S&P Global Ratings upgraded the credit rating of the Republic of Cyprus from "A-" to "A", while maintaining the positive outlook, with Cyprus returning to "A" rating for the first time since 2010, according to a statement from the Ministry of Finance.
It is added that "this upgrade is taking place at a time when the international environment is characterized by intense geopolitical uncertainties, which exert significant pressures on economies worldwide and have serious economic and social consequences. S&P's decision reflects its confidence in the strong fundamentals of the Cypriot economy, as well as in its resilience to the effects of the adverse international environment."
The main points of the S&P announcement are:
a) It is expected that economic growth will continue unless there is a significant deterioration in the situation in the Middle East. Economic growth is expected to be limited (compared to the recent past) to 2.7%, a number lower than in recent years but which will continue to be high compared to other European countries, while the recording of budget surpluses is also expected to continue.
b) The large reduction in public debt is projected to continue, with public debt projected to be reduced to just over 30% by 2029.
c) The satisfactory level of governance of the economy and the commitment of the Republic of Cyprus to prudent fiscal policy;
d) It is expected that the very positive situation in the labour market as well as the continuation of private investment (foreign and domestic) will increase domestic demand with positive results for the economy.
e) The current account deficit is projected to be close to 7% for the period 2027-2029. Despite its size, S&P believes it is manageable.
In addition to the developments related to the war, S&P points out the following key factors that may affect, positively or negatively, the future course of the credit rating of the Republic of Cyprus:
a) Significant external shock (expansion of the war in the Middle East) – Negative
b) The course of public finances, Negative or Positive
c) Greater reduction of the Public Debt, Positive
c) The continued inflow of foreign direct investment into the economy
This upgrade is a very positive signal to international markets, for the following reasons:
a) In such a negative environment, Cyprus is not only being upgraded, but further expectations for subsequent upgrades remain strong as the positive outlook is maintained, which means that if the company's forecasts are realized, there may be an upgrade within the next 12 months.
b) The Republic of Cyprus returned to grade A for the first time since 2010, having thus practically fully recovered from the consequences of the financial crisis of 2011-2013, while it is only one notch below the historically highest grade it has ever had (A+) than the S&P.
The continued commitment to fiscal discipline and sound economic choices has already borne fruit and is expected to yield more in the future.
In a written statement, Finance Minister Makis Keravnos welcomed the upgrade, noting that Cyprus rises one notch higher in the investment category and further strengthens its credibility in international markets.
"The upgrade of the credit rating of the Republic of Cyprus by the S&Ps, in a period of great instability and uncertainty, while conflicts and geopolitical negative developments continue, acquires particular importance and importance for the prospects of the Cypriot economy. The balanced and growth-oriented economic policy followed by the government, which ensures resilience and strengthens the fundamentals of the Cypriot economy, is recognized in practice by the upgrade of its credit rating by S&P," the minister adds.
The maintenance of the "positive outlook" in the assessment of the Cypriot economy by the Agency, as it continues, is particularly important and confirms the forecasts for the continued growth of the economy.
''The government will continue to consistently implement its prudent, growth-oriented and socially sensitive economic policy that ensures in the most effective way the resilience and growth of the economy along with surplus budgets and the continuation of the reduction of public debt, thus strengthening the ability of the state to respond to the challenges. The government's priority is for the benefits of the good course of the economy to reach our households and businesses, and through a targeted social policy to effectively support our most vulnerable fellow citizens," he concludes.
