Cyprus is showing resilience

Canadian credit rating agency DBRS Morningstar has affirmed the Republic of Cyprus’ long-term ratings, maintaining it at BBB (high) with a stable economic outlook.

Amid global uncertainties, DBRS cited risks such as the Ukraine conflict and trade disruptions in the Red Sea, which could impact Cyprus’ fiscal outlook. Downgrade possibilities loom if sovereign debt worsens due to prolonged weak growth, increasing fiscal pressures, or expanding bank liabilities.

Cyprus’ small, service-based economy remains susceptible to external shocks, compounded by challenges like nonperforming loans and low labor productivity. Key sectors include trade, tourism, finance and real estate, with a growing presence in technology. Despite robust economic growth, Cyprus’ labor productivity lags behind the EU average.

Plans for a bond issue in April aim to bolster Cyprus’ economic performance. Fitch and Standard & Poor’s are poised for potential upgrades, while Scope and Moody’s maintain a stable outlook. Fiscal pressures arise from public sector wage adjustments, health organization deficits, and expanded responsibilities, though Cyprus’ fiscal trajectory remains positive overall.