The country’s ratings, the agency said in a statement, reflect per‑capita income levels above the A‑category average, strong fiscal performance and policy credibility supported by membership of the European Union and the euro area.
These strengths, it noted, are offset by slightly weaker governance indicators compared with other countries, vulnerabilities in the external economy and a backdrop of regional political tensions linked to the division of the island.
The positive outlook is driven by continued debt deleveraging and favourable growth prospects that enhance fiscal and external resilience.
As Fitch pointed out, the war in Iran and its impact on energy prices pose a challenge for Cyprus, affecting growth, inflation and the external balance.
Cyprus is more exposed than other EU countries, the agency said, given its geographical location and energy situation, although at present the impact on credit metrics is assessed as moderate and temporary.
Nevertheless, it warned that an escalation or prolongation of the conflict could lead to higher risks, particularly if it further weighs on tourism, trade and investment.
Following a strong performance in 2025 (3.8%), GDP growth is expected to slow to an average of 2.6% in 2026–2027. Private consumption is forecast to weaken as inflation rises and financing conditions become tighter.
The vulnerable sectors
Fitch notes that services sectors, particularly tourism and real estate, remain vulnerable to changes in external demand - as already indicated by hotel booking data for March and April - affecting GDP and potentially employment.
However, the agency said Cyprus has seen a rapid shift over the past decade away from tourism towards higher value‑added services, mainly information technology, which now account for the largest share of gross value added in the services sector. This diversification strengthens growth resilience and supports continued productivity gains.
The agency estimates that harmonised inflation will rise to 3.9% in 2026, from 0.8% in 2025, before easing towards 2% thereafter. It added that Cyprus’s fiscal performance continues to outperform the euro area and A‑rated peers, supported by a strong commitment to sound public finances and a favourable macroeconomic framework.
Vote of confidence
The confirmation of Cyprus’s rating by Fitch constitutes another strong vote of confidence in the country’s economic trajectory, President Nikos Christodoulides said in a post on platform X.
Finance Minister Makis Keravnos said the report is yet another distinct and independent confirmation of the government’s prudent economic policy, which ensures stability and the continued growth of the Cypriot economy.
