Cyprus Mail 23 April 2020 -by Staff Reporter
Cyprus is in the top three European countries facing the greatest external risks to its economy from the aftermath of the coronavirus pandemic, Scope Ratings said on Wednesday.
Among 63 economies, Taiwan, China and Switzerland were 2020’s “Sturdy-3”, heading up the least vulnerable to external shocks.
Inside the EU, Scope found that Cyprus’ (BBB-/Stable), Croatia’s (BBB-/Stable) and Romania (BBB-/Negative) were the three EU member states facing the greatest external risk.
“Cyprus leads the EU risky-3,” it said, explaining that the island’s current account deficit widened to 6.7 per cent of GDP in 2019, from 4.4 per cent of GDP in 2018. The economy’s external position is characterised by high deficits in its trade in goods (21.5 per cent of GDP in 2019), offset by very high surpluses in services trade (21.3 per cent of GDP), the latter due to Cyprus’ standing in tourism services and as a financial services hub.
Scope’s said that special purpose entities (SPEs) in Cyprus considerably distort the economy’s external position while having limited links to real economic activity.
“Importantly, Cyprus benefits from euro area membership, unlike in the cases of peers in the 2020 EU risky-3: Croatia and Romania, giving Cyprus access to credit strengths in crisis moments such as reduced FX volatility and capped borrowing rates deriving from the common reserve currency,” the agency said.
