Nicosia: Fitch upgraded its outlook for the Cypriot economy to positive from stable on Friday night, confirming the Republic of Cyprus’ rating at ‘A-‘, with President of the Republic Nikos Christodoulides and Finance Minister Makis Keravnos expressing their satisfaction.
According to Cyprus News Agency, the new Fitch assessment prompted President Christodoulides to emphasize the government’s continued sense of responsibility in a post on X, while Finance Minister Keravnos welcomed the assessments from Moody’s and Fitch. He stated in a written note that foreign rating agencies acknowledge the rational policies the Cypriot government is implementing, which are driving the excellent performance of the economy.
Fitch’s upgrade is “considered a precursor to a future upgrade, provided the forecasts in the relevant report materialize,” as per a press release by the Ministry of Finance. Meanwhile, Moody’s maintained its existing A3 rating, reflecting Cyprus’ high wealth levels and robust growth performance, expected to remain strong in the medium term.
The American agency Fitch attributed the revision of Cyprus’ outlook to several rating drivers, including the rapid reduction in public debt from 2022-2025, which is projected to fall below the EU median by 2025. This reduction represents one of the fastest declines among Fitch-rated sovereigns, with debt projected to decrease further over the medium term, keeping debt-financing needs low.
Fitch also cited fiscal surpluses and strong fiscal growth as key factors, alongside a robust labor market with unemployment at pre-2009 levels. Wage pressures have stabilized, reducing risks to competitiveness, and inflation rates remain among the lowest in Europe.
The agency highlighted public finances, macroeconomic data, and balance of payments developments as main factors influencing Cyprus’ future rating. The strong economic performance and fiscal discipline are key contributors to potential future upgrades.
In contrast, Moody’s noted Cyprus’ strong institutional capacity and effective policymaking, with public debt on a sustained downward path and large fiscal surpluses. The economy’s diversification supports strong growth, with tourist revenues at record highs and a stable banking sector.
Moody’s emphasized a stable outlook, balancing risks related to economic, fiscal, and debt prospects. While non-performing loans persist, improvements in the banking sector are notable. However, Cyprus faces credit challenges, such as its small economy size and public sector spending pressures.
Minister Keravnos remarked that the Republic of Cyprus’ investment-grade rating is maintained by both Moody’s and Fitch. He acknowledged the international environment’s challenges but emphasized the government’s coordinated efforts to build a resilient economy and a sustainable future.
Keravnos concluded that Cyprus’ economic policy is recognized internationally for its focus on fiscal stability and social justice, reflected in positive assessments by major rating agencies.