Panayiotis Rougalas
Cyprus is wrapping up the year with strong marks from the world’s big credit rating agencies, capping what officials say has been one of the economy’s best-performing years in recent memory. November has unofficially become “ratings month,” with Standard & Poor’s issuing its verdict last Friday and Fitch and Moody’s set to follow this coming Friday. Their decisions will complete the full slate of assessments for 2025, and so far, the picture is bright.
Even though Cyprus didn’t tap the international markets this year, choosing instead to focus on paying down debt, the country has kept its hard-earned “A” category ratings. Last week, S&P upgraded Cyprus’ outlook from stable to positive while keeping the rating at A-. Earlier in September, DBRS Morningstar moved Cyprus up to a full “A,” citing the country’s steady progress and shifting its outlook back to stable.
All eyes now on Fitch and Moody’s
The next two ratings, from Fitch and Moody’s, are now in the spotlight. And early signs are encouraging. Moody’s has already floated the possibility of an upgrade, praising both Cyprus and Greece in its latest Global Sovereign Outlook. The agency singled Cyprus out as a country showing “continuous improvement,” thanks to a sharp drop in public debt and a decade of reforms that have tightened the island’s economic fundamentals.
A solid 2025 also sets the stage for a strong 2026, economists say, with potential benefits including cheaper borrowing, stronger investor confidence, and a more competitive business climate.
Fitch already leaning positive
Fitch’s most recent assessment, issued in May, kept Cyprus at A- with a stable outlook. The agency based its decision on six key points:
– Rapid debt reduction, expected to push Cyprus below the 60% debt-to-GDP mark next year, well under the EU average.
– Healthy fiscal surpluses projected to continue through 2027, thanks to revenues outpacing spending.
– Strong economic growth, consistently above 3% and expected to stay near that level in 2025–26.
– A resilient labor market.
– Positive medium-term prospects driven by ongoing reforms.
– A stable banking sector, with high capital and liquidity buffers.
Why these ratings matter
The Finance Ministry’s Medium-Term Public Debt Strategy makes it clear: better ratings translate directly into smoother and cheaper access to international markets. Cyprus’ upgrades in recent years have lowered financing costs, boosted investor confidence, and filled order books whenever the government issues bonds.
The numbers tell the story. In June 2024, Cyprus’ EMTN bond issue attracted €9.3 billion in orders, nine times the amount offered, reflecting intense global interest. The bond, a 7-year issue, carried a redemption yield of 3.310% and a coupon of 3.250%.
Investor appetite is expected to remain strong in 2025, according to the ministry, with investors increasingly diversified. Hedge funds, once heavily represented during the pandemic-era 2020 issue, have since retreated. Today’s buyers are mainly fund managers, banks, private banks, insurance and pension funds, and central institutions.
Recent issues also show a more balanced geographical spread. UK investors remain the largest group, followed by Germany, Austria and Switzerland, but Cypriot investors are playing a bigger role too, accounting for 20% in the most recent offering.
The ministry says newer investors continue entering the market, drawn by Cyprus’ stronger reputation and consistent upgrades. In other words, the island’s credit story is getting attention, and it’s mostly the good kind.
*Read the article in Greek here.
