The house upgraded the long -term ratings of foreign and domestic currency of the Republic of Cyprus from BBB (high) to A (low).
The DBRS rating house upgraded the long -term evaluations of foreign and domestic currency of the Republic of Cyprus from BBB (high) to A (low).
The trend in all long -term evaluations remains positive. At the same time, the house confirmed the short-term evaluations of a foreign and domestic coin of Cyprus on the R-1 (low). The trend in all short -term ratings remains stable.
As stated in a statement by the house, upgrading and positive trend reflect the sharp decline in public debt burden in recent years and the expectation that public debt measurements will continue to improve in the coming years.
The general government’s debt index to GDP decreased from 96.5% in December 2021 to 69.7% in September 2024, due to large budgetary surpluses and high rates of rational GDP growth.
As for the future, the European Commission predicts that the general government’s debt will be reduced to 56.7% of GDP in 2026, as economic and fiscal developments are expected to remain favorable.
It is emphasized that economic growth is likely to continue to benefit from strong private consumption, increasing exports of services and strong construction investments in the coming years.
It is indicated that while, like other European Union (EU) countries, the prospects are exposed to downward risks, such as the escalation of geopolitical and global commercial tensions, the Cypriot economy is less vulnerable to the immediate impact of increasing US duties on the imports of EU. field.
Fiscal performance
The house estimates that fiscal performance is expected to remain very strong with the EU providing the surplus of the general government’s budget at 2.7% of GDP on average in 2025 and 2026, compared to the previous fiscal results of Cyprus before the Pandemic.
Concerning improved budgetary results, the house notes that the country’s budgetary accounts benefit not only from favorable circular developments but also from structural improvements in the revenue side in recent years.
This, in turn, adds, will contribute to the compensation of the potential costs of expenditure resulting from the development of the rental rental plan and the implementation of large -scale energy projects, as well as the pressures to increase defense spending.
It is also noted that Cyprus’s credit profile also benefits from the improved financial situation of domestic banks, as the strong increase in capital capital reserves over the last two years has boosted banks’ durability.
Improvements in “debt and liquidity” and “monetary policy and financial stability” are the key factors for upgrading.
Evaluation A (low) of Cyprus is supported by a stable political environment, the health and economic policies of the government in recent years and a moderate interest in interest.
In addition, although governance has been weakened in recent years, the house continues to consider the country’s accession to the EU as an important basis for institutional quality.
On the other hand, Cyprus’s credit ratings are still limited by the small size of its services based on services, which makes it vulnerable to external vibrations, the relatively low level of labor productivity of the economy and the large current transaction deficit of the economy outside the special purpose.
Strongly foreseen growth dynamics
As far as the future is concerned, the dynamics of economic growth is projected to remain strong. The Central Bank of Cyprus (CBC) provides for real GDP increase by 3.2% in 2025 and by 3.1% in 2026, due to strong domestic demand. Private consumption is likely to benefit from further, although slowing down, increased real wages and the continued increase in employment levels.
In addition, investment activity is projected to be supported by many large investment projects, especially in the sectors of tourism and residential real estate and increasing EU capital inflows.
As in other countries, economic prospects are exposed to downward risks, such as the escalation of geopolitical tensions. A possible wide increase in US duties in imports of goods from EU countries is likely to have a less direct impact on Cyprus than in many other EU countries due to the nature of the Cypriot economy based on services.
It is also emphasized that a large global trade shock of goods will probably affect the economy indirectly, burdening external demand from commercial partners’ partners for exports in the Cyprus Services sector.
In general, however, Cyprus’s ratings continue to be limited by the small size of its services based on services, which makes it vulnerable to external vibration.
This is especially true for tourism and large inflows of capital, as the latter are a key lever in construction -related investment activity in recent years due to the comparatively low saving rate of the economy.
Gross added value in the field of Information and Communication Technology (ICT) has increased sharply since 2016, as several foreign ICT companies have transferred their activities to Cyprus, mainly due to different policy measures (eg tax incentives).
While, however, the share of the ICT sector in the total gross added value was more than doubled from 4.8% to 11.1% between 2015 and 2024, ICT employment increased was much less intense, representing 4.2% of total domestic employment in 2024, from 2,15%. Economic growth in recent years, which can be partly attributed to the importance of labor intensity industries such as tourism.
According to Eurostat, the level of nominal GDP per employed in Cyprus was only 89.2% of the EU average of 27 in 2023.