings with top business leaders and participation in an event co-hosted by PwC Canada and the French-Canadian Chamber of Commerce. He emphasised Cyprus’ strategic location, stable tax and investment framework, resilient economy, access to skilled labour, and promising growth prospects in key sectors.
Government’s Vision for the Future
The government articulated that the timing of the credit upgrade and the president’s visit serves a dual purpose: to boost investor confidence and to reinforce Cyprus as a stable hub for regional partnerships. The emphasis on a dynamic economy that provides high-paying jobs reflects the government’s commitment to economic stability.
Reinforcing Economic Policies
Finance Minister Makis Keravnos commented on the upgrade, stating that it confirms the rational economic policies implemented by Cyprus, which are grounded in fiscal discipline and sustainable growth practices. He noted that successive upgrades by international rating agencies illustrate ongoing confidence in the government’s economic strategy.
Keravnos asserted, “The upgrades create the necessary climate of trust and stability to attract foreign investment. They support growth, enhance competitiveness, and help create new jobs. The government will continue to apply sound fiscal policies to maintain economic security and provide social support to vulnerable groups and the middle class.”
