Fitch Ratings has affirmed Cyprus’ long-term foreign-currency issuer default rating (IDR) at “A-” with a “Positive Outlook.”
Cyprus’ ratings, Fitch said, reflect income per capita levels above the “A” median, strong fiscal out-turns and policy credibility supported by EU and eurozone membership. These strengths are balanced by slightly weaker governance indicators than peers, vulnerabilities in external finances and a backdrop of regional political tensions related to the division of the island, it notes, adding that the Positive Outlook is driven by continued debt deleveraging and favorable growth prospects.
On resilience to external challenges, according to the rating agency, the war in Iran and its impact on energy prices “constitutes a challenge for Cyprus, affecting growth, inflation and its external balances.”
“Cyprus is more exposed than other EU countries given its geographical location and energy matrix, but for now we believe the impact on credit metrics will be moderate and temporary,” it said, adding that this is supported by accelerated economic diversification, solid macro fundamentals and much-improved public and private balance sheets in recent years.