Rating agencies to issue updated reports after Cyprus elections

Four international rating agencies this week published the dates upon which they will issue their newest evaluating reports on the Republic of Cyprus’ creditworthiness for 2023.

The assessments will take place in a year marked by forecasts of a slowdown in economic growth amid continued uncertainty, high inflation and the energy crisis caused by the ongoing war in Ukraine.

At the same time, the policies of European and other central banks, as well as the aggressiveness with which they may raise interest rates again, are also expected to factor heavily into the evaluation process.

It should be noted that the new year begins with the credit rating of the Republic of Cyprus now standing two notches above the investment category minimum, after rating agencies Standard and Poor’s and DBRS Morningstar upgraded Cyprus’ long-term credit rating to BBB in 2022.

In addition, Fitch maintained Cyprus’ rating at BBB-, while only Moody’s continues to keep Cyprus in the junk category, having previously maintained the country’s rating at Ba1, with a positive outlook.

Standard and Poor’s will open the curtain on ratings in 2023 on March 3, 2023, with Fitch following on March 10.

The first ratings report dates from both Moody’s and DBRS Morningstar have been set for March 31, 2023.

It should be noted that the above assessments coincide with the election of the new president of the Republic of Cyprus, with the elections set to take place in February of next year.

The second set of ratings will commence on June 16, with Fitch being the first agency to publish its updated report.

Standard and Poor’s will follow on September 1 with its own report, while Moody’s and DBRS Morningstar have set their second potential rating report dates for September 29.

According to analysts, assessments in 2023 take on even greater significance as the period of low or negative interest rates has come to an end, with central banks around the world moving to hike their key interest rates in an effort to bring inflation under control, while uncertainty and economic slowdown have sent government bond yields on an upward trajectory.

Also, in addition to the normalisation of its monetary policy, the European Central Bank (ECB) is moving towards a policy of quantitative tightening, meaning the end of net bond purchases, while after February 2023 it will begin to reduce its balance sheet.
The purchases of government bonds by the ECB, which first started in 2014, had kept government bond yields, and consequently borrowing costs, at noticeably low levels.

The second half of the year saw a significant increase in bond yields, with both investors and analysts agreeing that a challenging 2023 can now be expected.