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DBRS slashes Cyprus’ growth rate by 0.7%

30/06/2022 09:00

Rating Agency, DBRS Morningstar, slashed Cyprus’ baseline growth rate by 0.7% for 2022 citing deteriorating outlook following Russia’s invasion of Ukraine.

In its updated sovereign baseline scenarios, the Canadian rating agency said Cyprus’ growth rate will reach 3.4% compared to 4.1% in its March 2022 projection and 3.5% in 2023 compared with the previous projection of 3.3%.

DBRS maintained its projection for unemployment unchanged to 6.9% for 2022 with unemployment rate raised to 6.8% in 2023 up from the previous projection of 6.4%.

“Since our March update, near-term growth outlooks have deteriorated across the majority of our rated sovereigns,” DBRS said, noting that “European growth projections for 2022, in particular, have been cut due to the impact of the Russian invasion of Ukraine, the resulting higher pressures on inflation and the additional disruptions in supply chains.”

The agency also pointed out that “with a few major advanced countries already close to neutral policy rates, we expect the tightening cycle will have an impact on demand growth in the next 6-12 months.”

“This is likely to ease inflationary pressures, but also increase the risk of a technical recession as borrowing costs increase and as some companies shed labor in response,” it added.

The agency also warned that high commodity prices appear likely to persist as the conflict in Ukraine continues, and could further dampen growth prospects headed into 2023.