Moody’s has kept Cyprus’ credit rating unchanged at A3 and its outlook stable, in its periodic review published on 29 May, something that has been welcomed by both President Nikos Christodoulides and Finance Minister Makis Keravnos.
Christodoulides said Moody’s assessment of the Cypriot economy recognises an economic strategy that is delivering results in practice, noting that the development has clear political and economic significance for Cyprus.
In a written statement, the President welcomed Moody’s latest assessment of the Cypriot economy, saying that at a time when the global economy is being tested by uncertainty, geopolitical tensions and continuous pressures, Cyprus is assessed as an economy with credibility, resilience and prospects.
He said Moody’s reference to strong institutional governance and effective policymaking confirms the soundness of the economic strategy being followed.
President Christodoulides said that from the first day of his administration, the priorities set were fiscal responsibility, stability, the reduction of public debt, the strengthening of growth momentum and the creation of real benefits for citizens.
“The results confirm that this course is correct, effective and internationally recognised,” he said.
According to the President, the development strengthens the credibility of the Republic of Cyprus, supports the confidence of markets and investors, helps protect the economy from external risks and creates greater scope for targeted social policy.
He added that this includes support for the middle class and the strengthening of households, workers, young people and businesses.
“We continue with the same seriousness, with a specific plan and a clear direction,” he said, adding that the aim is “to safeguard what we have achieved, further strengthen the resilience of our economy and turn every positive result into more security, more opportunities and better prospects for citizens and society.”
“Cyprus comes above all,” the President concluded.
Keravnos: The assessment confirms the resilience of the Cypriot economy
Finance Minister Makis Keravnos said the assessment confirms the resilience of the Cypriot economy, noting that sound, strict and preventive fiscal policy must continue “with consistency and responsibility.”
According to the Ministry, Moody’s said the rating reflects Cyprus’ strong economic resilience and positive medium-term growth prospects, despite an expected short-term slowdown due to risks stemming from the conflict in the Middle East, with possible effects on tourism and inflation.
The Ministry said the agency also pointed to Cyprus’ strong institutional capacity and effective policymaking, while public debt continues to decline steadily and debt sustainability indicators remain strong.
Growth has been in line with Moody’s projections, supported by the continued diversification of the economy, while the banking sector is backed by strong capital adequacy and improved profitability, the announcement added.
At the same time, the Ministry said Moody’s noted a number of challenges, including the small size of the economy, fiscal spending pressures, the impact of the conflict in the Middle East on growth and risks in the banking sector. Although these risks have been gradually easing due to structural improvements, they remain a key source of potential sudden developments.
According to the Ministry, further upgrades could follow if fiscal performance and public debt indicators exceed Moody’s expectations and if medium-term growth proves stronger than forecast, including through public and private investment and improved labour market conditions.
Conversely, negative deviations from Moody’s fiscal and debt projections, affecting the downward path of public debt, could put Cyprus’ ratings under downward pressure.
In a written statement, Keravnos said the Government agrees with and takes seriously Moody’s remarks on the challenges arising from ongoing negative geopolitical developments.
“As a Government, we are well aware of the enormous efforts being made as part of our rational economic policy to preserve the resilience of our economy and secure the positive assessments that place the Republic of Cyprus’ borrowing capacity in investment grade,” he said.
He added that the Government also knows that “even greater effort is needed” to maintain positive ratings.
“Therefore, sound, strict and preventive fiscal policy must continue with consistency and responsibility,” the Finance Minister concluded.
(Source: CNA)
