Cyprus economy praised by Moody’s analyst for resilience and growth

Vice President and Senior Analyst at Moody’s risk assessment group Haiko Peters this week praised the Cypriot’s economy steady improvement, referencing both its growth and ability to weather a tumultuous global economic environment.

In a virtual panel discussion organised by the Cyprus Economic Society, Peters highlighted the country’s upgraded status to Baa2 by Moody’s in September, underscoring steady improvement across a number of key areas.

These include Cyprus’ robust GDP growth, the economy’s resilience to recent external shocks, a steady debt reduction, and the ongoing strengthening of the country’s banking sector.

Peters noted that Cyprus rebounded faster than its Southern European counterparts, referring to Greece, Portugal, Spain, and Italy, from the pandemic’s effects, with tourism revenues surpassing pre-pandemic levels in 2023.

What is more, he forecasted further economic growth for Cyprus in 2024-25, stressing the positive impact of strengthened labour hours, productivity, and capital accumulation during the economic downturn.

Meanwhile, when addressing the EU’s financial support through the Recovery and Resilience Plan, Peters asserted that the 4 per cent of GDP allocated to Cyprus would bolster growth and encourage structural changes.

In addition, he praised Cyprus for achieving one of the most significant reductions in public debt among developed economies, deeming the public debt sustainable.

Peters also highlighted Cyprus as one of the few Baa2-rated countries predicted to have a fiscal surplus in 2024-25.

Furthermore, when responding to questions about growth sectors, he pointed to financial services, information and communication technologies (ICT), transportation, and tourism, noting that there is an expectation for mild growth in the latter sector.

While not directly mentioning imminent risks to the economy, Peters also acknowledged potential impacts from a Middle East conflict escalation and potential changes in migration patterns and interest rates.

Finally, he concluded by saying that Cyprus stands resilient amidst these challenges, positioned for continued economic growth.

In terms of the Cypriot economy, it should be noted that Cyprus’ Composite Leading Economic Index (CLEI), a key economic indicator compiled by the University of Cyprus’ Economic Research Centre (CypERC), remained positive in the fourth quarter of 2023, albeit while experiencing a slowdown during this period.

The centre’s latest update, released in January of this year, noted that the ongoing deceleration of the index underscored the challenges posed by a geopolitical environment rife with tension, combined with a broader sense of economic instability, on the growth prospects of the Cypriot economy.

Moreover, according to a statement from CypERC, the escalating military conflict in Israel since October further worsened the already unfavourable international geopolitical conditions, inevitably exerting a negative impact on the CLEI throughout the last quarter of 2023.

However, the centre noted that the Cypriot economy was buoyed by growth in a number of key sectors, including real estate, tourism, retail trade, and electricity production.