Nicosia: Morningstar DBRS’ fresh upgrade of Cyprus’ credit rating confirms the rational economic policy followed by the government, which is based on fiscal discipline and development approaches, as well as the resilience of the economy in an international environment full of challenges and uncertainties, Finance Minister Makis Keravnos said on Saturday in a written statement.
According to Cyprus News Agency, the Minister noted that this is the second upgrade by DBRS in 2025, demonstrating the confidence that international rating agencies continue to show in the economic policy followed by the government. Keravnos emphasized that these upgrades create an environment of trust and stability, which is crucial for attracting foreign investment and strengthening growth, competitiveness, and job creation.
He assured that the government is committed to implementing sound economic policies based on fiscal discipline. These policies aim to establish security conditions for the economy and contribute to a social policy that supports vulnerable groups and lower-income classes.
The Ministry of Finance also issued a separate announcement highlighting DBRS’s report, which upgraded Cyprus’ credit rating from “A (Low)” to “A” and revised the outlook from “positive” to “stable”. The agency justified its decision based on the sharp reduction in public debt in recent years and the expectation that public debt indicators will continue to improve significantly in the coming years.
The General Government debt ratio to GDP decreased from 96.5% in December 2021 to 64.3% in March 2025, driven by large fiscal surpluses and high nominal GDP growth rates, which stem from strong domestic demand and increasing exports of the service sector.
Looking ahead, the agency expects the public debt-to-GDP ratio to remain on a steady downward trend, as the state budget is likely to continue recording large surpluses and the economic outlook remains favorable. Fiscal outcomes benefit not only from cyclical favorable factors but also from structural improvements in revenues, such as the increase in income tax revenues mainly due to the relocation of several companies to Cyprus.
The government’s annual progress report in April 2025 projects the annual general government budget surplus at 3.5% of GDP in 2025 and 3.7% in the period 2026-2028. Taking into account these large fiscal surpluses, the general government debt is projected to decline to 43.3% of GDP in 2028, as cited by DBRS.
The revision of the outlook to ‘stable’ reflects the agency’s view that risks remain broadly balanced. Cyprus’ ratings are supported by a stable political environment, the strong financial position of the domestic banking sector, the government’s prudent fiscal and economic policies in recent years, and the moderate interest burden.
However, the Ministry of Finance noted that Cyprus’ credit ratings continue to be constrained by the small size of its service-based economy, which makes it vulnerable to external shocks, the economy’s comparatively low level of labor productivity, and the significant current account deficit. Despite weakened governance indicators in recent years, DBRS continues to view the country’s EU accession as an important foundation for the quality of its institutions.