Nicosia, Cyprus. Capital Intelligence Ratings on Monday affirmed Cyprus’ long-term foreign currency rating at BBB+ with a stable outlook and confirmed the short-term rating at A2. The agency cited strengthening public finances and robust economic performance among the factors supporting the rating.
Public finances and debt management
The agency said the ratings are supported by continued strengthening of public finances, reflected in sustained budget surpluses, declining public debt and low fiscal risks in the short to medium term. It added that active public debt management has reduced refinancing pressures, while significant state cash reserves provide a strong buffer against short-term shocks.
Banking sector-related risks
Capital Intelligence said the ratings also reflect the ongoing reduction of contingent liabilities linked to the banking sector, supported by declining macroeconomic imbalances and improved financial system resilience.
Economic performance and growth drivers
The agency said Cyprus’ economic performance remains robust, with growth among the strongest in the eurozone. It highlighted high GDP per capita, strong foreign direct investment inflows and a diversified services-based model, particularly in tourism, business services, shipping and information and communication technologies.
EU and eurozone support
The agency pointed to institutional and financial support from EU and eurozone membership, including access to Recovery and Resilience Facility funding, as a key supporting factor.
Constraints and structural challenges
Capital Intelligence said the ratings are constrained by significant external imbalances and structural challenges, including large current account deficits, high external debt and elevated external financing needs. It added that additional pressures stem from the still sizeable stock of non-performing loans held by credit-acquiring companies, as well as structural challenges in the labour market and productivity.
How do you think Cyprus can reduce external imbalances while sustaining strong growth?