Filenews 8 February 2026
Scope Ratings upgraded the long-term credit rating of the Republic of Cyprus to 'A' from 'A-', citing a significant reduction in public debt, sustainable fiscal surpluses and improved resilience of the banking sector. The outlook was revised to stable from positive, while short-term ratings were confirmed in S-1.
According to the rationale of the assessment, strong fiscal performance and economic growth led to a rapid de-escalation of public debt, which is estimated to have declined to 55.4% of GDP in 2025 from 113.6% in 2020. Public debt is expected to continue declining, falling below 40% of GDP by 2030.
At the same time, the banking sector strengthened, with the continued reduction of non-performing loans and the improvement of capital adequacy and coverage ratios. The NPL ratio decreased to 4.2% in October 2025, while the coverage ratio reached historically high levels, enhancing banks' ability to finance the economy and reducing fiscal risks.
Financial perspective
It is also noted that the outlook for public finances remains positive, with strong corporate tax revenues – boosted by the relocation of technology companies – and a resilient labour market as key drivers.
Following the fiscal surplus of 4.1% of GDP in 2024, it is estimated that a surplus of about 3.3% of GDP was recorded in 2025 as well, despite expenditures related to the National Solidarity Fund, the fires of July 2025 in the Limassol district and household support measures.
The tax reform, which includes an increase in corporate tax and relief for middle incomes, creates uncertainty as to the medium-term fiscal impact. Nevertheless, fiscal surpluses of around 3.1% of GDP in 2026 and 3.4% in 2027 are expected to continue, which are projected to remain above 1% of GDP until 2030.
The main fiscal risks relate to increased spending needs on climate adaptation, infrastructure, defence and an ageing population. However, it is reported that the country's strong fiscal position offers room to deal with potential economic pressures.
The Cypriot economy maintains strong growth rates, with GDP growing by 3.5% in 2025 after 3.9% in 2024, mainly driven by private consumption, rising real wages and investment. Growth of 3.1% is forecast for 2026, supported by private consumption and investment under the Recovery and Resilience Plan.
Unemployment stood at 4.3%, the lowest level in almost two decades, while inflation remained low at 0.8% in 2025 and is expected to approach 2% by 2027. In the medium term, growth is estimated to remain close to 3%, supported by private investment and the tourism and technology sectors.
External risks
Despite the improvement in fundamentals, Scope reports that Cyprus' assessment is limited by the small and open nature of the economy, external deficits and structural vulnerabilities of the banking sector.
The direct impact of higher US tariffs and geopolitical uncertainty remains limited so far, as Cypriot exports are mainly related to services. Potential impacts are expected to arise mainly through weaker demand from European economies.
The stable outlook, as indicated, reflects the assessment that strong fiscal and economic performance is balanced by structural challenges.
Christodoulidis: "We continue with the same responsibility"
The Government continues with the same responsibility, stressed the President of the Republic of Cyprus, Nikos Christodoulides, referring to the upgrade of the credit rating of the Republic of Cyprus by Scope Ratings.
In a post on the "X" platform, the President of the Republic noted that the rating agency upgraded the long-term credit rating of the Republic of Cyprus in local and foreign currency, as well as the unsecured debt of high senior interest, to grade A from A-.
"We continue with the same responsibility. Above all, Cyprus," the President wrote.
How does the Minister of Finance comment?
I am pleased to welcome another significant upgrade of the credit rating of the Republic of Cyprus, this time by the rating agency "Scope Ratings".
The upgrading of Cyprus' borrowing credibility from -A to A, the revision of the prospects of the Cypriot economy from positive to stable, but at the same time the confirmation of the Agency's short-term ratings in local and foreign currency, is yet another strong proof of the confidence shown in the government's economic policy by the major Rating Agencies, including those that do not maintain a contractual relationship with the Republic, such as "Scope Ratings".
The continuous upgrades of the credibility of the Cypriot economy and its classification in investment grade "A" by all major Agencies, reflect not only the creditworthiness of the Republic of Cyprus in the international markets, but also the dynamics of the Cypriot economy. A dynamic that was emphatically confirmed in practice during the last fully successful issuance of the new 10-year bond of the Republic of Cyprus.
The government will continue with the same consistency to implement its economic policy that leads to continuous stable and sustainable growth, guided by fiscal discipline and financial stability, focusing on the continuous reduction of public debt as a percentage of GDP that allows the development of important initiatives for substantial support of citizens and especially of the underprivileged social classes through sensitive economic policies.
CNA
