Fitch Ratings has upgraded Cyprus’ long-term foreign currency issuer default rating from BBB to BBB+, with a positive outlook.
The upgrade underscores Cyprus’ diminished vulnerabilities to financial shocks, its resilience to external disruptions, and favorable medium-term fiscal trends. Fitch commended the nation's strong commitment to fiscal prudence, which is anticipated to continuously enhance its credit metrics.
Fitch highlighted reduced risks within the banking sector, attributing this improvement to better asset quality, increased profitability, and robust liquidity and capital buffers. The non-performing loan ratio decreased to 7.9% at the end of 2023, marking the lowest level since the global financial crisis.
Additionally, the agency acknowledged Cyprus’ significant deleveraging over the past decade, with household and corporate debt-to-GDP ratios showing substantial declines. Continued strong fiscal performance and a stable economic outlook are expected to further enhance asset quality.
Public debt is forecasted to decline to 70.6% of GDP in 2024 and 65.1% in 2025, propelled by high nominal growth and substantial fiscal surpluses. The cost of servicing the debt remains well managed, with interest costs projected to stay around 3.5% of revenues.
