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
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.