President Nikos Christodoulides has said on that the affirmation by Standard & Poor’s of the Republic of Cyprus’ A rating grade, with a positive outlook was another strong vote of confidence in the country's economy, especially in a time of intense geopolitical instability in the wider region.
In a post on X, President Christodoulides said that “in an international environment of uncertainty”, it is recognised that Cyprus’ economy is based on solid and healthy foundations and has the resilience to manage challenges, “as a result of its commitment to fiscal responsibility and the implementation of a rational economic policy”.
“We continue with consistency and the same sense of responsibility, strengthening an economy that endures, adapts, and moves forward, always for the benefit of citizens”, he said.
Finance Minister Makis Keravnos has also welcomed the latest S&P assessment on the country’s economy as an independent confirmation of the government’s prudent economic policy.
In a written statement, the Finance Minister said that the assessment, conducted “under conditions of instability in the economic and geopolitical environment, caused by ongoing wars, with potential risks to our economy”, was “a separate and independent confirmation of the government’s prudent economic policy”.
He noted that Cyprus’ economic policy is based on fiscal discipline, the reduction of public debt, and a balanced growth strategy that supports businesses and households, creating a favourable climate for investment.
Keravnos expressed satisfaction that S&P has maintained the Republic of Cyprus’ rating at investment grade A-, with a positive outlook, sending the message that the country is a pillar of security and stability. “We look forward to welcoming our tourists and visitors to a safe European Cyprus”, he concluded.
S&P maintains Cyprus at a high rating level, Finance Ministry says
In a separate press release, commenting on S&P’s decision to keep the Republic of Cyprus at A- with a positive outlook, the Ministry of Finance said that the credit rating agency keeps Cyprus at a high rating level, with prospects for further upgrades despite the significant challenges in the international geopolitical and economic landscape, “thus demonstrating its confidence in the ability of the Cypriot state to manage crises and in the strong performance of the economy.”
This move in a broader environment of instability and volatility, it added, “sows that the agency believes the fundamental indicators of the Cypriot economy remain sound, and that despite the impacts of the war in the Middle East, the positive trajectory of recent years is expected to continue as conditions normalise”.
“This confidence stems from a commitment to fiscal discipline and the rational economic policies being implemented, as well as from the successful management of crises such as the COVID-19 pandemic and the initial phase of the Russia-Ukraine war”, it said, among other things.
S&P affirms A- ratings on Cyprus with “positive outlook”
Standard & Poor's credit rating agency affirmed its 'A-/A-2' long- and short-term ratings on Cyprus with “a positive outlook”, noting that it expects the country’s economy to withstand the effects of the current conflict in the Middle East.
The positive outlook reflects the S&P’s view that Cyprus’ external performance could outperform their forecast over the next two years due to a faster pace of decline in the economy’s external leverage, even against the uncertainties raised by the ongoing conflict in the Middle East, the agency said.
Cyprus’ economy continues to deleverage, as its external debt position keeps improving while government debt, as a percentage of GDP, continues to steeply fall, it said.
It also noted that Cyprus’ previously high stock of external debt has declined sharply over recent years, “thanks to strong services exports and FDI inflows, which have outweighed primary income outflows”. At the same time, it added, government debt continues to fall both as a percentage of GDP and in absolute terms, supported by strong economic growth, robust tax revenue, and controlled spending.
“We project fiscal surpluses averaging over 3% of GDP through 2029, reducing net general government debt to slightly above 30% of GDP over the same period”, the agency said. “We anticipate domestic demand will increasingly drive growth, boosted by a strong labor market, rising incomes, and significant public and private investment, including New Generation EU (NGEU) funds”, it also said.
The agency also note that, given Cyprus’ sustained external and fiscal deleveraging, alongside its substantial economic expansion, it expects the economy to withstand the effects of the current conflict in the Middle East. “We anticipate potential impacts including a temporary slowdown in growth--particularly in tourism and shipping--higher inflation driven by rising energy prices, and a widening current account deficit this year due to Cyprus’ reliance on energy imports”, it said. The extent of these effects will depend heavily on the conflict’s duration and intensity, it added.
The agency projects Cyprus' economy to expand by about 2.8% this year, despite the conflict in the Middle East, as domestic demand will become a more prominent driver of growth, with private consumption benefiting from higher real wages and private investment supplemented by public investments financed by NGEU funds.
“Energy prices represent the main pressure point for Cyprus’ economy in the current geopolitical situation as the country is highly dependent on oil imports”, it said, noting that Cyprus’ energy costs “are among the highest in the EU, while its share of renewable generation in the energy mix is among the lowest”.
“The completion of a long-delayed liquefied natural gas (LNG) terminal, currently under construction, could help mitigate medium-term energy risks, while gas extraction in neighboring waters remains a long-term aspiration”, the agency also said.
It also noted that Cyprus has delivered “exceptional” budgetary performance in recent years, and it anticipates continued strong surpluses.
Cyprus’ institutional arrangements remain comparatively strong; the government remains committed to prudent management of public finances, with one of the fastest rates of decline in net general government debt in Europe in recent years, it also said.
(Source: CNA)
