Filenews 22 July 2025 - by Theano Thiopoulou
A major problem of the Cypriot economy, the private debt of natural and legal persons, is beginning to recede – it was reduced to almost half – and was at 180% of GDP by the end of 2024, from the historic high of 349% of GDP recorded in the first quarter of 2015.
More specifically, corporate debt stood at 121% of GDP at the end of 2024, while household debt stood at 59%, according to data provided by the Central Bank in its June 2025 economic bulletin.
The Central Bank clarifies regarding the high percentage of corporate debt that a large part of it is due to ship-owning companies (referred to as Special Purpose Entities) with no or very limited physical presence in Cyprus and have real assets (ships) and are financed almost entirely by non-domestic sources. Although they are registered/established in Cyprus, they have little or no relation to the domestic real economy.
The percentage of private debt becomes even lower if the debt of Special Purpose Vehicles is excluded and the debt-to-GDP ratio of enterprises is limited to 75% and that of the non-financial private sector to 135%, approaching the indicative threshold of 133% set by the European Commission.
The Central Bank explains in the economic bulletin that a further significant reduction in private debt levels will depend to a large extent on the effective management of the claims held by Credit Acquisition Companies (SPs), which are counted in the total private debt.
Another important element for the economic situation of domestic households is the fact that they tend to have significant real and financial assets and accumulate deposits as a safety net. Over time, according to the Central Bank, the total deposits of households exceed their debt, resulting in the net debt-to-GDP ratio remaining at negative levels, reaching -46% at the end of 2024.
Borrowing is moving
Credit expansion to the domestic private sector is on a path of gradual recovery from April 2024, returning to positive rates of change, after a year of negative growth. According to the Central Bank, this development is mainly attributable to the improvement in the rate of change of net business loans, which gradually became less negative throughout 2024 and returned to a positive sign in early 2025, as well as to the continued resilience of credit expansion to households. The upward trend was further strengthened in the first quarter of 2025, reflecting the dynamics of the Cypriot economy.
The economic bulletin indicates that the positive path is in line with the gradual easing of monetary policy from mid-2024, as the reduction in interest rates leads to reduced borrowing costs and boosts credit expansion, despite the still restrictive financing conditions.
The return of business loans at positive rates of change suggests that new lending exceeded repayments, which was reinforced by the rise in economic activity and the gradual de-escalation of bank interest rates, thus contributing to the strengthening of overall loan demand.
The annual growth rate of housing loans stood at 2.8% in March 2025, up from 1.8% a year earlier.
