Moody’s raises Cyprus’ outlook to positive

The Moody’s rating agency on Saturday increased the Cypriot government’s outlook from stable to positive.

The decision to improve the outlook reflects Moody’s confidence in the potential for strong fiscal and debt performance in Cyprus over the next few years. According to Moody’s, this optimistic scenario is expected to result from continued prudent fiscal policy and good medium-term economic growth prospects.

Moreover, upward pressure on ratings may be further supported by increased confidence in the strengthening and deleveraging of the Cypriot banking sector, which has reduced the country’s vulnerability to banking sector risks and is expected to support strong growth and solid fiscal outcomes.

Moody’s expects Cyprus to continue to achieve significant fiscal surplusesforecasted at approx. 2.3–2.4 percent. GDP for 2024-25, although slightly lower than the government forecast of 2.8-2.9%. GDP.

These surpluses are expected to further reduce debt to below 65 percent of GDP by 2025. Moody’s assesses that risks to the fiscal and debt outlook are biased toward more favorable outcomes.

When asked about the modernization, President Nikos Christodoulides said it was a significant achievement. He expressed the view that he recognized the government’s approach to overall economic policy, which could be summarized by responsible fiscal policy, a sound financial system and continuous and bold reforms.

“Within this framework, we will continue to have a strong economy that will allow us – because this is our main goal – to pursue targeted social policy for all our fellow citizens whom we should help,” he said. He added that a strong economy will also enable policies to be pursued in the areas of health and education, which are the government’s priorities.

In his comments, Finance Minister Makis Keravnos said the government will continue to support economic activity responsibly in light of the challenges posed by geopolitical developments and changes in the energy sector, ensuring economic growth and employment while maintaining sound public finances.

“Moody’s decision to change the outlook to positive is based on the prospect of continued fiscal resilience and a downward trend in public debt in the coming years,” Keravnos said. According to him, “such a scenario could materialize by continuing prudent fiscal policy with prospects for solid economic growth.”

He added that further boosting confidence by strengthening and deleveraging the banking sector would contribute to improved economic growth and fiscal performance, strengthening the prospects for improved credit ratings by Moody’s. “The government will continue to responsibly support economic activity in light of the challenges posed by geopolitical developments and changes in the energy sector, ensuring growth and employment while maintaining sound public finances,” he concluded.