Fitch ratings upgrades Cyprus's long-term credit ratings

Europe Materials 12 March 2023 08:54 (UTC +04:00)

Fitch Ratings has upgraded Cyprus' long term foreign-currency issuer default rating by one notch to "BBB" from "BBB-," according to a statement published by Fitch on Saturday, Trend reports citing Xinhua.

The statement said the upgrade reflects the country's fiscal outperformance, improvement in government indebtedness, and macroeconomic resilience, among others.

According to the Fitch analysis, Cyprus' public finances last year turned a 1.7 percent deficit of gross domestic product (GDP) in 2021 to a 2.3 percent surplus in 2022, with its public expenditure declining sharply and revenues rising at a faster pace than nominal GDP growth.

"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," the statement said.

The improvement of nominal GDP growth and the much improved fiscal performances translated into a sharp decline in the government debt to GDP ratio to 86.5 percent in 2022, from 101.1 percent in 2021, Fitch added.

Economic analysts said that the upgrade came as a bonus to the new Cypriot government under President Nicos Christodoulides, who sworn in on Feb. 28.

Former Finance Minister Constantinos Petrides said before leaving office that the expected Fitch's upgrade of Cyprus' ratings to the higher investment level would help the eastern Mediterranean island obtain cheaper borrowing by issuing its first green bond by the end of this year.

The previous government had already decided to raise up to 1 billion euros (1.06 billion U.S. dollars) through the green loan to finance climate-related or special environmental projects.

In addition, Fitch said that as the fallout from the Ukraine conflict continues, the expected slowdown in economic activity will be a drag on Cyprus's economy, resulting in a lower fiscal surplus of 1.8 percent of GDP this year, before growing marginally to 2.0 percent in 2024.