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DBRS Morningstar Elevates Cyprus’s Credit Rating, Bolstering Economic Confidence

by THEFUTURE.TEAM

Robust Fiscal Recovery Propels Cyprus’s Rating Upgrade

The internationally respected ratings firm DBRS Morningstar has raised Cyprus’s sovereign credit rating from ‘A(Low)’ to ‘A’, while adjusting its outlook from ‘positive’ to ‘stable’. The upgrade reflects the island’s rapid public debt reduction and strong economic indicators, with expectations that further improvements will continue in the coming years.

Fiscal Discipline and Debt Reduction

Recent fiscal data reveals a significant decline in the general government debt as a percentage of Gross Domestic Product (GDP), dropping from 96.5% in December 2021 to 64.3% by March 2025. This reduction is attributed to substantial fiscal surpluses and robust nominal GDP growth driven by strong domestic demand and expanding service exports. DBRS Morningstar anticipates that the debt-to-GDP ratio will maintain its downward trajectory as the government continues to deliver large surpluses and favorable economic conditions prevail.

Structural Reforms and Revenue Growth

Beyond cyclic factors, structural improvements have bolstered Cyprus’s fiscal performance. An uptick in income tax revenues, largely due to the relocation of numerous companies to Cyprus, has significantly enhanced government income. The government’s Annual Progress Report outlines projected fiscal surpluses of 3.5% of GDP in 2025 and 3.7% for the period 2026-2028, with forecasts suggesting that government debt will drop to 43.3% of GDP by 2028.

Stable Political Environment and Strategic Governance

The stable political backdrop and resilient domestic banking sector underscore Cyprus’s robust economic framework. The country’s prudent fiscal and economic policies, combined with moderate interest burdens, have consistently received favorable evaluations by international rating agencies. While challenges remain—such as the limited size of an economy centered on services, relatively low labor productivity, and a significant current account deficit—the integration into the European Union continues to strengthen institutional quality and governance standards.

Enhanced Investor Confidence and Future Prospects

Cyprus’s recent rating upgrade has galvanized investor confidence by positioning the nation well within the high-investment grade spectrum. Finance Minister Makis Keravnos emphasized that the latest upgrade from DBRS Morningstar is a clear testament to Cyprus’s rational economic policies and fiscal discipline. He noted that this marks the second upgrade for the country in 2025, underscoring a sustained commitment to favorable economic policies that not only promote growth but also secure fiscal stability in the face of global uncertainties.

Outlook: Securing Growth and Attracting Investment

Looking ahead, the government remains committed to maintaining stringent financial policies while implementing a social strategy to support vulnerable groups and the small and medium-sized sector. With the momentum of continuous fiscal enhancements and a favorable policy environment, Cyprus is well-positioned to attract foreign investments, enhance competitiveness, and generate new employment opportunities.

Mercedes-Benz Posts Higher Profit Despite China Slowdown

by THEFUTURE.TEAM

Mercedes-Benz reported stronger-than-expected second-quarter results, lifting its shares on Tuesday despite mounting pressure from Chinese automakers and a weaker outlook for sales and revenue.

The earnings provided a boost for Europe’s auto sector, where manufacturers continue to grapple with tariffs, softer demand and intensifying competition from Chinese rivals. Volkswagen, Mercedes-Benz and BMW have all accelerated restructuring efforts in response.

Cost Discipline Lifts Quarterly Profit

Mercedes-Benz shares rose as much as 5.9% following the results before trimming gains to trade 3.5% higher by 1118 GMT. The company reaffirmed its profit margin guidance for its core passenger car business after reporting an adjusted return on sales of 4.0% for the second quarter, above market expectations and within its 3% to 5% target range.

“In an environment where some automakers are ringing alarm bells on their competitive positioning, Mercedes delivered a clear and confident message,” Morningstar analyst Rella Suskin said.

Second-quarter operating profit increased 22% to €1.5 billion ($1.7 billion), despite a 3% decline in revenue. Lower administrative and research and development costs, together with strong performances from the financial services and vans divisions, supported earnings, while the results also included a €131 million gain related to the planned sale of leasing subsidiary Athlon.

China Remains The Key Pressure Point

Despite stronger profitability, Mercedes continues to face a challenging market environment. Sales in China fell 30% during the second quarter, prompting the company to abandon earlier expectations for stable car sales and group revenue. It now expects both to decline slightly from a year earlier.

BMW also lowered its outlook in June following a deeper-than-expected slowdown in China, highlighting the pressure facing Germany’s premium carmakers. At the same time, Mercedes said Chinese manufacturers are increasingly expanding into European markets, although Chief Executive Ola Kaellenius said their focus remains on higher-volume segments rather than the premium market.

“But that is not a reason to sit back and be relaxed,” he said.

Manufacturing Shift Continues

Mercedes is also reshaping its manufacturing footprint. The company said its German factories will undergo a more aggressive push toward leaner production, although it declined to provide further details while talks with labour representatives continue. Production is also being expanded in lower-cost Eastern European locations, including Hungary, where the company is increasing capacity at its Kecskemet plant, as well as in Poland.

Chief Financial Officer Harald Wilhelm said the full-year margin for the passenger car division is expected to come in at the lower end of the company’s guidance range, reflecting a higher share of electric vehicle sales in Europe, which remain more expensive to produce and continue to weigh on profitability.

“We must continue to work flat out to reduce costs so that we can remain competitive on the prices of our products,” Kaellenius said.

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