Scope upgrades Cyprus credit rating to ‘A’, Finance Minister hails “strong proof of confidence”

Scope noted that Cyprus’s public finances remain sound, supported by strong corporate tax revenues — boosted by the relocation of information and communications technology firms — and a resilient labour market
Scope Ratings has upgraded Cyprus’s long-term sovereign credit rating to A from A-, revising the outlook to Stable, citing the sharp reduction in public debt, sustained fiscal surpluses and a stronger banking sector. Finance Minister Makis Keravnos welcomed the move as “another significant upgrade” and a “strong proof of confidence” by international rating agencies in the government’s economic policy.
Scope said the upgrade reflects Cyprus’s strong fiscal performance and sustained economic growth, which have driven one of the fastest reductions in public debt in recent years. Public debt is estimated to have fallen to 55.4% of GDP in 2025, from 113.6% in 2020, and is projected to continue declining to below 40% of GDP by 2030, strengthening fiscal resilience and providing buffers against economic shocks.
The rating agency also highlighted the continued strengthening of the banking sector. Non-performing loans (NPLs) have fallen steadily, while coverage ratios have risen to record highs, enhancing banks’ capacity to finance the economy and reducing contingent liabilities for the state. The NPL ratio declined to 4.2% in October 2025, with capital adequacy and liquidity indicators remaining well above euro area averages.
Scope noted that Cyprus’s public finances remain sound, supported by strong corporate tax revenues — boosted by the relocation of information and communications technology firms — and a resilient labour market. Following a headline budget surplus of 4.1% of GDP in 2024, the government is estimated to have recorded another surplus of around 3.3% of GDP in 2025, despite spending linked to the National Solidarity Fund, the July 2025 wildfires in the Limassol district and household support measures.
While the impact of the government’s tax reform, which includes an increase in the corporate tax rate alongside relief for middle-income earners, remains uncertain for public finances, Scope expects Cyprus to continue posting fiscal surpluses. These are forecast at 3.1% of GDP in 2026 and 3.4% in 2027, remaining above 1% of GDP through 2030, among the strongest fiscal positions in the European Union.
Economic growth is expected to remain robust. After expanding by 3.9% in 2024, real GDP growth is estimated at 3.5% in 2025, driven mainly by private consumption, rising real wages and investment. Growth is forecast at 3.1% in 2026, supported by private consumption and investments under the Recovery and Resilience Plan. Unemployment fell to 4.3%, the lowest level in almost two decades, while inflation remained subdued at 0.8% in 2025 and is expected to gradually approach 2% by 2027.
Despite the improved fundamentals, Scope cautioned that Cyprus’s ratings remain constrained by structural factors linked to its small and open economy, large external imbalances and remaining vulnerabilities in the banking sector. The direct impact from higher US tariffs and geopolitical uncertainty has so far been limited, as Cyprus’s exports are predominantly services, though weaker demand from European economies could pose indirect risks.
The Stable Outlook, Scope said, reflects its assessment that Cyprus’s strong fiscal and economic performance is broadly balanced by these structural challenges.
Finance Minister Makis Keravnos said the upgrade confirms the credibility and dynamism of the Cypriot economy and was clearly reflected in the recent successful issuance of a new 10-year government bond.
He stressed that the government will continue to pursue a policy of fiscal discipline and financial stability, with a focus on further reducing public debt as a share of GDP, while creating space for targeted measures to support citizens, particularly more vulnerable social groups.
Source: CNA