Cypriot Businesses Concerned by Moody's Ratings Downgrade Threat

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Cypriot Businesses Concerned by Moody's Ratings Downgrade Threat

Wednesday, January 19, 2011

The Cyprus Chamber of Commerce and Industry has expressed concern over the recent announcement, by ratings agency Moody's, that the jurisdiction's credit rating may face a downgrade at the end of the agency's next 90 day review, from its current AA3 standing.

Commenting recently on the state of the Cypriot finances, Moody's warned that a number of factors, including the banking sector's exposure to the ailing Greek economy, the failure of the budget to address structural issues such as the size of the public sector payroll, and declining competitiveness, could mean that it would follow the lead of Standard & Poor's , which downgraded the Cypriot credit rating in November 2010, from A+ to A.

Fitch Ratings is also bearish, and has warned, according to reports, that it may downgrade its own AA- rating during a review to be conducted in April.

Cautioning the government against delaying taking action to address the situation, and warning that the expected inflation rate of 3.5% represents a serious threat to the island's international reputation, and to its business community, the CCCI warned that the anticipated growth rates for this year and next (with the Cypriot Central Bank reportedly having predicted growth of 1.8% in 2011, and 2.4% in 2012) may not be attained unless serious steps are taken by lawmakers to address the situation.