Cyprus economy expands at three times EU average as rating reviews loom

Cyprus faces three credit rating decisions in September Cyprus is due to receive three credit rating decisions in September, with DBRS Morningstar, Standard & Poor’s and Capital Intelligence Ratings scheduled to review the Republic’s standing before Fitch and Moody’s follow with assessments in November. Canadian agency DBRS Morningstar will announce its decision on September 4, followed by Standard & Poor’s and Capital Intelligence Ratings on September 18. Cyprus currently holds investment-grade ratings from all major international agencies, with recent assessments pointing to continued economic growth, strong public finances and a resilient banking sector. DBRS confirmed Cyprus at A with a stable outlook on March 13, 2026, citing the economy’s continued strong growth momentum during the previous year. The agency also said Cyprus’ ratings were supported by the government’s strong fiscal performance in recent years, the banking sector’s strong financial position and a stable domestic political environment. S&P confirmed Cyprus at A- with a positive outlook on March 20, saying the economy was expected to maintain strong growth over the coming years. Capital Intelligence Ratings also confirmed Cyprus at BBB+ with a stable outlook on March 20 and is due to announce its next assessment on September 18. The November reviews will come from Fitch on November 6 and Moody’s on November 20. Fitch maintained Cyprus at A- with a positive outlook on May 8, while Moody’s completed a periodic review on May 29, retaining its A3 rating with a stable outlook. The upcoming reviews come as the government argues that Cyprus’ economy remains resilient despite external pressures. “The Cypriot economy continues to grow at a satisfactory pace, despite heightened geopolitical uncertainty and the ongoing energy crisis with the rise in global fuel prices,” Finance Minister Makis Keravnos said on Tuesday. Keravnos said the economy expanded 3.3 per cent during the first half of 2026, three times the EU average, while unemployment stood at 4 per cent. Inflation, however, increased from 0.5 per cent in January to 3.1 per cent in June, with the government forecasting a rate of around 4 per cent by the end of the year. The government has allocated €200 million for measures to ease the impact of inflation, while Keravnos said any decision on extending the reduced fuel tax would depend on developments. “Measures are being assessed on an ongoing basis, and depending on developments any decisions will be taken at the given moment,” Keravnos said. He added that EU guidance called for anti-inflation measures to be targeted and temporary. Cyprus recorded a fiscal surplus equivalent to 1.1 per cent of GDP during the first six months of 2026, while the government expects a surplus of about €900m for the full year. “We are not complacent. Challenges persist, crises and wars are ongoing, with unforeseen developments,” Keravnos said. “That is why we will continue to implement this prudent economic policy,” he added. Keravnos said the surplus supported social policies worth more than €1 billion, equivalent to almost 33 per cent of the budget, while also allowing the government to repay about €1 billion of debt each year. “The goal is not to have surpluses for their own sake. Surpluses are there for our needs, and mostly to repay the approximately €1bn in debt a year,” he said. Extra material: The Economics Research Centre of the University of Cyprus (CypERC) forecasts Cyprus’ real GDP growth will slow from an estimated 3.8 per cent in 2025 to 2.7 per cent in 2026, before rising to 3.1 per cent in 2027. Eurostat reported that second-quarter GDP increased by 0.4 per cent in the euro area and 0.5 per cent across the EU compared with the previous quarter, an improvement from first-quarter growth of zero and 0.1 per cent respectively. On an annual basis, second-quarter GDP rose by 1.0 per cent in the euro area and 1.2 per cent in the EU.