Economic outlook remains favourable says ratings agency

International rating agency Morningstar DBRS on Saturday rated Cyprus at a BBB (high) long-term credit rating with a stable trend, noting that favourable economic prospects balance downside risks.

“The stable trend balances favourable economic and fiscal developments against important downside risks,” the agency said.

According to the Canada-based agency, Cyprus registered a real GDP growth rate of 2.5 per cent in 2023 which compares favourably with the Euro area’s average of just 0.4 per cent, bolstering public finances and supporting the further reduction of Cyprus’ debt-to-GDP ratio to 77.4 per cent at end-2023.

“Cyprus’ BBB (high) ratings are supported by a stable political environment, the government’s sound fiscal and economic policies in recent years, and a favourable government debt profile,” the agency added.

Morningstar noted that the economic outlook remains favourable, with private consumption likely to benefit from a further rebound in real wages and solid employment growth, whereas investment activity is projected to be bolstered by the inflow of Next Generation EU funds and several major investment projects, particularly in the tourism and residential real estate sectors.

The agency also cites the Central Bank of Cyprus (CBC) December projections that the real GDP growth will strengthen moderately to 2.6 per cent in 2024 and 3.1 per cent in 2025.

Morningstar however pointed out that “at the same time, the growth outlook is exposed to important downside risks such as an escalation of the military conflict in Ukraine and a prolonged disruption in trade in the Red Sea.”