Berlin-based credit rating agency Scope on Saturday announced that it had upgraded Cyprus’ long-term credit rating from ‘A-’ to ‘A’.

In justifying its decision, it cited a “significant reduction” of Cyprus’ public debt, “sustainable financial surpluses”, and “improved banking sector resilience”.

It said that “strong fiscal performance and economic growth” had led to that reduction of public debt, which fell to 55.4 per cent of the island’s gross domestic product last year from a high of 113.6 per cent in 2020.

Additionally, it said, that figure is expected to fall further, and has been forecast to fall below 40 per cent of GDP by the end of the decade.

It also pointed out that the island’s banking sector “is strengthening”, with a “continued reduction of non-performing loans”.

On the matter of public finances, it stated that the island has “strong” corporate tax revenues, which have been bolstered by technology companies electing to relocate to Cyprus, and a “resilient” labour market.

It highlighted the fact that the government recorded a budget surplus of 4.1 per cent in 2024 and a surplus of 3.3 per cent last year, “despite expenditures”, including those related to the wildfires which tore through the Limassol district last July.

It did note that the government’s recent sweeping reforms to the tax system “create uncertainty about the medium-term fiscal impact”, but remains reassured that budget surpluses will continue through 2030.

Going forward, it said, Cyprus’ main “fiscal risks” concern increased spending needs due to climate adaptation, infrastructure, defence, and the island’s ageing population, though it said that “the country’s strong fiscal position offers room to cope with potential economic pressures”.

It said to this end that the GDP “maintains strong growth rates”, hitting a rate of 3.5 per cent last year, and that this growth is driven by “private consumption”, which in turn “increases real wages and investment”.

Additionally, it pointed out that the island’s unemployment rate of 4.3 per cent is “the lowest level in two decades”, and that its inflation rate remains at a low rate of 0.8 per cent.

Meanwhile, it said, medium-term growth is “estimated to remain close to three per cent” year-on-year, with this growth “supported by private investment and the tourism and technology centres”.

It also made reference to “external risks”, stating that Cyprus’ assessment is “limited by the small and open nature” of its economy, as well as “structural vulnerabilities in its banking sector”.

Nonetheless, it did say that the economy has thus far only seen a “limited” impact from tariffs levied by United States President Donald Trump, given the fact that most Cypriot imports in the modern era are services.

However, it stated that “possible impacts are expected to arise mainly through weaker demand from European economies”.

President Nikos Christodoulides offered a brief reaction to the upgrade in a post on social media, writing that “we are continuing with the same responsibility”.

Finance Minister Makis Keravnos, meanwhile, said the upgrade “reflects not only the creditworthiness of the Republic of Cyprus in international markets, but also the dynamism of the Cypriot economy”.

“The government will continue with the same consistency to implement its economic policy, which leads to continuous stable and sustainable growth, guided by fiscal discipline and financial stability, focusing on the continuous reduction of public debt as a percentage of GDP,” he said.

He added that this “allows for the development of important initiatives to substantially support the public, and especially underprivileged social classes, through sensitive economic policies”.