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Fitch Ratings has upgraded Cyprus' Long-Term Foreign Currency Issuer Default Rating from 'BBB' to 'BBB+' with a positive outlook.
The upgrade reflects Cyprus' reduced vulnerabilities to financial shocks, resilience to external shocks, and favorable medium-term fiscal trends. Fitch praised the country's strong commitment to fiscal prudence, which is expected to continue improving its credit metrics.
Fitch highlighted reduced risks in the banking sector due to improved asset quality, rising profitability, and strong liquidity and capital buffers. The non-performing loan ratio dropped to 7.9% at the end of 2023, the lowest since the global financial crisis.
The agency also noted Cyprus' significant deleveraging over the past decade, with household and corporate debt-to-GDP ratios falling significantly. Strong fiscal performance and a stable economic outlook are expected to further improve asset quality.
Public debt is projected to decline to 70.6% of GDP in 2024 and 65.1% in 2025, supported by high nominal growth and large fiscal surpluses. The cost of servicing the debt remains well contained, with interest costs as a percentage of revenues forecast to stay around 3.5%.
President Nicos Christodoulides called the upgrade a vote of confidence in Cyprus' economy, affirming its stable and dynamic growth path. He assured continued commitment to fiscal responsibility, a stable financial system, and ongoing reforms.
The Ministry of Finance echoed the optimism, citing grounds for further upgrades if current fiscal and macroeconomic trends persist.
