Moody’s has kept Cyprus’ credit rating unchanged at A3 and its outlook stable, in its periodic review published on May 29, the Ministry of Finance said on Saturday. Finance Minister Makis Keravnos said the assessment confirms the resilience of the Cypriot economy, noting that sound, strict and preventive fiscal policy must continue ‘with consistency and responsibility.’
According to the Ministry, Moody’s said the rating reflects Cyprus’ strong economic resilience and positive medium-term growth prospects, despite an expected short-term slowdown due to risks stemming from the conflict in the Middle East, with possible effects on tourism and inflation.
The Ministry said the agency also pointed to Cyprus’ strong institutional capacity and effective policymaking, while public debt continues to decline steadily and debt sustainability indicators remain strong.
Growth has been in line with Moody’s projections, supported by the continued diversification of the economy, while the banking sector is backed by strong capital adequacy and improved profitability, the announcement added.
At the same time, the Ministry said Moody’s noted a number of challenges, including the small size of the economy, fiscal spending pressures, the impact of the conflict in the Middle East on growth and risks in the banking sector. Although these risks have been gradually easing due to structural improvements, they remain a key source of potential sudden developments.
According to the Ministry, further upgrades could follow if fiscal performance and public debt indicators exceed Moody’s expectations and if medium-term growth proves stronger than forecast, including through public and private investment and improved labour market conditions.
Conversely, negative deviations from Moody’s fiscal and debt projections, affecting the downward path of public debt, could put Cyprus’ ratings under downward pressure.
In a written statement, Keravnos said the Government agrees with and takes seriously Moody’s remarks on the challenges arising from ongoing negative geopolitical developments.
‘As a Government, we are well aware of the enormous efforts being made as part of our rational economic policy to preserve the resilience of our economy and secure the positive assessments that place the Republic of Cyprus’ borrowing capacity in investment grade,’ he said.
He added that the Government also knows that ‘even greater effort is needed’ to maintain positive ratings.
‘Therefore, sound, strict and preventive fiscal policy must continue with consistency and responsibility,’ the Finance Minister concluded.