Anastasaides’ re-election reduces uncertainty over economic policies, DBRS says

The re-election of President Nicos Anastasiades for a second term in office reduces uncertainty over the direction of economic policies in Cyprus, rating agency DBRS has said.

In a press release, DBRS said the latest election result gives President Anastasiades a solid mandate for a second consecutive term, adding the recovery of the economy under his first term seemed to have driven votes in his favour.

Furthermore, the agency noted that with the presidential elections settled, the focus moves back to addressing the challenges Cyprus faces, such as the the reduction of banks’ high non-performing loans (NPLs), the still high private sector debt, as well as maintaining healthy growth prospects and public finances.

DBRS sees the election outcome as reducing the uncertainty over the direction of economic policies. DBRS expects continuity on fiscal policy and the debt management strategy, and more progress on efforts to address banking sector vulnerabilities, after delays on pending reforms in Parliament ahead of the elections, the agency added.

Referring to the future reforms, DBRS said the government lacks a majority in the House of Representatives, which resulted in delays in adopting additional reforms and is likely to remain a challenge for the government’s reform agenda.

Moreover, the completion of additional privatisations is likely to be a major test for the newly re-elected administration, the agency said, adding that if completed, reforms such as privatisations could contribute to a faster-than-expected decline in public debt.

DBRS in December 2017, changed the trend on the BB (low) ratings for Cyprus from Stable to Positive.

This change reflects DBRS’s view that Cyprus’s solid fiscal and economic performances are likely to be maintained, leading to a further reduction in the government debt-to-GDP ratio, the agency added.

DBRS said the Cypriot economy is expected to grow by 3.8% in 2017 beating the earlier projection of 3%, while economic growth is projected at 35 in 2018 and 2019.

According to DBRS, the forecast for the 2017 fiscal surplus was revised upwards to 1.0% of GDP from an earlier forecast of only 0.2% and it is now expected to remain above 1.3% over the next two years.

Source: Cyprus News Agency