Morningstar DBRS reports economic risks for Greece and Cyprus due to Middle East conflict

The rating agency Morningstar DBRS has released a report highlighting the economic vulnerability of Greece and Cyprus to geopolitical instability in the Middle East. The agency identifies the tourism and shipping sectors as the primary channels through which these tensions impact both national economies. Disruptions in maritime and air transport are causing increased operational costs and pressure on freight rates and tourist flows. Cyprus is considered more vulnerable due to its closer geographical proximity to the conflict zones. While the banking systems in both countries have shown resilience and maintained strong profitability, the agency notes higher credit risks for Cypriot banks due to their loan concentration in the tourism sector. Despite these challenges, both nations possess sufficient capital buffers to navigate the current environment. The report emphasizes that tourism and shipping represent a significantly higher share of the GDP in Greece and Cyprus compared to other European Union member states. Ultimately, the agency warns that ongoing geopolitical events are likely to negatively impact the tourism sector, which has served as a key growth engine for both countries in recent years.