On Friday, Morningstar DBRS confirmed Cyprus' credit rating at BBB (High) and upgraded the outlook from stable to positive.

According to a press release, the positive trend reflects the view that public debt is likely to continue improving. General government debt as a percentage of GDP dropped from 99.3% in 2021 to 77.4% in 2023.

The European Commission forecasts further reductions in general government debt, projecting it will decrease to 65.4% of GDP by 2025, driven by strong economic growth and fiscal surpluses. The country’s growth is expected to continue benefiting from robust private consumption, increasing exports of services, and strong construction investments, according to the agency.

The Commission also predicts that Cyprus' real GDP will grow by an average of 2.9% in 2024 and 2025, compared to a 1.1% growth rate for the Eurozone. Favorable developments in growth and employment are expected to further boost tax revenues and social security contributions, the report notes.

Morningstar DBRS also highlighted that, in the first seven months of 2024, general government revenues increased by 14.2% year-on-year, driven by higher income taxes and social contributions, surpassing the 9.4% rise in public spending.

The BBB ratings for Cyprus, the press release states, are supported by a stable political environment, sound fiscal and economic policies, and moderate interest burdens.

However, the rating agency noted that Cyprus' credit ratings remain constrained by the small size of its service-based economy, making it vulnerable to external shocks. Cyprus also faces significant challenges due to non-performing loans (NPLs) in the banking sector and the comparatively low productivity levels in its economy.

In a statement posted on the social media platform "X," President of the Republic of Cyprus, Nikos Christodoulides, affirmed the government's responsible economic policies, as reflected in DBRS Morningstar's confirmation of the credit rating and its upgrade to a positive outlook.

President Christodoulides emphasized that this announcement validates the government's prudent and serious economic policy, which benefits the whole of society and avoids populist and irresponsible approaches.

In a written statement on Saturday, Finance Minister Makis Keravnos also addressed the DBRS Morningstar credit rating confirmation. He noted that the government will continue to support the economy responsibly and flexibly, particularly in light of challenges arising from the global economic and political environment.

Keravnos highlighted that the government's ongoing policy will focus on promoting growth, employment, and public finance stability by advancing suitable economic plans that maximize opportunities for continued economic development while reducing public debt.