13/08/2003 12:02
Standard & Poors Credit Rating Agency downgraded on Wednesday the local currency sovereign credit ratings on the Republic of Cyprus from AA-/A-1+ to A+/A-1.
“The downgrading of the local currency rating reflects the deterioration of the medium-term fiscal prospects due to weaker fiscal discipline and an increase in the public debt to 64% of the GDP for 2003 against 59% in 2002”, said S&P’s credit analyst, David Cooling.
Mr. Cooling commented on the initial government estimates for a fiscal deficit of 2.3% in November, which now is anticipated to reach 5.4%, due to the lower-than-expected growth in revenues after the tax reform, the slowdown of the Cyprus economy and the growth in primary expenditure to stand at 12% in 2003.
The analyst estimated that the upward trend of the primary expenditure will leave deficit at 4.6% in 2004 and 4.3% in 2005, while public debt is expected to reach 66% of the GDP in 2004.
EMU
The agency anticipates that Cyprus’ accession prospects in the EMU will provide new conditions for structural reform in economy, including a fiscal consolidation. “The government is expected to announce the measures on fiscal consolidation later this month as part of the Pre-Accession Economic Program” the announcement reported, however, the analyst appreciated that with the efforts for a Cyprus’ settlement and the shrinkage of the island’s tourist industry, “fiscal consolidation will remain a challenge”.
FINMIN: Deficit lower than 3% in 2006
Finance Ministry’s Manager of Economic Study and EU, Andreas Charalambous, told StockWatch that the downgrading of S&P was “anticipated” as initial estimates have now changed.
“The Ministry has given priority to the fiscal consolidation and has already prepared a program included in the Pre-Accession Economic Program to be sent in the European Commission”, Mr. Charalambous noted.
Mr. Charalambous revealed the relevant forecasts included in the PEP on the fiscal deficit and the growth rate, whereas the Ministry estimated that should growth rate fluctuates to 4%, the fiscal deficit will reach 3-4% in 2004, less than 3% in 2005 and 2% in 2006.
The Central Bank did not wish to comment on the downgrading.
“The downgrading of the local currency rating reflects the deterioration of the medium-term fiscal prospects due to weaker fiscal discipline and an increase in the public debt to 64% of the GDP for 2003 against 59% in 2002”, said S&P’s credit analyst, David Cooling.
Mr. Cooling commented on the initial government estimates for a fiscal deficit of 2.3% in November, which now is anticipated to reach 5.4%, due to the lower-than-expected growth in revenues after the tax reform, the slowdown of the Cyprus economy and the growth in primary expenditure to stand at 12% in 2003.
The analyst estimated that the upward trend of the primary expenditure will leave deficit at 4.6% in 2004 and 4.3% in 2005, while public debt is expected to reach 66% of the GDP in 2004.
EMU
The agency anticipates that Cyprus’ accession prospects in the EMU will provide new conditions for structural reform in economy, including a fiscal consolidation. “The government is expected to announce the measures on fiscal consolidation later this month as part of the Pre-Accession Economic Program” the announcement reported, however, the analyst appreciated that with the efforts for a Cyprus’ settlement and the shrinkage of the island’s tourist industry, “fiscal consolidation will remain a challenge”.
FINMIN: Deficit lower than 3% in 2006
Finance Ministry’s Manager of Economic Study and EU, Andreas Charalambous, told StockWatch that the downgrading of S&P was “anticipated” as initial estimates have now changed.
“The Ministry has given priority to the fiscal consolidation and has already prepared a program included in the Pre-Accession Economic Program to be sent in the European Commission”, Mr. Charalambous noted.
Mr. Charalambous revealed the relevant forecasts included in the PEP on the fiscal deficit and the growth rate, whereas the Ministry estimated that should growth rate fluctuates to 4%, the fiscal deficit will reach 3-4% in 2004, less than 3% in 2005 and 2% in 2006.
The Central Bank did not wish to comment on the downgrading.
Related Articles
