The international credit ratings agency Fitch confirmed on Saturday Cyprus’ long-term rating at ‘A-’ with a stable outlook, citing strong public finances, falling debt levels and steady economic growth.
The finance ministry welcomed the move, which it described as a vote of confidence in the government’s economic policies.
Fitch said Cyprus continues to outperform many countries in the same rating group, pointing to a high primary budget surplus of 4.3 per cent of GDP in 2024 and a sharp drop in public debt, which fell from 73.6 per cent of GDP in 2023 to 65.3 per cent by the end of last year. The surplus reached 5.6 per cent, the highest in nearly two decades, helped by rising revenues and controlled spending.
The agency expects debt to fall even further, reaching 52.6 per cent in 2026 and potentially close to 45 per cent by 2030, provided current trends continue.
Cyprus’ robust economic performance was also noted. Growth is projected at 3 per cent for both 2025 and 2026, slightly below the 3.4 per cent seen in 2024. Fitch says the economy is supported by a strong services sector and a healthy labour market. Employment rose by 2 per cent in 2024 and unemployment dropped to 4.5 per cent, near record lows.
However, the agency also highlighted ongoing vulnerabilities. These include a high current account deficit, expected to stay around 7 per cent of GDP in the coming years. Fitch said this is among the highest in the EU, although foreign direct investment (FDI) continues to cover the gap, flowing into more diverse sectors.
Cyprus’ banking system was described as stable, with a key capital strength ratio (CET1) of 24.5 per cent, the highest in the EU. Non-performing loans have dropped to 6 per cent, a sign of continuing recovery.
Yet some long-term risks remain, including weaker governance compared to other ‘A’ rated countries, as well as the island’s political division and external threats such as global instability and regional conflicts.
Fitch’s model had initially rated Cyprus at ‘A’, but external risks brought the final rating down by one notch. The agency said future upgrades would depend on further debt reduction and a narrowing of the external deficit. In contrast, a worsening in public finances or a sharp external shock could lead to a downgrade.
The finance ministry welcomed the report, saying it recognises the country’s stable path and positive prospects, despite ongoing global and regional challenges, such as the war in Ukraine and tensions in the Middle East.
In a statement, the ministry said: “Fitch has recognised Cyprus’ solid economic progress in recent years, as well as the good outlook for the near future, despite the significant challenges facing the global economy.”
It added that sticking to responsible fiscal policy is vital for further upgrades in the future and for boosting the country’s competitiveness and stability.
“The government will continue to implement sound economic plans that make the best use of available opportunities, aiming for continued growth and further debt reduction,” the ministry concluded.
Source: www.cyprus-mail.com
Aleksei Andrievskii is the founder of the ANDRIEVSKII SEA WEALTH family office in Cyprus, member of the advisory board at Bendura Bank AG, Liechtenstein