The milestones of the assessments of the Cypriot economy for 2023

The dates for the issuance of the potential evaluations of the creditworthiness of the Republic of Cyprus for 2023 were published by the four international rating agencies.

The assessments will take place in a year marked by forecasts of a slowdown in economic growth amid continued uncertainty, high inflation and an energy crisis due to the ongoing war in Ukraine. At the same time, an important role is expected to be played by the policies of the Central Banks and the aggressiveness with which they may raise interest rates again.

It is noted that the new year begins with the credit rating of the Republic of Cyprus now two notches above the minimum investment category, after the rating agencies Standard and Poor's and DBRS Morningstar upgraded the long-term Cyprus credit rating to BBB in 2022. In addition, Fitch maintained its rating at BBB-, while only Moody's continues to maintain Cyprus in the junk category, i.e. Ba1, with a positive outlook.

The rating curtain in 2023 is opened by Standard and Poor's on March 3, 2023, with Fitch following on March 10, while on March 31 the first ratings by Moody's and DBRS Morningstar have been determined. It is noted that the specific assessments coincide with the election of the new President of the Republic of Cyprus.

The second set of ratings begins on June 16 from Fitch, with S&Ps following on September 1, while Moody's and DBRS Morningstar have set their second potential ratings for September 29.

Assessments in 2023 take on even greater significance as the period of low or negative interest rates has come to an end as Central Banks around the world move to hike their key interest rates in an effort to bring inflation under control, while uncertainty and economic slowdown have sent government bond yields on an upward trajectory.

Besides, in addition to the normalization of its monetary policy, the European Central Bank (ECB) is led to "quantitative tightening", i.e. to the end of net bond purchases, while after February 2023 it will begin to reduce its balance sheet. The purchases of government bonds by the ECB, which had started in 2014, had kept government bond yields and consequently borrowing costs at particularly low levels. The last half of the year saw a significant increase in bond yields with investors/analysts discounting a difficult 2023.

It is recalled that in the EU, ratings are governed by regulation 462/2013 (CRA3), which obliges rating agencies to publish the dates of potential ratings, which are always on a Friday.

KYPE