Economy to outperform EU average
Credit rating agency Morningstar DBRS on Wednesday revised its economic growth and unemployment projections for Cyprus, reflecting a more optimistic outlook for the country’s economy.
In its report, the agency updated its macroeconomic forecasts for several sovereign nations, including Cyprus.
It increased its 2025 GDP growth estimate for Cyprus by 0.3 percentage points compared to its December 2024 projection, now expecting economic expansion to reach 3.1 per cent.
In addition, the agency maintained its forecast for 2026 GDP growth at 2.9 per cent.
In terms of unemployment, the agency now expects the jobless rate in Cyprus to stand at 4.9 per cent in 2025, revising its estimate downward by 0.2 percentage points from the previous December forecast.
At the same time, its 2026 unemployment projection improved by 0.1 percentage points, with the rate expected to remain at 4.9 per cent.
What is more, Morningstar DBRS noted that economic growth forecasts for several smaller European nations have trended upwards.
It highlighted Denmark, Spain, Portugal, Cyprus, and Malta as countries projected to grow at a significantly faster pace than the European average.
“This outperformance reflects strong net export growth in these countries, combined with supportive conditions for domestic investment and rising consumer demand,” the report stated.
It should be noted that this latest report follows the agency’s recent upgrade of Cyprus’ credit rating, underscoring the country’s economic resilience.
Specifically, the agency last week raised Cyprus’ credit rating from BBB (high) to A (low) with a positive outlook, citing significant reductions in public debt.
It mentioned that the debt-to-GDP ratio fell from 96.5 per cent in 2021 to 69.7 per cent in 2024, with forecasts predicting a further decline to 56.7 per cent by 2026.
Strong economic growth, fiscal surpluses, and improved banking sector resilience contributed to the upgrade.
Moreover, future upgrades depend on sustained debt reduction and economic resilience, while risks include geopolitical tensions and fiscal pressures.
Finally, the agency mentioned that a downgrade could occur if public debt worsens or banking sector liabilities increase significantly.
