Stable prospects for the Cyprus economy were outlined in the most recent Scope Ratings report, published on Friday.

The credit rating agency said Cyprus showed stable economic fundamentals and one of the highest growth rates in the eurozone.

It projected that the island will see a real GDP growth of 2.8 per cent in 2025, marking a 0.6 per cent moderation from 3.4 per cent in 2024.

However, Scope expects that lower inflation, ongoing infrastructure investments, and further progress in the disbursement of the Recovery and Resilience Fund will contribute positively to the economic climate.

The distribution of the third tranche, amounting to €76.9 million, in April is anticipated to additionally support the economic growth.

In regard to Cyprus’ external position, characterised by large imbalances due to high import needs, the report finds moderate levels of savings, significant repatriation of profits by foreign-owned companies, and remaining vulnerabilities in the banking sector, reflected in a high rate of non-performing loans.

According to the rating agency, Cyprus’ fiscal surplus is expected to reach 3.3 per cent of GDP in 2025, marking a 1.2 per cent decrease from 4.5 per cent in 2024. From 2026 to 2029, the surplus is projected to average 2.1 per cent.

Furthermore, the government’s plan to maintain the primary surplus and adopt a more cautious fiscal policy for controlled spending is highlighted, with a tax reform expected by the end of 2025 that will increase the corporate income tax from 12.5 per cent to 15 per cent, marking a clear shift for businesses.

Scope notes that lower commodity prices could support domestic demand, given Cyprus’ heavy dependency on oil imports.

However, it also stressed that the Cypriot economy was particularly vulnerable to rising global trade tensions, such as the ongoing trade disputes and US tariff actions, which could hurt service exports, particularly in the shipping sector that makes up about 7 per cent of GDP.

With US trade relations limited and mainly focused on commercial services, the report said Cyprus remained particularly reliant on the EU, which accounts for around 20 per cent of its domestic exports and 60 per cent of domestic imports.