Finance Minister Makis Keravnos on Saturday hailed rating agency Morningstar DBRS’ decision to give Cyprus a credit rating of BBB (high) and upgrade the island’s outlook from “stable” to “positive”.
Reacting to the news, he said the government “will continue to … promote the appropriate financial plans which will allow the maximum possible utilisation of all the opportunities offered for the continued development of the economy while reducing the public debt.”
Morningstar DBRS based their assessment of Cyprus on the reduction of its public debt, with the country’s public debt as a percentage of gross domestic product (GDP) falling from 99.3 per cent in 2021 to 77.4 per cent in 2023.
On Friday, he had said public debt currently stands at 69.3 per cent of Cyprus’ GDP, and is forecast to fall to 64.2 per cent by the end of 2025.
On Saturday, he said Cyprus’ economic growth is, according to Morningstar DBRS, “likely to continue to benefit from strong private consumption, rising services exports, and strong construction investment in the coming years”.
He added that these “favourable developments” in terms of growth, as well as the related predicted drop in the island’s unemployment rate from five per cent to 4.8 per cent in 2025, “are expected to boost tax revenues and social security contributions”.
To this end, he said continued growth in the government’s revenue “has been a key driver of fiscal surpluses in recent years.
In the first seven months of 2024, the government’s general revenue increased by 14.2 per cent compared to the same period last year, due to increased income tax revenues and social security contributions.
Keravnos said this figure “clearly outstripped the increase in public spending”, which stood at 9.4 per cent over the same period.
He said Morningstar DBRS believes Cyprus’ public finances “are likely to continue to benefit from strong, albeit decelerating revenue growth, which will offset modest spending pressures from rising government wages, and spending related to ageing.”
The ratings upgrade came just hours after Keravnos had announced that cabinet had approved the state budget for 2025 and the government’s medium-term fiscal framework for the three years between 2025 and 2027.
He said the budget and medium-term fiscal framework “have as their main priorities the maintenance of a budget surplus, the restraint of public sector employment, the reduction of public debt, and the promotion of the green transition and digital transformation.”
This, he said, will be done with the aim of “creating conditions for sustainable growth in key sectors of the economy and maintaining a sound financial system.”
