Cyprus’ public finances remain on a strong footing, with German rating agency Scope projecting public debt will fall below 60 per cent of GDP this year and under 50 per cent in the following years.  

In its report, shared by Cypriot daily Politis, the agency said that it kept the country’s credit profile at A- with a stable outlook, citing robust fiscal indicators, a historically high primary surplus and the continued reduction of non-performing loans (NPLs).

GDP grew by 3.3 per cent year-on-year in the second quarter of 2025, making Cyprus the second-fastest growing economy in the eurozone after Ireland.  

Scope forecasts growth of around 3 per cent annually through 2030, despite weaker euro area activity and higher US tariffs. 

Fiscal performance remains solid. After posting a record general government surplus of 4.3 per cent of GDP in 2024, the cash balance for the first seven months of 2025 reached €840.6 million, 2.4 per cent of GDP.

Moreover, Scope expects a full-year surplus of about 3.5 per cent, supported by rising social security contributions and income and wealth taxes.

Public debt fell to 65 per cent of GDP in 2024, down nearly 49 percentage points from its 2020 peak, with Scope analysts Carlo Capuano and Alessandra Poli noting that further declines are likely given fiscal discipline and growth momentum.  

High cash reserves, estimated at 11 per cent of GDP at the end of 2024, provide additional flexibility. 

Revenue growth has been buoyant, with social security contributions up 9.2 per cent and income and wealth taxes up 8.8 per cent in the first seven months.  

 However, spending pressures are building, with government wage costs and social transfers both rising by nearly 7 per cent, raising concerns about long-term budget flexibility. 

The planned tax reform, aimed at easing the burden on the middle class and combating evasion, may not be fiscally neutral.  

Scope foresees the fiscal balance gradually easing but staying just below 1 per cent of GDP by 2030, still among the strongest in the euro area. 

In the banking sector, asset quality continues to improve. The NPL ratio dropped to 5.9 per cent in May 2025, down 1.5 points year-on-year, with coverage rising to 61 per cent.

However, household NPLs remain higher at 7.6 per cent, combined with still-elevated private debt.

The countercyclical capital buffer will be activated in 2026, strengthening already high bank capital levels. 

Scope cautioned that external risks, including subdued eurozone growth and rising trade tensions, could weigh on the outlook.  

Nevertheless, it expects steady expansion of around 3 per cent through the decade and a gradual convergence of NPLs towards the EU average of about 2 per cent. 

The next review of Cyprus’s sovereign rating by Scope is scheduled for October 10, 2025.