Robust Ratings in a Volatile Global Landscape
Leading credit rating agencies have maintained an overall positive outlook on the Republic of Cyprus, underscoring the nation’s robust economic resilience despite pervasive geopolitical tensions. Since March, agencies such as Moody’s, DBRS, Standard & Poor’s, and Fitch Ratings have affirmed Cyprus’ credit ratings. While minor reservations persist regarding certain economic challenges, the consensus remains that the country’s fundamentals are strong.
Steady Endorsement From Rating Agencies
Moody’s has reaffirmed Cyprus’ rating at A3 with a stable outlook, citing the island nation’s ability to withstand both domestic and international pressures. In a similar vein, Standard & Poor’s reiterated the A- rating, emphasizing a positive forward-looking perspective. DBRS confirmed an A rating with a nod to Cyprus’ capacity to absorb external shocks, while Fitch maintained its A- rating with an emphasis on a positive economic outlook.
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Diverse Economic Drivers Support Fiscal Stability
Economic activity remains supported by multiple sectors, reducing dependence on any single source of growth. Tourism faced pressure earlier this year following regional tensions and the drone incident near a British military base on March 2, contributing to a 30.7% annual decline in tourist arrivals. However, visitors from EU countries now account for 42% of total arrivals, providing greater diversification. The information and communication technology sector contributed 14.4% of Cyprus’ gross value added in 2025, while fiscal projections indicate budget surpluses of 2.3% of GDP in both 2026 and 2027. Public debt is projected to decline to 37.7% of GDP by 2030.
Energy Security And Infrastructure Challenges
Despite improvements in public finances, rating agencies continue to highlight pressures linked to infrastructure spending, healthcare, public sector wages, defence and climate-related investments. Moody’s pointed to these expenditure pressures, while Standard & Poor’s identified energy security as a key policy challenge. The delayed LNG terminal project at Vasiliko remains a concern, as does Cyprus’ relatively high energy cost base and limited contribution from renewable energy sources. Standard & Poor’s also noted uncertainty surrounding the electricity interconnection project linking Cyprus, Greece and Israel, which has faced delays despite receiving European Union support.
Geopolitical Risks And Short-Term Economic Outlook
DBRS highlighted growing uncertainty linked to developments in the Middle East. Given Cyprus’ proximity to the region, the agency noted potential risks for tourism activity and investment flows, particularly those connected to the construction sector. Despite these concerns, Fitch said current geopolitical and economic risks do not materially alter its overall assessment of Cyprus’ economic outlook.
