The ratings indicate a stable trend which highlight the agency’s view that while the Cypriot economy continues to perform successfully, there is also the need for further progress to ensure financial stability and minimize risks.

The country’s real GDP growth was 3.9% in 2018, among the strongest in the Euro area, and the predicted to be at 3.6% in 2019. Cyprus has made significant progress in reducing vulnerabilities in the banking sector, efforts which are shown through the liquidation of Cyprus Cooperative Bank and the banks’ sale of non-performing exposures (NPEs).

The BBB (low) rating is also supported by the country’s solid budget position, its prudent public debt management framework, its Eurozone membership fostering sustainable macroeconomic policies and its openness to investment encouraging a favourable business environment.

DBRS also noted: “Nevertheless, Cyprus also faces significant credit challenges related to still sizable NPEs in the banking sector, high levels of private and public sector debt, external imbalances, and the small size of its service-driven economy, which exposes Cyprus to adverse changes in external demand.”