S&P Upgrades Cyprus Credit Rating to A

S&P Global Ratings has upgraded Cyprus' long-term sovereign credit rating to A. This is the first time the island has held this grade since 2011. The outlook remains positive. President Nikos Christodoulides called the decision a major economic milestone. Finance Minister Makis Keravnos cited the rating as proof of fiscal responsibility. The upgrade signals strong international investor confidence in the Cypriot economy.

The agency expects fiscal surpluses averaging just under 3% of GDP through 2029. Net public debt should fall to slightly above 30% of GDP in the same period. Economic growth is projected to average near 3% annually. Strong tax revenues and spending controls drive this trajectory. Resilient domestic demand and a tight labor market provide further support. Public and private investment, including Next Generation EU funds, contributes to the expansion.

Export Base and Investment Strength

Services exports have grown significantly, led by information technology and intellectual property. This diversification strengthens the country's external revenue base. Foreign direct investment inflows have moderated private sector external debt. The banking sector shows continued improvement. Non-performing loan ratios dropped to 1.6% in December 2025. This figure sits below the European average. Domestic lending increased by 2.5% in 2025. This marks the first growth in years after a prolonged decline.

Energy Security and Infrastructure Challenges

Cyprus remains heavily dependent on imported oil for electricity generation. S&P forecasts higher oil prices in 2026 and 2027. The agency deems these increases manageable for the economy. The Vasilikos liquefied natural gas terminal is a critical medium-term measure. It aims to reduce energy costs and shift away from diesel. Construction delays put the end-2027 operation date at risk. The Great Sea Interconnector project remains stalled due to differences with Turkey. EU funding for this grid connection is largely secured but unused.

Inflation and Geopolitical Resilience

Consumer price growth is expected to average 3.8% this year. Cyprus faces particular exposure to oil price fluctuations. Reduced VAT rates on fuel extend until 2027, providing a buffer. The economy has remained resilient despite regional conflicts. Geopolitical developments in Russia, Ukraine, and the Middle East have not derailed growth. Energy security remains a top government priority. The agency notes that the current environment requires sustained fiscal prudence. These factors underpin the A rating decision by GN auto markets/bonds: sovereign debt analysts.