Cyprus is to appeal to international and local lenders to borrow an additional €3.25 bln to cover financing needs created by the fiscal impact of the COVID-19 pandemic.
The Finance Ministry’s Public Debt Management Office announced that it is expanding its financing program in response to the coronavirus crisis.
Cyprus will be looking to raise some €2 bln from international markets and €1.25 bln from local investors.
In a communication sent out to investors, the PDMO notes that given the uncertainty of the times, and the rapid developments on a global scale, it is hard for authorities in each country to give specific details regarding macroeconomic and fiscal predictions.
The PDM has said that that they expect the country’s economy to shrink by 5% to 9.7% during the current year, with the unemployment rate rising to 9% compared to an average 7.1% in 2019.
The office notes that it has taken into consideration the €2 bln support package to employees and businesses as announced by the government.
Last month Cyprus closed all non-essential businesses and retail shops to contain the spread of coronavirus while most people are urged to work from home.
Nicosia expects the toll of the coronavirus outbreak will be felt mostly during the second quarter of 2020, while recovery is expected to begin sometime during the second half of 2021.
Regarding public finances, the government’s fiscal balance is expected to reach a deficit of around 4% of GDP in 2020, stemming from the impact of the pandemic on economic activity that affects both revenues and expenditures, as well as temporary fiscal implications brought on by measures adopted.
Fitch rating agency changed its outlook for Cyprus from positive to stable on 4 April, citing the impact of the coronavirus pandemic on its economy and Nicosia’s fiscal position.
It forecasts a GDP contraction of more than 2% in 2020 “reflecting the material negative impact of the health crisis on the global economy.”