With uncertainty remaining high due to the war conflict in the Middle East and without it being easy to measure any impact on the economy, Cyprus in this fragile environment is expected to receive the first assessment for 2026 from the Canadian agency DBRS on March 13.
Under these circumstances, it remains to be seen what DBRS will include in the scenarios for Cyprus to ascertain, among other things, the effects that the war in the Middle East has on economic indicators.
In March, it is not only the Canadian agency that is expected to give an assessment. The American house Standard and Poor's takes its turn on March 20. Obviously, the agencies will not judge the economy only by the developments of the last few days, but are expected to examine more broadly the geopolitical tension in the Middle East, which de facto creates a new macroeconomic landscape, different for each country in Europe.
So far, Cyprus has secured stable ratings from major international agencies, is at investment grade "A" and all agencies maintain the credit rating of the long-term bond of the Republic of Cyprus in the upper middle tier, with a stable outlook.
It should be recalled that in September 2025, DBRS upgraded the creditworthiness of the Cypriot economy to Tier A, justifying the decision on the sharp reduction in public debt in recent years and the expectation that public debt ratios will continue to improve significantly in the coming years. The rating given by the agency a few months ago was based on the solid outlook and reflected the view that the risks to the credit rating are balanced. The assessment is based on a stable political environment, a strong financial situation in the banking sector, prudent fiscal and economic policy and moderate debt servicing costs.
Standard & Poor's confirmed in November 2025 the credit rating of the Republic of Cyprus at "A-" (investment grade), while upgrading the outlook to positive. This decision reflects confidence in the Cypriot economy, with a further upgrade expected in the next 12 months. As a precondition for a future upgrade, it cites a shrinking current account deficit, while warning that a possible deterioration in geopolitical conditions or weaker performance of key trading partners could put pressure on credit ratings. It should also be mentioned that credit rating agencies reserve the right to change their credit rating calendar.
The escalation of the war in the Middle East and the obstruction of navigation in the Strait of Hormuz bring new inflationary risks, but the economy of Cyprus has three important advantages, even before the start of the war. Inflation rose 0.9% in Cyprus in February, from 1.2% in January, according to preliminary data released by Eurostat ahead of the new crisis in the Middle East. But if the duration of the war is extended, then inflation is expected to return, mainly due to energy costs.
Also, growth may slow down and this will depend on tourist flows and as a result the fiscal balances will be tested.
It should be noted that the level of inflation in the country is the lowest in Europe.
Cyprus records the third largest reduction of public debt in the EU, with a level significantly lower than the average of both the EU and the Eurozone. The target for public debt as a percentage of GDP below 60% was achieved a year earlier. It is also important that the state treasury records a surplus of €939.2 million, corresponding to 2.6% of GDP, in the period January-December 2025, according to the preliminary fiscal data of the Statistical Service.
