Cyprus Commended for Financial Prudence, Yet Faces Potential Long-Term Perils According to Scope Ratings
In a report published today, European rating agency Scope Ratings commends Cyprus for its robust fiscal performance and sustained economic growth. The report, which does not specify the nature of the fiscal buffers mentioned, highlights the country's repeated budget surpluses and a declining public debt.
According to the report, Cyprus's strong fiscal track record has been a significant factor in the steady GDP growth and declining unemployment, which have, in turn, strengthened the credit profile of the country. However, the report also warns of lingering structural vulnerabilities and external risks in Cyprus's economy.
Scope Ratings proposes strengthening fiscal consolidation, enhancing structural reforms to improve competitiveness, and ensuring effective implementation of the economic adjustment program to reduce long-term risks of Cyprus's economic stability program. The report does not provide details on the specific long-term reforms required, but it emphasizes the need for long-term reforms to boost productivity, address demographic pressures, and diversify the economy.
The report identifies significant challenges for Cyprus, including high levels of private sector debt, an economy heavily reliant on tourism and services, and vulnerabilities in the real estate sector. Medium- to long-term risks for Cyprus include its small size, exposure to external shocks, energy price volatility, and geopolitical tensions. The report does not specify the nature of the structural vulnerabilities or external risks in Cyprus's economy.
The report also notes that while the sharp decline in public debt is expected to continue on a downward path, the fiscal buffers provide the government with resilience. However, it emphasizes that long-term reforms are still needed to ensure Cyprus's economic stability program's long-term success.
The report does not provide any information on the potential impact of these long-term risks on Cyprus's economy. Scope Ratings, the organization that published the report, has previously highlighted the strong fiscal track record of Cyprus and identified significant challenges for the country.
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