Fitch upgrades Cyprus to A on rapid debt reduction and keeps Greece at BBB

Fitch Ratings upgraded Cyprus to ‘A’ with a stable outlook^2,4. The agency cited rapid debt reduction⁶ and the strength of the country’s public finances³, raising the rating on declining debt¹.

Cyprus’s finance minister, Makis Keravnos, said in a statement that the upgrade took the rating from “A-” to “A”, with the outlook revised from positive to stable⁹. The president welcomed the upgrade, saying: “The government will continue to implement its prudent fiscal policy”⁸.

Fitch also affirmed Greece at ‘BBB’ with a stable outlook^10,11,12.

Why it matters to investors

The upgrade is a vote of confidence in the Cypriot budget, but the external accounts remain the weak spot. Fitch expects the current account deficit to average 8.1% of GDP in 2026 to 2028¹, and to remain large over that period⁴. The trade deficit is affected by higher energy costs⁴.

Revised figures increased the 2025 current account deficit by €870 million to €3.21 billion³. Fitch expects the deficit to remain high but manageable and inflationary pressures to ease in the coming years⁶. The Ministry of Finance gave the same reading in its own announcement, describing a deficit expected to remain high but manageable alongside an expected easing of inflationary pressures⁵. Fitch said short-term risks center on inflation¹.

On the domestic side, Fitch described a solid labor market with record high participation rates². Cyprus secures a higher sovereign credit rating on the back of strong public finances⁷.

For Greece, the affirmation leaves the rating unchanged. Fitch noted that the implicit interest rate on the Greek debt stock remains low at about 1.5%, below expected nominal GDP growth¹⁰. External imbalances remain a concern¹³.

What to watch

For Cyprus, the path of the current account deficit and energy costs will test whether the stable outlook holds^1,4. The government has pledged to keep a prudent fiscal policy⁸, and the finance ministry is counting on easing inflation⁵.

For Greece, the focus is on whether external imbalances narrow¹³ while the low interest burden on its debt persists¹⁰. Fitch keeps the BBB rating while those imbalances remain a concern^12,13.

Both decisions bear on the pricing of Cypriot and Greek government debt, with Cyprus now rated ‘A’^2,7 and Greece held at ‘BBB’^10,11.