In a statement published on Friday evening, 4 March 2022, the international credit rating agency Standard and Poor's (SP), confirmed the Republic of Cyprus' creditworthiness at investment grade ("BBB-") as well as the positive outlook in which it had classified the Cyprus economy on (3) September 2021, despite the impact of geopolitical developments from the Ukraine crisis and the ongoing impact due to the coronavirus pandemic.
As SP itself points out, the recording of a positive outlook for the economy reflects the possibility, under certain conditions, for an upgrade of the Cypriot economy's credit rating within the next 24 months.
The main factors that will influence the course of the economy's rating, according to S&P, are fiscal discipline and the consequent reduction of public debt, the maintenance of healthy economic growth rates in the medium term and a further reduction in the amount of non-performing loans in the domestic banking system.
Overall, S&P has given a positive assessment of the government's policies that have led to the improvement in fiscal indicators in 2021 and the performance of the economy in general, alongside the ongoing effort to reduce NPLs that continued during the pandemic period.
Although S&P acknowledges the strong interconnectedness of Cyprus' economy with Russia's economy and the potential negative consequences of the Russian-Ukrainian crisis and the resulting EU sanctions, it takes the view that the resulting consequences will be limited in 2022 and the economy will return to growth in the period 2023-2025.
In summary, S&P's decision contains significant positive points for the Cypriot economy, despite the difficulties created by the wider geopolitical conditions, and shows their confidence in the potential of the Cypriot economy to cope with the challenges it faces. The further improvement in public finances and the ongoing consolidation of the banking sector are expected to lead to further upgrades of the Cypriot economy's credit rating.
(SX)
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