Morningstar DBRS announced on Friday it has upgraded the Republic of Cyprus’ main credit rating from BBB (high) to A (low).
Furthermore, the trend on the Cypriot rating remains positive, which signals the prospect for another upgrade at some point soon.
The Canada-based rating agency, one of the world’s four majors, stated that the upgrade and the positive trend reflect the sharp decrease of the public debt burden in recent years and DBRS’ expectation that public debt metrics will continue to materially improve over the next years.
The general government debt-to-GDP ratio declined from 96.5% in December 2021 to 69.7% in September 2024, driven by large budgetary surpluses and high rates of nominal GDP growth.
Looking ahead, the European Commission forecasts general government debt to decrease to 56.7% of GDP in 2026 as economic and fiscal developments are projected to remain favorable.
Economic growth is likely to continue to benefit from robust private consumption, rising service exports and strong construction investment over the next few years.
While, like other European Union countries, the outlook is exposed to downside risks such as an escalation of geopolitical and global trade tensions, the Cypriot economy is less vulnerable to the direct impact of rising US tariffs on EU goods imports than most other EU countries given the relatively small size of its manufacturing sector, said DBRS.