Moody’s reaffirmed Cyprus’s credit rating at A3 with a stable outlook on May 29, reflecting the country’s strong economic resilience and positive medium-term growth prospects, the Finance Ministry announced.
The rating agency noted that short-term growth is expected to slow due to risks arising from the conflict in the Middle East, with knock-on effects for tourism and inflation. Over the medium term, however, Moody’s said Cyprus’s growth trajectory remains supported by the continued diversification of the economy.
Among the strengths Moody’s identified, the agency pointed to sound institutional capacity and effective policymaking, a steady decline in public debt levels with debt sustainability indicators remaining strong, and a banking sector underpinned by solid capital adequacy and improved profitability.
The agency also flagged a number of challenges. It noted that Cyprus’s small size makes it less resilient to external shocks than a larger economy — a point it has raised in previous assessments. Spending pressures on the fiscal side remain an ongoing risk to the public finances, while risks in the banking sector, though gradually easing due to structural improvements, continue to represent a potential source of sudden developments.
Moody’s said further upgrades could materialise if fiscal metrics and public debt indicators outperform its projections, or if medium-term growth proves stronger than expected, driven in part by public and private investment and improved labour market conditions. Conversely, the agency warned that a negative divergence in fiscal outcomes and public debt from its projections — particularly if it undermines the downward debt trajectory — could put Cyprus’s rating under downward pressure.
Finance Minister Makis Keravnos said the Moody’s assessment confirms the resilience of the Cypriot economy, adding that the government takes seriously the challenges the agency highlights arising from continuing negative geopolitical developments.
Keravnos said the government is aware of the significant efforts required under its economic policy to maintain the country’s resilience and preserve its investment-grade rating. He added that further effort is still needed and that strict, precautionary fiscal policy must continue to be applied consistently and responsibly.