Tags: Cyprus | S&P | Fitch | rating

S&P Upgrades Cyprus Credit Rating

Friday, 25 Apr 2014 09:12 AM

Standard & Poor's raised its long-term credit rating on Cyprus Friday and affirming its short-term rating with a positive outlook for the bailed-out island's economic recovery.

Meanwhile, Fitch Ratings revised its outlook on the long-term foreign currency issuer default rating to stable from negative and affirmed it at B-minus.

In March 2013, cash-strapped Cyprus agreed a 10-billion-euro ($13.8 billion) rescue package from a troika of lenders — the European Commission, European Central Bank and International Monetary Fund — to bail out its economy and oversized banking system.

S&P raised its long-term rating to B from B-minus and affirmed its short-term rating at B based on the positive economic outlook and adherence to the bailout agreed with international lenders.

It said the upgrade "primarily reflects Cyprus' better-than-expected economic performance, based on its resilient tourism and business services sectors."

But it said a dip in Russian tourists would adversely affect economic growth, particularly when coupled with the weakening Russian ruble already hurting Cyprus' tourism sector.

Russia is the island's second-biggest tourist market and there are fears stronger sanctions against it over the Ukraine crisis would stem the flow of visitors.

For its part, Fitch said fiscal targets had been exceeded significantly. The government debt-to-GDP ratio was contained at 5.4 percent in 2013, below the troika's forecast of 7.8 percent and Fitch's 6.7 percent.

"The outcome reflects a large fiscal correction and a less severe-than-expected recession. Tight expenditure control contributed significantly to the favorable outcome," said Fitch.

But while the contracted only 5.4 percent in 2013, rather than an expected 7.7 percent, Fitch expects the recession to last longer than assumed under the EU-IMF program.

Output should contract by around 3.9 percent in 2015 and one percent in 2016 and not return to growth until 2017, it said. This compares with the troika forecast for growth from 2015.

Cypriot President Nicos Anastasiades welcomed the upgrades.

"Today's two upgrades... are the best reward for the efforts of the government and the society at large in tackling the unprecedented consequences of the economic crisis," he said.

"We are not yet able to say that we overcame the problems, but the upgrades are confirmation that we are moving on the right path."

The president pledged to stick to the troika's tough reform and austerity program.

© AFP 2017

   
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Standard and Poor's raised its long-term credit rating on Cyprus Friday and affirming its short-term rating with a positive outlook for the bailed-out island's economic recovery.
Cyprus, S&P, Fitch, rating
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2014-12-25
Friday, 25 Apr 2014 09:12 AM
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