Cyprus was one of the five sovereigns who saw its long-term credit rating upgraded in 2022, international rating agency DBRS Morningstar said in a sovereign ratings review for the outgoing year.
“The conflict in Ukraine has further strained the public finances of many sovereigns, which were already stressed by the impact of the COVID-19 pandemic,” the agency said.
The review noted as the adverse effects of the pandemic faded, the continuation of stronger growth and improved public sector balance sheets led to upgrades across five DBRS Morningstar-rated sovereigns: Ireland, Cyprus, Greece, Portugal, and Uruguay, noting however that the weaker growth outlook for 2023, the continuation of the conflict in Ukraine and the ongoing energy crisis have resulted in a stabilization of rating trends across our sovereign rating universe.
“As of December 16, 2022, none of DBRS Morningstar’s sovereign ratings have positive trends,” the agency said.
But the agency added that “overall, the majority of DBRS Morningstar’s rated sovereigns have weathered the crisis well.”
According to DBRS, three credits in Europe have seen downward rating pressure. These include the rating on Belgium which was downgraded to AA given budgetary pressures and high government debt relative to peers, while the trend on Slovakia (A [high]) was revised to Negative due to the growth outlook and on the back of the possibility of a full stoppage of Russian gas supplies.
Moreover, the agency said that unexpected developments in the UK have resulted in the rating (AA [high]) being placed Under Review with Negative Implications. “This rating action reflects risks to the fiscal outlook, concerns about the inconsistency between fiscal and monetary policies that led to a large sell-off of UK assets, and potential risks to the UK’s financial flexibility,” DBRS added.
On Asia, DBRS said that the negative trend on China reflects expectations of weaker economic performance in the medium term, due to continued property sector weakness, China’s ageing demographics, and heightened U.S.-China tensions.
On North America, DBRS said that the region’s economies which are energy self-sufficient retain a high degree of resilience, “but we expect medium-term fiscal challenges to persist, particularly for the United States.”
Source: Cyprus News Agency