Cyprus ratings in election, slowdown year
The four international rating agencies have published their potential rating dates for Cyprus’ credit rating in 2023 – and they are all on a Friday.
The ratings will take place in a year marked by a projected economic slowdown, amid the continued uncertainty that clouds the economic outlook, due to high inflation and the energy crisis, fueled by the continuing war in Ukraine. Furthermore, the outlook is affected by the policies of central banks and their aggressive stance concerning interest rate hikes.
Cyprus enters 2023 having its investment grade status consolidated as two rating agencies, Standard & Poor’s and DBRS Morningstar have placed the country’s long-term credit rating two notches above the investment grade limit. Fitch maintains the Cypriot rating just above investment grade while Moody’s continues to hold Cyprus’ rating in “junk” (Ba1), but has assigned a positive outlook. All other agencies have assigned a stable outlook to the Cypriot long-term rating.
The first ratings begin on March 3 with S&P scheduled to issue its first rating action, while Fitch will follow on March 10. Rating agencies Moody’s and DBRS are scheduled to issue their potential rating actions on March 31.
The first batch of ratings coincide with the election of the new president of the Republic and the assumption of duties by the new government. The second set is scheduled to begin with Fitch on June 15 and S&P on September 1. Moody’s and DBRS Morningstar have scheduled their second rating actions for September 29.
Rating actions are believed to have more weight in 2023, as the low interest rate environment came to an end due to policy rate hikes by major central banks across the world in a bid to control soaring inflation, while economic uncertainty and economic slowdown have driven sovereign bonds’ yields in a upward trajectory.
Moreover, apart from monetary policy normalization, the European Central Bank embarked on “quantitative tightening,” that is, ending net bond purchases under its asset purchase program. Asset purchases and more particularly sovereign bonds, begun in 2014, compressing borrowing costs for governments in the euro area.
Under EU rules, agencies publish two dates for the potential release of both solicited and unsolicited sovereign credit rating actions.
