Rating agency DBRS Morning Star has revised Cyprus’ growth outlook down once more amid gloomier forecasts for global growth taking into account soaring inflation and heightened uncertainty due to the war in Ukraine.
In its updated forecasts, the agency reduced Cyprus’ growth prospects for this year by 0.2 percentage points to 3.2% with growth outlook for 2023 slashed by 0.7 percentage point to 2.8%. In tis June forecast, DBRS Morning star said it expected growth to reach 3.4 and 3.5% in 2022 and 2023 respectively.
“Baseline forecasts are becoming increasingly bearish, particularly the outlook for 2023,” the agency said in an update, adding that high inflation, energy and labor shortages, and rising interest rates are key contributors to the gloomy global forecasts.
DBRS also noted that near term risks to inflation are tilted toward the upside, but central bank actions will begin to take greater effect over the next few quarters.
The agency projects that the US economy growth rate will reach 0.9% in 2023, while the European outlook has also deteriorated sharply, faced with the prospects of energy shortages this winter, and the U.K. economy is expected to shrink by 0.1%.
“Risks of a recession are elevated and asset prices may come under increasing pressure, but financial stability risks appear to be contained,” the agency added.
DBRS Morning Star is scheduled to issue a rating action for the Cypriot economy on October 7.
Source: Cyprus News Agency