Cyprus upgraded to BBB by Fitch

Fitch Ratings, an international leading provider of credit ratings, commentary and research for global capital markets, has upgraded Cyprus’ long-term Credit Rating to BBB, from BBB-, with a stable outlook.

The upgrade reflects the outperformance of Cyprus’ fiscal balance and growth rate, as well as the resilience of the local economy to the external shocks triggered by the war in Ukraine.

Quoting the Fitch Ratings rating action commentary, “Public finances improved significantly last year, with the general government balance turning from a deficit of 1.7% of GDP in 2021 to a surplus of 2.3%, much higher than Fitch’s forecast of a small deficit at the previous review in September 2022. Public expenditure/GDP declined sharply, as Covid-19 support measures were discontinued, while revenues rose at a faster pace than nominal GDP. The improving public finance trends more than offset the impact of support measures to business and households to counter the impact of high energy prices.”

Further, the rating action commentary sates: “Real GDP expanded by 5.6% in 2022 (above our forecast of 4.7% last September), as tourism expenditure reached above 90% of its 2019 level, despite the absence of tourists from Russia for most of the year.”

In the relevant announcement by the Press Office, the Ministry of Finance of the Republic of Cyprus added: “In summary, Fitch’s announcement contains many positive points for the Cypriot economy despite the problems created by the wider geopolitical conditions and recognizes its resilience and the ability of the Cypriot economy to cope with the challenges presented. The continued improvement of the state’s fiscal position and the continued consolidation of the banking sector are the two key areas critical for achieving further upgrades.”

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