Credit rating agency Fitch on Saturday upgraded Cyprus’ credit rating from BBB+ to A-, becoming the second such agency in the space of three weeks to give the island an ‘A’ grade.
The agency said it had upgraded Cyprus’ score on account of “the rapid reduction in public debt, strong fiscal surpluses, and limited fiscal risks”, as well as the “strong growth potential of the Cypriot economy, the positive medium-term prospects, and the improvement of the banking sector”.
It pointed out that Cyprus “had one of the largest reductions in public debt relative to gross domestic product (GDP)” of all the countries they had evaluated this year, and added that its current forecasts suggest that the trend of debt reduction will continue.
To this end, it expects that Cyprus’ debt to GDP ration will fall to 60 per cent next year and then to 55.1 per cent in 2026, well below the current Eurozone average of 89 per cent.
Additionally, it said, it expects Cyprus’ government surplus to reach 3.9 per cent of GDP this year. This figure is expected to fall to an average of 2.9 per cent over the next two years.
It went on to say that the Cypriot authorities expect “a relatively conservative path for net expenditure over the medium term”, with limited fiscal risks and a “strong commitment across the political spectrum to maintain prudent fiscal policies with an emphasis on debt reduction”.
The news was hailed by President Nikos Christodoulides, who said the ratings upgrade “constitutes recognition of the country’s positive course and a vote of confidence in our responsible policies”.
These policies, he said, are aimed at creating a “competitive and resilient economy aimed at improving the daily lives of the people of Cyprus”.
Finance Minister Makis Keravnos pointed out that Fitch’s announcement was the latest in “a chain of continuous and successive upgrades which are based on the results and prospects of the Cypriot economy”.
He said the upgrades “clearly show the confidence shown by international ratings agencies in the economic policy this government is following”, and that they “create the necessary climate of trust and stability to attract foreign investment into our economy, strengthening competitiveness, and continually creating new jobs”.
The most recent upgrade to which Keravnos was referring was when ratings agency Moody’s gave the island a score of ‘A3’ three weeks ago, restoring the island to the ‘A’ grade for the first time since 2011.
The agency explained that Cyprus has “significantly reduced its public debt ratio since its peak in 2020 and ranks among the countries with the largest debt ratio reductions worldwide”.
Fitch themselves had only upgraded Cyprus’ credit score from BBB to BBB+ in June, saying at the time that the move “reflects reduced vulnerabilities to financial shocks, resilience to external shocks, and favourable medium-term trends”.
