Moody’s analyst points out sustained improvement in Cyprus’ credit profile
07:52 - 08 February 2024
Sustained improvements in the Cypriot economy, as well as better performance compared to countries with similar categorisation to Cyprus, have been highlighted by Haiko Peters, Vice President and Senior Analyst at Moody's Sovereign Risk Group.
Peters was speaking during a webinar panel discussion hosted by the Cyprus Economic Society.
He also said that further growth of the Cypriot economy was expected for the years 2024-25.
During his presentation, he noted that the Cypriot economy was upgraded by two notches last September by Moody's to the Baa2 category. He referred to sustained improvements in Cyprus' credit profile, such as robust medium term GDP growth and resilience to recent economic shocks, steady reduction in debt levels, and continuous strengthening of the banking sector.
He pointed out that Cyprus recovered faster than other Southern EU countries such as Greece, Portugal, Spain, and Italy from the pandemic shock, while tourism revenues surpassed pre-pandemic levels in 2023.
He also said that potential growth prospects materially strengthened from the period of economic recession, driven by total labour hours, productivity, and capital accumulation.
He also mentioned that EU funding through the Recovery and Resilience Facility, amounting to 4% of GDP for Cyprus, would support potential growth and encourage structural reforms.
He also mentioned that the demographic trends in Cyprus and the labour supply are more favourable compared to the euro area as well as countries in southern Europe. He noted that the ongoing increase in the employment rate had a positive impact on the labour supply.
At the same time, Peters noted that Cyprus had one of the largest reductions in its debt burden among advanced economies and that public debt is affordable.
Cyprus, he also said, is among the few countries rated Baa2 by Moody's for which a fiscal surplus is forecasted for 2024-25, while the debt burden has decreased rapidly compared to the country’s peers despite starting from a higher point.
Responding to questions about sectors expected to grow, he referred to financial services, information and communication technologies (ICT), transportation, and tourism for which, as he said a moderate growth was expected.
Although he did not refer to any direct risks to the economy, he said that Cyprus would be affected by an expansion of the conflict in the Middle East and possibly changes in immigration and interest rate environments.