DBRS, the Canadian rating company, said that the outcome of Sunday’s presidential elections gives President Nicos Anastasiades a solid mandate to continue his government’s policies to tackle challenges.
The Cypriot president, who was compelled into taking tough decisions for the banking system which included losses for depositors at the island’s two largest lenders in the first weeks of his first term five years ago, “campaigned on his record and his proposed policies are known,” DBRS said in an emailed statement on Wednesday.
“DBRS expects policy continuity,” the rating company which changed in December Cyprus’s BB (low) credit rating from stable to positive, said. “The government remains committed to addressing the country’s challenges. These include reducing banks’ high non-performing loans, lowering still high private-sector debt, maintaining healthy growth and reducing the public debt ratio”.
On Sunday, Anastasiades, supported mainly by Disy, got 56 per cent of the vote while his challenger Stavros Malas, supported by Akel, got 44 per cent. The DBRS rating is three notches below investment grade.
DBRS added that it expects the island to continue its “solid economic and fiscal performance”.
The rating company added that it expects an economic growth rate exceeding 3 per cent in both 2018 and 2019 after the economy expanded a projected 3.8 per cent last year.
“The forecast for the 2017 fiscal surplus was revised upwards to 1 per cent of gross domestic product (GDP) from an earlier forecast of only 0.2 per cent,” it said. “Importantly, it is now expected to be above 1.3 per cent over the next two years. Because of these stronger-than-expected developments and a partial early debt repayment, the government debt ratio is estimated to have fallen below 100 per cent in 2017, one year earlier than initially estimated in the government’s stability programme in April 2017”.
“Another positive development is that banks’ non-performing loans continue to decrease,” DBRS said.
On Wednesday, the Central Bank of Cyprus said that they dropped to €21.4bn or 44.1 per cent of the total in October 2017.