A run of strong data buoys Cyprus economy

Ratings agency Standard and Poor’s has placed the economy of Cyprus as being ‘positive,’ it had formally been ‘stable’.

The agency said 10 years after the financial crisis on the island, the local economy is again achieving fiscal surpluses.

Furthermore, the agency said it could raise the sovereign rating on Cyprus within the next 12-24 months ‘if debt reduction were to continue on its current path, supported by tight expenditure control and consistent fiscal surpluses’.

According to S&P, the economy continues to show resilience but notes the island displays high reliance on imported oil and petrol products.

The agency also estimates that Cyprus’ net debt reflects ‘sizable cash buffers of about €3 billion, which we assume will likely be maintained in the near term. Notably, Cyprus’ debt costs remain affordable, with interest payments projected to occupy only 4.1% of government revenue on average over 2023-2026’.

Elsewhere, tourism revenue saw an impressive surge in the first half of this year, reaping 1.09 billion euros, despite the absence of Russian tourists. Britain remains the main source of tourism for the local holiday industry, new figures show. Arrivals from the UK are complimented by a healthy flow of arrivals from Israel, Poland, and Sweden

FINANCIAL CRISIS

The 2012–2013 Cypriot financial crisis was an economic crisis that involved the exposure of Cypriot banks to overleveraged local property companies, the Greek government-debt crisis, the downgrading of the Cypriot government’s bond credit rating to junk status by international credit rating agencies, the consequential inability to refund its state expenses from the international markets and the reluctance of the government to restructure the troubled Cypriot financial sector.

On 25 March 2013, a €10 billion international bailout by the Eurogroup, European Commission (EC), European Central Bank (ECB), and International Monetary Fund (IMF) was announced, in return for Cyprus agreeing to close the country’s second-largest bank, the Cyprus Popular Bank (also known as Laiki Bank), imposing a one-time bank deposit levy on all uninsured deposits there, and seizing possibly around 48% of uninsured deposits in the Bank of Cyprus .