The government will continue supporting economic activity in a responsible manner, in view of the challenges it has to address both in terms of growth and employment as well as public finances,  Minister of Finance Makis Keravnos said in a written statement, in view of the decision published on Friday, June 14, by the rating agency Standard & Poor's which raised the credit rating of the Republic of Cyprus to "BBB+" from "BBB" while maintaining its outlook as positive.

"The government will continue to support economic activity in view of the challenges it has to face (ongoing war in Ukraine, Israel-Hamas war, inflationary pressures) in a responsible manner, both in terms of growth and employment (holding down unemployment), as well as public finances," Keravnos stressed.

To achieve this goal, he added, the government supports the Cypriot economy and society, in a targeted and flexible manner and by promoting, at the same time, the appropriate financial plans which will allow the maximum possible utilization of European programmes and funds, and especially the financial support through the Recovery and Resilience Plan.

"Standard & Poor's justifies its decision to upgrade the credit rating of the Republic of Cyprus on the basis of the progress achieved by the Republic during recent years in addressing fiscal imbalances, amid strong growth, despite the external shocks", the Minister said.

He added that the upgrade also reflects the strengthening of the financial position of Cypriot banks and the progress they have made in balancing their funding profile in recent years, the reduction of public debt, as well as the expectation that the amount of public debt as a percentage of GDP will fall below 60%, which is the limit of the Maastricht Treaty, since 2027.

In addition, the agency said that, despite pressures on the expenditure , the government will be able to maintain an average surplus in public finances of 2.1% in the period 2024-2027, which is the strongest forecast among the 20 member states of the euro zone, Keravnos noted.

The Minister said that the agency points out that the positive outlook reflects its opinion that the fiscal and economic results are better than those of countries of the same category/level (peer countries), exerting upward pressure on the evaluations of the Republic of Cyprus. The agency's position is that the strengthening of the financial position of the Cypriot banking system will lead to a greater convergence of domestic financing conditions with those of the eurozone, with a possible positive impact on the evaluations of the Republic of Cyprus, he added.

The Minister further noted that Standard & Poor's underlines as the most important factors for the future upgrading of the credit rating of the Republic of Cyprus, the further improvement in the resilience of the Cypriot financial system, which continues to be burdened with the highest rate of non-performing loans to the European Union, and the shrinking of the high current account deficit and the total gross external financing needs of residents, thus limiting the agency's concerns about external leverage.

Keravnos also pointed out that the agency emphasizes that the Cypriot economy will record a medium-term economic growth rate of 2.5% during the period 2024-2027, supported by the further expansion of tourism and the "Information and Communication Sector", with associated business relocations having positive effects in the real estate sector. He also said that the agency notes the successful implementation of the structural reforms in the context of the Recovery and Resilience Plan, as the key to the further growth of the Cypriot economy.