Morningstar DBRS said Greece and Cyprus face increased economic risks due to tensions in the Middle East. Both economies rely on tourism and shipping, which are sensitive to geopolitical disruptions. Cyprus is more exposed due to its geographic proximity to conflict areas. Rising costs and route changes are affecting transport and travel.
Geopolitical Disruptions And Economic Exposure
Instability in the region is affecting freight rates and tourist flows. Shipping operators are adjusting routes, leading to higher fuel and insurance costs. Extended disruptions could increase pressure on economies that depend on external demand. Impact is stronger where tourism and transport are closely linked.
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Impact On Shipping And Tourism
Tourism remains a key driver of economic activity, with effects across transport, services and consumption. The sector supports a broad share of domestic demand. Shipping plays a smaller direct role but remains important for both countries. Ports such as the Port of Piraeus and the Port of Limassol are affected by route changes. Longer shipping routes and higher risk premiums are increasing costs. Adjustments reflect efforts to avoid affected regions.
Banking Sector And Credit Risks
Despite these challenges, the report notes that the banking systems in both countries maintain robust profitability and solid capital buffers. However, banks in Cyprus are particularly exposed due to a heavier reliance on tourism-related loans, rendering them more susceptible to falling visitor numbers and associated revenue pressures. Conversely, Greek banks have relatively limited exposure to tourism, although they face risks linked to shipping-related activities. The evolving situation could strain asset quality over time, especially if prolonged high fuel costs and disrupted supply chains persist.
Broader Economic Implications And Policy Outlook
Both economies face higher energy costs, inflation pressure and slower growth. Forecasts have been revised to reflect these conditions. The Central Bank of Cyprus lowered its 2026 growth projection, while the Bank of Greece expects moderate growth under current conditions.
