Finance Minister Makis Keravnos welcomed the decision by the international rating agency Morningstar DBRS to maintain the Republic of Cyprus’s long-term credit rating at the “A” investment grade and to significantly upgrade the outlook from “Stable” to “Positive” by the international rating agency Morningstar DBRS.
In a written statement, Mr. Keravnos noted that this development “is yet another confirmation of the resilience demonstrated by the Cypriot economy amid a period of ongoing instability for the global economy, fraught with challenges and risks.”
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“It is particularly important that the agency affirms the prudent and proactive economic policy pursued by the government, which is continuously strengthening the Republic of Cyprus’s economic position and leading to a steady reduction in public debt,” the Minister noted.
At the same time, he emphasized that Morningstar DBRS “bases its very positive conclusions on the fact that, the Republic of Cyprus has substantial fiscal reserves that enable it to effectively address potential risks arising from international geopolitical developments in the short term.”
Mr. Keravnos further stated that the government “will continue to support the economy in a responsible and flexible manner, both in terms of growth and employment, as well as public finances,” with the aim of “making the most of all available opportunities for sustained economic growth while simultaneously reducing public debt.”
Furthermore, the Ministry of Finance, in a statement, noted that the fact that the rating agency Morningstar DBRS has affirmed the Republic of Cyprus’s long-term credit rating at “A” and revised the outlook from “Stable” to “Positive,” “constitutes a significant affirmation of the resilience and positive outlook of the Cypriot economy in an international environment marked by heightened uncertainty and geopolitical challenges.”
The Ministry notes that, according to Morningstar DBRS, the decision is based primarily on the expectation that the Republic of Cyprus will maintain its strong fiscal position and continue the steady reduction of public debt, with the debt-to-GDP ratio projected to fall below 40% by 2029. Furthermore, the rating is supported by favorable growth prospects and significant structural fiscal surpluses.
According to the Ministry, the Republic of Cyprus’s rating is supported by strong institutions, EU membership, a stable political environment, and effective fiscal and economic policies. The small size of the economy and low productivity are cited as negative factors.
It is noted that in its assessment, Morningstar DBRS also took into account the limited negative impact of the war in the Middle East, the strong fiscal performance over the past two years, the ongoing and significant reduction in public debt, the banking sector’s substantial capital and liquidity positions, as well as the improvement in the quality of its assets, the effects of special-purpose entities and foreign-owned companies on the national accounts, and the stable political and institutional environment.
The Ministry of Finance notes that the improvement in the outlook for the Republic of Cyprus’s credit rating during a period of major geopolitical and economic challenges is remarkable, especially given the continued momentum of the Cypriot economy and the positive fiscal policy, which has generated significant surpluses that allow the government to effectively manage potential risks arising in the external environment.
“Maintaining strong fiscal performance, continuing to reduce public debt, and implementing policies that enhance the economy’s productivity and resilience are key prerequisites for a potential further upgrade of the creditcredit rating of the Republic of Cyprus,” the Ministry of Finance concludes.
