Fitch International Rating Agency has revised Cyprus’ long-term rating from stable to positive, citing economic resilience, fiscal surpluses with continued reduction of public debt, and the improved banking sector.
The agency issued its revision on Friday evening and affirmed Cyprus’ long-term foreign-currency issuer default rating to the investment level of “BBB.”
Fitch said that Cyprus’ economy has remained relatively resilient this year, with gross domestic product (GDP) increasing by 2.5 percent on an annual basis in the first three quarters of 2023.
It predicts the country’s GDP to grow 2.7 percent for the next year, and 3.0 percent for 2025, due to a continued expansion in domestic demand, a sizeable inflow of EU funds along with improved macroeconomic conditions among Cyprus’s main trading partners.
Fitch expected Cyprus to register a general government budget surplus this year of 2.3 percent of GDP, higher than the 1.7 percent projected by its previous review in June. The public debt-to-GDP ratio is estimated to decline to 79.6 percent at the end of this year.
The agency also noted that positive trends in bank profitability driven by higher interest rates have translated into improvements in solvency metrics for the banking sector.
“Cyprus’ economy has come a long way since the near meltdown and its bailout by the Eurogroup and the International Monetary Fund 10 years ago,” Finance Minister Makis Keravnos said while commenting on the country’s economy.
However, Fitch also warned that the further escalation of geopolitical tensions in the Middle East may affect investment and tourism links between Cyprus and Israel, as the latter has the growing importance “as a trade partner and source of investment in recent years.”