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Fitch Upgrades Cyprus’s Credit Rating to ‘A-‘ from ‘BBB+’

Fitch Ratings has upgraded Cyprus’s Long-Term Foreign-Currency Issuer Default Rating (IDR) from ‘BBB+’ to ‘A-‘, citing significant progress in debt reduction, robust fiscal performance, and strong economic growth. The upgrade reflects a series of key rating drivers that underscore the country’s financial stability and growth prospects.

Sharp Decline in Debt-to-GDP Ratio

A standout factor in the upgrade is Cyprus’s remarkable reduction in its debt-to-GDP ratio. Fitch highlighted that Cyprus has achieved “one of the sharpest declines in public debt/GDP among Fitch-rated sovereigns in recent years.” Public debt is projected to fall from a peak of 113.5% in 2020 to 65.5% in 2024, with further reductions to 60% in 2025 and 55.1% in 2026. This trend would position Cyprus well below the current eurozone average of 89% and in line with the ‘A’-median ratio.

Driving this debt reduction is a combination of factors, including high primary fiscal surpluses, sustained nominal GDP growth, and stable interest rate costs. Fitch forecasts an average primary surplus of 4.8% of GDP for the period 2024-2026, with the general government surplus expected to reach 3.9% of GDP in 2024.

Consistent Fiscal Discipline

Fitch acknowledged Cyprus’s consistent outperformance in fiscal results, which have regularly exceeded prior forecasts. Revenue growth, fuelled by strong employment gains and enhanced tax collection, has been a key contributor. Fitch projects a gradual decline in fiscal surpluses, averaging 2.9% in 2025-2026, but this still surpasses the projected ‘A’ median deficit of 2.7%.

Another crucial factor is Cyprus’s commitment to prudent fiscal policies, with support from across the political spectrum. This commitment includes a focus on debt reduction, increased revenue-raising capacity, and the maintenance of substantial cash reserves, which are expected to average 12% of GDP over the forecast period. Efforts to address long-term structural issues, such as financing the social security system, could further mitigate future fiscal risks.

Solid Economic Growth Outlook

Cyprus’s economic outlook remains positive, with Fitch forecasting GDP growth of 3.8% in 2024 and an average of 3.1% over the forecast period. Growth will be driven by high-performing sectors, notably information and communication technology (ICT) and financial services, which are known for their high productivity.

Unemployment is also on a steady downward trajectory. Fitch expects the unemployment rate to drop to 4.6% by 2026, a sharp decline from its peak of 16.1% in 2014.

Banking Sector Resilience

Cyprus’s banking sector has continued to strengthen, with Fitch highlighting improvements in solvency, liquidity, and profitability. Benefiting from higher interest rates and a favourable macroeconomic environment, banks have seen a reduction in non-performing loans (NPLs) — now at 7% as of the first half of 2024, down from 7.9% at the end of 2023. While still above the EU average, the drop was achieved organically rather than through asset sales, signalling long-term financial stability.

Fitch noted that improvements in the banking sector have reduced risks to macroeconomic stability and lowered the likelihood of contingent liabilities for the government. However, some legacy challenges within the sector remain and will need to be addressed in the medium term.

What the Upgrade Means for Cyprus

The Fitch upgrade to ‘A-‘ reflects growing international confidence in Cyprus’s fiscal and economic outlook. The country’s ability to reduce debt, maintain strong fiscal surpluses, and enhance banking sector stability all contributed to the rating uplift. This enhanced rating positions Cyprus more favourably in global financial markets, potentially reducing borrowing costs and attracting further investment.

As Cyprus continues to make progress on its economic and fiscal targets, it is well-placed to sustain its role as a regional financial hub, offering strong growth prospects and financial stability for investors and stakeholders alike.

TikTok Returns To US App Stores 

TikTok is once again available for download in the Apple and Google app stores in the US, following a delay in the enforcement of its ban by former President Donald Trump. The ban’s postponement until April 5 gives the administration additional time to evaluate the situation.

Key Developments

The decision to restore TikTok access came after Google and Apple received reassurances from the Trump administration that they would not face legal consequences for reinstating the Chinese-owned app. According to Bloomberg, US Attorney General Pam Bondi sent a letter outlining these guarantees.

In an executive order signed on January 20, Trump instructed the attorney general not to take enforcement action for 75 days, providing time for his administration to determine how to proceed.

Uncertain Future For TikTok In The US

While TikTok is back on the US app stores, its long-term survival remains uncertain. If no deal is reached by early April to address national security concerns, the app may face another shutdown. ByteDance, the parent company, has insisted that TikTok is not for sale.

Legislation And Pressure On ByteDance

The Protecting Americans from Foreign Enemy-Controlled Apps Act, which passed with bipartisan support in Congress, mandates a nationwide ban on TikTok unless ByteDance sells its US operations. This law was signed by President Joe Biden in April of last year.

In late January, the app was briefly removed from US stores following the ban’s activation, impacting over 170 million American users. However, TikTok was restored soon after, following Trump’s intervention in his first hours as president. During that time, he signed an executive order allowing 75 days for a deal that would safeguard national security. Trump also suggested that the US could take a 50% stake in TikTok, a move he believed would keep the app “in good hands.”

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