Fitch to evaluate Cyprus’ economy

A two-member Fitch delegation – one of the world’s premier rating agencies – will visit Cyprus between 24 and 25 January 2008 in the framework of its annual evaluation of the Cypriot economy.
The delegation will meet the Governor of the Central Bank of Cyprus (CBC) Athanasios Orpanides, the Permanent Secretary of the Ministry of Finance and other senior officials of the Ministry and the CBC.
The Central Bank, in a press release issued here, underlines that this is the first visit of Fitch after Cyprus’ accession to the euroarea on January 1 2008.
According to CBC’s press release, Fitch in its previous evaluation of Cyprus’ economy in July 2007, revised higher the credit rating of Cyprus to “AA-, Stable” from “A+, Positive”.
Fitch decided the upgrading of the Cypriot economy after the EU Council announced its decision to allow Cyprus and Malta to adopt the euro on 1 January 2008 and the setting of the conversion rate at which the euro would replace the Cyprus pound (1 euro = 0,585274 Cyprus pounds).
Rating agencies before they issue an evaluation they examine, evaluate and take into account economic developments, with emphasis on fiscal developments and inflation. Cyprus accession to the euroarea is expected to have a positive impact on its economy rating.
The Cyprus economy is estimated to advance well during 2008, while its achievements in 2007 were highly praised by euro area chief Jean Claude Juncker, European Central Bank Governor Jean Claude Trichet, as well as by Joaqin Almunia, Commissioner for Economic and Monetary Affairs on January 21 during eurogroup’s meeting in Brussels.
According to Cypriot Minister of Finance Michalis Sarris, the growth rate of the Cypriot economy, due to external factors, is expected to be maintained in 2008 within the levels of the past few years – around 4%-, while employment will continue to increase and unemployment decrease to 3.9%.
The inflation rate is expected to be around 2.5% because of the high prices of fuel.
Furthermore, the public surplus is estimated to be around 0.5% of GDP. The decrease in the surplus compared to 2007 is due to the temporary nature of part of income for 2007, recent tax reductions, and the full implementation of social cohesion measures.
Public debt will drop below 50%, thus breaking the barrier of 60%, which was an important commitment for entering the euroarea.
These projections are based on the evaluation that there will be no unforeseen events that would have a toll on the economy and public finances, such as drastic increases in the price of crude oil and geopolitical tension in the region.
Fitch Ratings is a leading global rating agency committed to providing the world’s credit markets with independent, timely and prospective credit opinions.
Fitch Ratings is dual-headquartered in New York and London, operating offices and joint ventures in more than 49 locations and covering entities in more than 90 countries.