Insider Economy Cyprus among EU countries facing greatest external sector risk, says Scope Ratings

Cyprus among EU countries facing greatest external sector risk, says Scope Ratings

Cyprus is in the top three European countries facing the greatest external sector risk, according to Scope Ratings’ updated external vulnerability and resilience ranking. Among 63 economies, Taiwan, China and Switzerland are 2020’s “sturdy-3”, heading up the least vulnerable to external shock.

Inside the EU, Scope finds that Cyprus (BBB-/Stable), Croatia (BBB-/Stable) and Romania (BBB-/Negative) are the three EU member states facing the greatest external sector risk.

Cyprus leads the EU risky-3, it said explaining that Cyprus’s current account deficit widened to 6.7% of GDP in2019, from 4.4% of GDP in 2018.The economy’s external position is characterised by high deficits in its trade in goods (21.5% of GDP in 2019),offset by very high surpluses in services trade (21.3% of GDP), the latter due to Cyprus’s standing in tourism services and as a financial services hub.

Nonetheless, current account deficits have resulted in one of the largest negative NIIP levels among EU economies at -116%, alongside very high gross external debt levels of 936% of GDP in Q42019, which, nonetheless, still represent deleveraging against a 2015 peak at 1,263% of GDP. In addition, well above 70% of government debt is held by non-residents.

However, Scope Ratings note that special purpose entities (SPEs) in Cyprus considerably distort the economy’s external position while having limited links to real economic activity: excluding SPEs, the NIIP and gross external debt were more modest at-34.3% of GDP and 262% of GDP respectively as of Q3 2019, even if nonetheless still worse than the euro area average.

Importantly, Cyprus benefits from euro area membership, unlike in the cases of peers in the 2020 EU risky-3: Croatia and Romania, giving Cyprus access to credit strengths in crisis moments such as reduced FX volatility and capped borrowing rates deriving from the common reserve currency.

(CNA)

Top Stories

Afternoon lessons in Limassol postponed

The Limassol Municipality announced that the scheduled for 19 October beginning of the Limassol Municipality Open School lessons will be postponed until further notice....

Nippon Foundations makes big donation to Cyprus

One of the most known cultural foundations of Japan, the Nippon Foundation, made a big donation of books to Cyprus. The books were donated...

Increase of COVID-19 cases in educational institutions of Polis Chrysochous

Epidemiologists are focusing their attention on Polis Chrysochous since the COVID-19 seems to be spreading in the school community there. According to the authorities...

Roads in Larnaca, Nicosia to close due to Egyptian President’s visit

The Police announced that on Wednesday 21 October, the Egyptian President Abdel Fattan Al-Sisi is expected to visit Cyprus. During his visit increased security...

Giannakis Gavriel new AKEL MP for Famagusta

Giannakis Gavriel was on Tuesday 20 October declared as the new MP of AKEL for the Famagusta District. In a statement the new AKEL MP...

Taste

Squash soup

Ingredients: 1 kg pumpkin, cut into small cubes, approximately 5 cups 2 medium (400g) sweet potatoes, cut into cubes, approximately 2 ½ cups 1 chopped leek, only...

Mezedes

No visit to Cyprus is complete without enjoying the traditional meal of many small dishes known as ‘meze’. This large feast, which has been a...

Prawns with fried cheese, barley shaped pasta

Put the barley shaped pasta into a small pan with salted water, bring to a boil and when tender, drain. Peal the prawns leaving...

Salmon and shrimp sheftalies

Mix all ingredients for tabbouli in a bowl and keep to one side so flavours can combine. Prepare the sheftalies: wash and soak the casing...