NICOSIA, Oct. 3 (Xinhua) -- Fitch Ratings has affirmed Cyprus' Long Term Foreign-Currency Issuer Default Rating (IDR) at BBB- with a stable outlook, a Fitch press release made available on Saturday said.
Cypriot Finance Minister Constantinos Petrides said Cyprus' affirmation was made possible despite strong economic challenges as a result of the coronavirus crisis impact, most notably on the all-important tourism and travel sectors, which provide 21 percent of the country's gross domestic product (GDP).
Petrides added that this was made possible as a result of government measures, the resilience of some economic sectors and the small number of COVID-19 cases, which allowed minimal restrictive measures imposed on the country.
Fitch said in its press release that "Cyprus had a strong track record of growth before the pandemic with average growth in the five years to 2019 of 4.4 percent, above the BBB median of 3.6 percent. Fitch maintains its assumption of 2 percent growth potential over the medium term, unchanged by the pandemic."
The rating agency forecast a 6 percent GDP contraction in 2020 followed by a 4 percent rebound in 2021, and 2.7 percent growth in 2022.
But it warned that the large banking sector remains a weakness, notably very high non-performing loans ratios that are still weighing on capital and profitability.
According to Fitch, non-performing loans are likely to increase due to the COVID-19 shock.
As a result of arrangements made with the banks, about half of total performing loans are in a moratorium until the end-December 2020.
Fitch said the measure will limit the increase of non-performing loans in the short term and support borrowers' liquidity in 2020.
But the agency said it remains hard to assess which portion of these loans will become non-performing. Enditem
