Fitch raises Cyprus' credit rating by a notch to BBB+ thanks to resilient economy, fiscal discipline (2024)

NICOSIA, Cyprus (AP) — The Fitch agency said Saturday it has raised Cyprus’ credit rating by a notch to BBB+.

It cited the country’s heightened ability to withstand financial shocks, the government’s commitment to keeping its finances in order and a strengthened banking sector thanks in part to the lowest bad loan ratio since the global financial crisis.

Fitch said in a statement that it also lists the island nation’s outlook as positive.

The agency said household and corporate debt in Cyprus continued to fall last year, coming very close to the European Union average. It also pointed to the country’s “very strong fiscal performance” in the last two years, with a primary surplus to reach 4.5%, which it called “by far the highest” among countries that use the euro as their currency.

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Public debt is expected to fall to 70.6% of gross domestic product this year and to 65.1% in 2025 thanks to high growth and large budget surpluses. Although the Cyprus’ debt level is still relatively high, the government has managed to reduce it “at one of the sharpest rates in the eurozone” and among other countries that the agency rates.

Other factors for the upgrade include relatively high income per capita and credible policies backed by the European Union and the eurozone.

Cyprus’ economic growth accelerated this year, and Fitch projects overall growth to reach 3% this year and 2025.

Fitch did note a large current account deficit due to low savings relative to investment and warned that ratings could change if there was a “structural fiscal loosening.”

A 2013 financial crisis forced Cyprus to seek a multibillion-euro bailout from its eurozone partners and the IMF that included a seizure of savings over 100,000 euros in the country’s largest bank and the shuttering of its second biggest bank. The seized deposits were used to prop up Cyprus’ ailing banking sector.

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