The fact that two ratings agencies either improved or kept the same rating for Cyprus was welcomed on Saturday with “particular satisfaction” by Finance Minister Makis Keravnos.

Both Moody’s and Fitch, he said, “seem to trust” the rational policies consistently implemented by the Cyprus government, which are driving the excellent performance of the economy.

Overnight on Friday, Fitch upgraded its outlook for the Cypriot economy to positive from stable, confirming the island’s A- rating.

At the same time, credit rating agency Moody’s issued a periodic review, without making any change to its rating of Cyprus, noting this decision does not indicate whether a rating action is likely in the near future.

“We continue with the same sense of responsibility,” President Nikos Christodoulides wrote in a post on X.

According to the finance ministry, Fitch’s move “is considered a precursor to a future upgrade, provided the forecasts in the relevant report materialise.”

Moody’s referred to the existing A3 rating for Cyprus, which “reflects the country’s high wealth levels and strong growth performance, which we expect will remain robust over the medium term,” the ministry said.

Meanwhile, Fitch said the revision of Cyprus’ outlook reflects several key rating drivers.

The change in outlook occurred, according to Fitch, due to the rapid reduction in public debt during 2022–2025 and because this reduction is expected to continue during 2026–2027, with public debt falling below the 60 per cent of GDP (55.4 per cent) in 2025, making it lower than the EU median.

This debt reduction, according to Fitch, represents a decline of nearly 70 percentage points since its peak in 2020, “one of the fastest reductions among Fitch-rated sovereigns.”

“With debt projected to come down to around 40 per cent of GDP over the medium term, debt-financing needs will remain low,” the agency added.

The change in outlook also occurred due to ongoing fiscal surpluses, which are projected to continue through 2025–2027 due to “strong fiscal growth” above that of the Eurozone.

Additionally, the positive outlook is attributed to the very strong labour market, with unemployment falling to pre-2009 levels.

According to Fitch, wage pressures have remained contained and are expected to stabilise, reducing risks to competitiveness. Also, harmonised inflation was only one per cent in January-October, among the lowest rates in Europe.

The agency maintained Cyprus at a high rating level with potential for further upgrades, recognising the strong economic performance of recent years as well as the favourable prospects despite significant global economic and geopolitical challenges.

Moody’s said Cyprus has strong institutional capacity and effective policymaking with public debt levels on a sustained downward path meaning the government continues to run large fiscal surpluses. According to Moody’s, growth has remained strong, supported by the diversification of the economy.

Tourist arrivals have returned to pre-pandemic levels with revenues hitting all-time highs, while the banking sector’s stability is supported by large capital buffers and sufficient liquidity.

“The stable outlook reflects a balance of risks related to economic, fiscal and debt prospects,” Moody’s said, noting that risk sensitivity is shaped by “banking-sector and political risks,” which the agency considers “contained.”

Although non-performing loans remain in the economy, the number that remain in the banking sector are on a firm downward path and banks “generally display large capital buffers and improved profitability.”

However, Cyprus faces a number of credit challenges, it said, including the small size of the economy. Spending pressures associated with the public sector wage bill and ageing costs are an ongoing risk to the future trajectory of the public finances.

Keravnos said Moody’s maintaining Cyprus’ investment-grade rating of A3 reflects the country’s high level of prosperity and strong growth rates expected to continue in the medium term.

Fitch’s improving the economic outlook from stable to positive is “considered a precursor to a future upgrade, as the positive trajectory of public finances, macroeconomic indicators, and the balance of payments is expected to allow the agency to place Cyprus at a higher level of its investment-grade scale,” Keravnos said.

He added that the government “recognises the seriousness of the challenges within an unstable and difficult international environment marked by geopolitical turbulence, which is why it works in a coordinated and methodical manner to build a resilient economy, a fairer society, and a sustainable future for all.”