S&P Upgrades Cyprus Economy’s Outlook To Positive Amid Accelerated Debt Reduction

by THEFUTURE.TEAM

November 17, 2025

Credit rating agency S&P has elevated Cyprus’s economic outlook from stable to positive, underscoring a faster-than-anticipated improvement in external debt ratios. The upgrade reflects expectations for the island’s external position to outperform current projections over the next two years as a result of accelerated debt de-escalation.

Steady Ratings And Fiscal Discipline

Cyprus maintains its long-term and short-term credit ratings at A-/A-2. The firm noted that continued reductions in net external leverage could potentially warrant a further upgrade. Despite a persistent current account deficit, robust foreign direct investment inflows have facilitated a gradual decline in external debt. This fiscal discipline has fostered impressive performance, as strong economic activity and high employment levels have boosted tax revenues and social security contributions, thereby supporting sustainable public finance surpluses and reducing overall public debt.

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Projected Growth And Resilient Economic Policies

Looking ahead, forecasts indicate an average surplus of 3.3% of GDP between 2025 and 2028, with net debt anticipated to decline to 35% of GDP by 2028, in contrast to 56% last year and 90% in 2019. The economic momentum, bolstered by a surge in tourism and the relocation of technology companies, is expected to be driven by domestic demand, rising real incomes, and increased public and private investments. The resilience of Cyprus’s economy is further highlighted by its limited exposure to international trade tensions and its ability to withstand geopolitical instabilities in regions such as Ukraine and the Middle East.

Leadership Endorsement And Forward-Looking Strategies

Cyprus President Nikos Christodoulides hailed the outlook upgrade as a milestone that signifies the nation’s entry into a phase of enhanced economic momentum, reflecting consistent and responsible fiscal decisions. He underscored Cyprus’s emerging reputation as a reliable center for quality investment, characterized by lower borrowing costs, vibrant entrepreneurship, and well-paid job opportunities. Finance Minister Makis Keravnos echoed this sentiment, emphasizing that the upgrade reinforces international confidence in the government’s economic policies. He affirmed that continued fiscal discipline and targeted initiatives will sustain stable and sustainable growth even amidst increased geopolitical risks.

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ECB Launches Geopolitical Stress Tests For 110 Eurozone Banks

by THEFUTURE.TEAM

March 9, 2026

The European Central Bank is preparing a new round of geopolitical stress tests aimed at assessing potential risks to major financial institutions across the euro area. Up to 110 systemic banks, including institutions in Greece and the Bank of Cyprus, will take part in the exercise, which examines how geopolitical events could affect financial stability.

Timeline And Testing Process

Banks are expected to submit initial data on March 16, 2026. Supervisors will review the information in April, while the final results are scheduled to be published in July 2026. The process forms part of the ECB’s broader supervisory work to evaluate financial system resilience under different risk scenarios.

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Geopolitical Shock As The Primary Concern

The stress tests place particular emphasis on geopolitical risks. These may include armed conflicts, economic sanctions, cyberattacks and energy supply disruptions. Such events can affect banks through changes in market conditions, borrower solvency and sector exposure. Lending portfolios linked to regions or industries affected by geopolitical developments may face higher risk levels.

Reverse Stress Testing: A Tailored Approach

Unlike traditional stress tests that apply the same scenario to all institutions, the reverse stress test requires each bank to define a scenario that could significantly affect its capital position. Banks must identify a geopolitical shock that could reduce their Common Equity Tier 1 (CET1) ratio by at least 300 basis points. Institutions are also expected to assess potential effects on liquidity, funding conditions and broader economic indicators such as GDP and unemployment.

Customized Risk Assessments And Supervisor Collaboration

This methodology allows banks to submit risk assessments based on their own exposures and operational structures. The approach is intended to help supervisors understand how geopolitical events could affect institutions differently and to support discussions between banks and regulators on risk management and contingency planning.

Differentiated Vulnerabilities Across Countries

A joint report by the ECB and the European Systemic Risk Board indicates that countries respond differently to geopolitical shocks. The Russian invasion of Ukraine led to higher energy prices and inflation across Europe, prompting central banks to raise interest rates. Belgium, Italy, the Netherlands, Greece and Austria experienced increases in borrowing costs and lower investor confidence. Germany, France and Portugal recorded more moderate changes, while Spain, Malta, Latvia and Finland showed intermediate levels of exposure.

Conclusion

The geopolitical stress tests will not immediately lead to additional capital requirements for banks. Their results will feed into the Supervisory Review and Evaluation Process (SREP). ECB supervisors may use the findings when assessing capital adequacy, risk management practices and operational resilience at individual institutions.

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