Moody's Investors Service on Friday raised its ratings on the Government of Cyprus by two notches, to Baa2, and changed its outlook on the country to stable from positive.

The ratings upgrade reflects "broad-based, sustained improvements" in Cyprus's credit profile, resulting from past and ongoing economic, fiscal, and banking reforms, according to Moody's. It expects Cyprus's economy to grow by 2.3% this year and 2.8% next year, then to have average growth of 3.2% over 2025 to 2027.

Moody's said its outlook balances the country's positive credit trends against remaining challenges.

The agency also raised Cyprus's local and foreign currency country ceilings to Aa2 from A1.