Moody’s keeps Cyprus rating at A3 despite rising fiscal risks

International ratings agency Moody’s has confirmed Cyprus’s sovereign credit rating at A3 with a stable outlook, noting the resilience of the country’s economy and its high growth rates. The decision was taken following a scheduled review by the ratings committee on 21 May 2026.

The agency emphasized that the Cypriot economy continues to perform well thanks to the population’s high level of wealth and effective government policy. According to Moody’s, economic growth is expected to remain sustainable in the medium term, although in the coming years it may be affected by external factors, including tensions in the Middle East, which are putting pressure on the tourism sector and inflation.

At the same time, analysts drew attention to a number of structural challenges that could complicate the state’s financial situation in the future.

An additional burden on the budget will be adapting to the consequences of climate change. Estimates suggest that total costs in this area could reach 3.4 billion euros by 2035.

Despite these risks, Moody’s believes that Cyprus has sufficient institutional capacity to manage emerging challenges. The agency notes that although the republic’s economy is relatively small and more vulnerable to external shocks than that of larger states, the effectiveness of decision-making and the stability of state institutions remain its strengths.

Maintaining the rating at investment grade confirms international market confidence in Cyprus’s financial stability, but, according to experts, the authorities must take into account the growing pressure on public spending in the long term.