Filenews 14 December 2024
The international credit rating agency "Standard & Poor's" announced on Friday, December 13, 2024 the upgrade of the credit rating of the Republic of Cyprus to "A-" from "BBB+", bringing the outlook to a Stable Outlook. The decision is based on the continued outperformance of the Cypriot economy, despite heightened geopolitical tensions, and recognises the dynamics of the Cypriot economy, the reduction of public debt and the strengthening of banks' financial position.
Reasons for the upgrade
The upgrade is attributed to the strong rate of economic growth, boosted by the inflow of workers and capital into the Cypriot economy, and to the substantial reduction of public debt. The rating agency estimates that the government is on track to achieve a fiscal surplus for the third consecutive year. Moreover, the stable outlook reflects the balance of risks, with geopolitical tensions posing a challenge but also the growing resilience of the economy limiting fiscal vulnerabilities.
Prospects and challenges
The agency underlines that factors that could lead to further upgrading include:
Reduction of the current account deficit and external debt.
Further contraction of public debt beyond expectations.
Conversely, a potential downgrade could result from prolonged geopolitical effects or a slowdown in structural reforms, which could affect access to European funds.
Future prospects
The Cypriot economy is expected to grow at a medium-term growth rate of 3% over the period 2025-2027, supported by investment, private consumption and the successful implementation of structural reforms under the Recovery and Resilience Plan. We see a healthy labour market and targeted government policies as important tools to sustain growth.
Government Commitment
The government, recognizing the challenges posed by geopolitical developments, is committed to promoting economic growth and maintaining employment through responsible management of public finances. Through flexible and targeted measures, it seeks to make maximum use of European programmes, with an emphasis on financial support through the Recovery and Resilience Plan.
