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      Scope takes no action on the Republic of Cyprus
      FRIDAY, 22/01/2021 - Scope Ratings GmbH
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      Scope takes no action on the Republic of Cyprus

      No action has been taken on the Repubic of Cyprus following a monitoring review.

      Scope Ratings reviews its ratings either yearly, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations. Scope performs monitoring reviews to determine whether outstanding ratings remain proportionate. Monitoring reviews are conducted either by performing a portfolio review in terms of the applicable methodology/ies, latest developments, and the rated entity’s financial and operational aspects relative to similarly rated peers; or through targeted reviews on an individual credit. Scope publicly announces the completion of each monitoring review on its website.

      Scope completed the monitoring review for the Republic of Cyprus (BBB-/Stable; S-2/Stable) on 21 January 2021, incorporating the update from the sovereign methodology. The review resulted in no action on the assigned ratings. This monitoring note does not constitute a rating action nor does it indicate the likelihood of a credit rating action in the short term. The latest information on the credit ratings in this monitoring note along with the associated rating history can be found on www.scoperatings.com.

      Key rating factors

      The Republic of Cyprus’s long-term BBB-/Stable ratings are underpinned by the country’s proven track record of robust economic expansion, fiscal consolidation and commitment to structural reform. The 2014-19 period saw robust growth and fiscal performance which placed Cyprus’s debt-to-GDP ratio on a firm downward trajectory. The ability and willingness of the Cypriot government to revive its economy, maintain fiscal discipline and address banking sector vulnerabilities is a key factor supporting its debt sustainability in the context of the Covid-19 crisis. While public debt is projected to rise in 2020-21, Scope’s baseline assumes a return to a declining debt trend supported by a declining interest-payment burden, strong growth and sustained fiscal discipline from 2021 onwards. However, structural challenges remain and threaten to impede the government’s efforts to stabilise debt levels. These include: i) an externally dependent, concentrated, and service-oriented economy which is vulnerable to deteriorating external demand and international investor sentiment; ii) vulnerabilities in the banking sector, with a very high share of non-performing loans, which constrain the credit supply; and iii) high levels of public and private indebtedness as well as large external imbalances which increase the economy’s sensitivity to shocks. The Stable Outlook reflects Scope’s assessment that the challenges Cyprus faces in the context of the Covid-19 crisis remain manageable.

      For the updated scorecards accompanying this review, click here.

      The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Rating Methodology: Sovereign Ratings, 9 October 2020) is available on https://www.scoperatings.com/#!methodology/list.

      This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
      Lead analyst: Thibault Vasse, Analyst.

      © 2021 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Analysis GmbH, Scope Investor Services GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin.

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