Cyprus bucked rating trend in 2022

Rating agency DBRS Morningstar this week said that Cyprus was one of only five countries whose credit rating it upgraded during 2022, a year marked by a plethora of challenges, all of which had an adverse impact on the global economy.

The other countries were Greece, Ireland, Portugal and Uruguay, according to a 2022 review of the countries assessed by the agency.

The agency’s report noted that amid the war in Ukraine and the effects of the energy crisis there is no country under assessment that has a positive trend in its assessment.

Moreover, the agency said that the conflict in Ukraine has further burdened the public finances of many states, which were already under pressure due to the impact of the Covid-19 pandemic.

“As the negative conditions of the pandemic subsided, continued stronger growth and improved public sector balance sheets led to upgrades in five countries: Ireland, Cyprus, Greece, Portugal and Uruguay,” DBRS Morningstar said in its review.

However, the agency also said that the prospect of weaker economic growth in 2023, the continuation of the war in Ukraine and the ongoing energy crisis have led to the stabilisation of rating trends across all countries.

“Until December 16, there was no country with a positive trend in its evaluation, while three evaluations in Europe were under downward pressure,” the agency said.

“This is Belgium, which was downgraded to AA due to pressures on public finances and high public debt compared to countries with a similar rating,” it added, noting that the trend in Slovakia’s rating was also revised to negative due to the outlook for growth, combined with the complete termination of Russian gas supplies.

What is more, the house put the United Kingdom’s rating on a negative review, citing risks to its fiscal prospects, concerns about an inconsistency between fiscal and monetary policy, which has signalled a sell-off in British bonds, as well as potential risks to Britain’s financial flexibility.

The rating agency went on to explain that the countries it evaluates generally coped well with the current, multidimensional set of challenges.

“The economies of North American countries, which are self-sufficient in terms of their energy needs, have maintained a high degree of resilience,” the agency said.

“However, we expect short-term fiscal challenges to continue, particularly in the US,” the report concluded.