The credit rating of the Republic of Cyprus from BBB (Low) to “BBB” was upgraded by the Credit Rating House DBRS Morningstar, at the same time revising the outlook from positive to stable.
DBRS justifies its decision to upgrade the Republic’s credit rating to “BBB”, based on the prudent policy of public debt management, the historically positive performance of the Cypriot government regarding the ability to reduce the budget deficit, the participation of Cyprus in the Eurozone and its favorable business and investment character.
According to the House, the rating upgrade reflects the better-than-expected performance of Cyprus’s finances and public finances in 2021 and the expectation that medium-term conditions remain supportive in trying to reduce Cyprus’s debt, despite the risks posed by the invasion. of Russia in Ukraine and the pandemic.
According to a written statement by the Minister of Finance of Cyprus Konstantinos Petridis, the Cypriot economy exceeded the pre-pandemic level of real GDP in 2021, despite the partial recovery of the tourism sector. Fiscal recovery has progressed much faster than expected in 2021, with the budget deficit shrinking to 1.8% of GDP from 5.6% of GDP in 2020, mainly due to strong revenue growth. The House notes that Cyprus returned to a small primary surplus of 0.1% of GDP in 2021. In this context, the increased public debt ratio of Cyprus decreased from 115.0% of GDP in 2020 to 103.9% of GDP in 2021.
In addition, in the banking system, the Cypriot Ministry of Finance notes, the continuing decline in non-performing loans and the limited impact of the pandemic on the quality of banks’ assets are supporting factors for the upgrade. Improvements in Fiscal Management and Policy, Debt and Liquidity, as well as in Monetary Policy and Financial Stability are key factors for the upgrade.
The government, concludes Mr. Petridis, remains strictly committed to strengthening the fiscal position of Cyprus, promoting sustainable recovery and the long-term stability of the Cypriot economy.