The credit rating agencies for the creditworthiness of the Republic of Cyprus, which started giving the ratings from March and the last one was given on Friday night by Moody's, appeared restrained but optimistic. DBRS, Fitch, Standard and Poor's kept their ratings as they were, making some remarks, which in most cases acknowledge the pluses of the economy.
The Cypriot economy maintains strong resilience in the face of geopolitical turbulence and international pressures, according to Moody's, which confirmed the rating of Cyprus at the A3 level with a stable outlook. On March 20, the rating agency S&P issued a statement, through which it maintained the rating of the Republic of Cyprus at level A- with a positive outlook. On March 13, the rating agency DBRS confirmed the rating of Cyprus at A, having as a powerful weapon the surpluses for shock absorption. Earlier on May 8, the rating agency Fitch issued a statement through which it maintained the rating of the Republic of Cyprus at level A- and the outlook of the economy at positive.
Moody's acknowledges that the tourism sector, which entered 2026 from a position of strength, but was affected in the short term by a drone attack on a British military base on March 2, which led to a 30.7% year-on-year decline in arrivals in March. Nevertheless, Moody's points out that this risk is mitigated by the diversification of tourists' source markets, with EU countries now accounting for 42% of arrivals. The rating agency also highlights the significant contribution of the technology and information (ICT) sector, which accounted for 14.4% of gross value added in 2025. However, it should be noted that some of the recent foreign investment is characterised by high mobility and may be reversed in the event of a deterioration in conditions. The agency predicts that budget surpluses will stand at 2.3% of GDP in both 2026 and 2027, with public debt falling further to 37.7% by 2030.
Despite the fact that there are positive and negative factors affecting the economy at this time, Fitch believes that the negative developments are not sufficient to reverse the positive image of the Cypriot economy.
Asterisks
Despite the significant improvement in public finances, Moody's warns of increasing pressures on public spending, related to infrastructure projects, health costs, public sector wage spending, defense and climate change adaptation needs. Special reference is also made to the financial challenges associated with the LNG terminal project in Vasiliko. Standard & Poor's makes extensive reference to energy security and says it remains a priority for the Government, especially given the current geopolitical environment. "The completion of a liquefied natural gas (LNG) terminal, which is under construction and long overdue, could help mitigate medium-term energy risks, while extracting natural gas in neighbouring waters remains a long-term ambition," he adds. He notes that Cyprus' energy costs are among the highest in the EU, while its share in the production of Renewable Energy Sources in the energy mix is among the lowest. It states that progress on the project of the electrical interconnection of Cyprus, Greece, Israel has currently stalled, due to a disagreement with Turkey, despite securing EU funding for most of the project.
DBRS indicates that the recent increase in hostilities in the Middle East has increased uncertainty about Cyprus' short-term economic prospects, given the island's geographical proximity to the region. This is especially true for tourism and large capital inflows, as the latter have been a key driver of construction-related investment activity in recent years due to the comparatively low savings rate of the economy.
