Breaking news

Cyprus Nears First ‘A’ Fitch Rating In 13 Years: A Milestone In Economic Recovery

Cyprus is on the cusp of achieving its first ‘A’ rating from Fitch in over a decade, marking a significant milestone in the country’s economic recovery. The international rating agency Fitch recently upgraded Cyprus’s credit rating from BBB to BBB+, and Standard & Poor’s followed suit, both reflecting positive economic developments.

The Road to Recovery

In the aftermath of the financial crisis in 2013, Cyprus faced severe economic challenges, including a high ratio of non-performing loans (NPLs) and substantial public and private debt. Over the years, concerted efforts have been made to address these issues, leading to significant improvements. Fitch noted that the NPL ratio had dropped to 7.9% by the end of 2023, the lowest since the global financial crisis, a significant decrease from its peak near 50%.

Policy and Legislative Reforms

The Cypriot government has implemented various policy and legislative reforms to strengthen the financial sector and promote economic resilience. A notable initiative is the revised divestment framework approved by Parliament, expected to further reduce NPLs and enhance the banking sector’s stability. Additionally, the government’s efforts in deleveraging have resulted in reduced household and corporate debt-to-GDP ratios, bringing them closer to the EU average.

Economic Indicators and Future Prospects

The upgrades by Fitch and Standard & Poor’s signal increased confidence in Cyprus’s economic prospects. These improvements, coupled with a positive outlook, pave the way for Cyprus to achieve an ‘A’ rating for the first time since 2011. The return to an ‘A’ rating would signify a restored confidence in Cyprus’s economic stability and growth potential, attracting further investment and boosting economic activity.

Challenges Ahead

Despite these advancements, challenges remain. The non-performing loans, though reduced, still represent a higher percentage of total loans compared to other EU countries. Additionally, ongoing social incentives complicate the resolution of mortgage-related NPLs. The Cypriot economy must continue to navigate these complexities to maintain its upward trajectory.

Cyprus Hits Historic Tourism Peak As Overtourism Risks Mount

Record-Breaking Performance In Tourism

Cyprus’ tourism sector achieved unprecedented success in 2025 with record-breaking arrivals and revenues. According to Eurobank analyst Konstantinos Vrachimis, the island’s performance was underpinned by solid real income growth and enhanced market diversification.

Robust Growth In Arrivals And Revenues

Total tourist arrivals reached 4.5 million in 2025, rising 12.2% from 4 million in 2024, with momentum sustained through the final quarter. Tourism receipts for the January–November period climbed to €3.6 billion, marking a 15.3% year-on-year increase that exceeded inflation. The improvement was not driven by volume alone. Average expenditure per visitor increased by 4.6%, while daily spending rose by 9.2%, indicating stronger purchasing power and higher-value tourism activity.

Economic Impact And Diversification Of Source Markets

The stronger performance translated into tangible gains for the broader services economy, lifting real tourism-related income and overall sector turnover. Demand patterns are also shifting. While the United Kingdom remains Cyprus’ largest source market, its relative share has moderated as arrivals from Israel, Germany, Italy, the Czech Republic, the Netherlands, Austria, and Poland have expanded. This gradual diversification reduces dependency on a single market and strengthens resilience against external shocks.

Enhanced Air Connectivity And Seasonal Dynamics

Air connectivity has improved markedly in 2025, with flight volumes expanding substantially compared to 2019. This expansion is driven by increased airline capacity, enhanced route coverage, and more frequent flights, supporting demand during shoulder seasons and reducing overreliance on peak-month flows. Seasonal patterns remain prominent, with arrivals building through the spring and peaking in summer, thereby bolstering employment, fiscal receipts, and corporate earnings across hospitality, transport, and retail sectors.

Structural Risks And Future Considerations

Despite strong headline figures, structural challenges remain. The European Commission’s EU Tourism Dashboard highlights tourism intensity, seasonality, and market concentration as key risk indicators. Cyprus records a high ratio of overnight stays relative to its resident population, signalling potential overtourism pressures. Continued reliance on a limited group of origin markets also exposes the sector to geopolitical uncertainty and sudden demand swings. Seasonal peaks place additional strain on infrastructure, housing availability, labour supply, and natural resources, particularly water.

Strategic Investment And Market Resilience

Vrachimis concludes that sustained growth will depend on targeted investment, product upgrading, and continued market diversification. Strengthening year-round offerings, improving infrastructure capacity, and promoting higher-value experiences can help balance demand while preserving long-term competitiveness. These measures are essential not only to manage overtourism risks but also to ensure tourism remains a stable pillar of Cyprus’ economic development.

The Future Forbes Realty Global Properties
eCredo
Aretilaw firm
Uol

Become a Speaker

Become a Speaker

Become a Partner

Subscribe for our weekly newsletter