Berlin, Germany. Credit rating agency Scope upgraded Cyprus’ long-term credit rating from ‘A-’ to ‘A’, citing lower public debt, sustained fiscal surpluses, and stronger banking sector resilience.
Reasons cited for the upgrade
Scope said the decision reflected a “significant reduction” of Cyprus’ public debt, “sustainable financial surpluses”, and “improved banking sector resilience”.
Public debt trajectory
Scope said “strong fiscal performance and economic growth” had reduced public debt to 55.4 per cent of GDP last year from 113.6 per cent in 2020. It added that public debt is expected to continue falling, with forecasts placing it below 40 per cent of GDP by the end of the decade.
Banking sector developments
The agency said the banking sector “is strengthening” and cited a “continued reduction of non-performing loans”.
Public finances and budget balances
Scope said Cyprus has “strong” corporate tax revenues, supported by technology companies relocating to the country, and a “resilient” labour market. It noted that the government recorded a budget surplus of 4.1 per cent in 2024 and a surplus of 3.3 per cent last year, “despite expenditures” including those linked to wildfires in the Limassol district last July.
Tax reform uncertainty and fiscal risks
Scope said recent tax system reforms “create uncertainty about the medium-term fiscal impact”, but it expects budget surpluses to continue through 2030. It added that Cyprus’ main “fiscal risks” include higher spending needs related to climate adaptation, infrastructure, defence, and an ageing population, while stating that the country’s “strong fiscal position offers room to cope with potential economic pressures”.
Growth outlook
Scope said GDP growth remained strong at 3.5 per cent last year, driven by “private consumption”, which it said “increases real wages and investment”.
How do you think the credit rating upgrade could affect Cyprus’ borrowing costs and investment outlook?