news | 27 April 2018 | ServPRO Accountants & Consultants

Fitch upgrade Cyprus to BB+

Last week, Fitch upgraded Cyprus’ long-term foreign-currency issuer default rating (IDR) to ‘BB+’ from ‘BB’ as a result of the country’s strong economic recovery and prudent fiscal policy, leading the country’s rating just one step below the investment grade.

The rating agency has noted:

“We forecast the government will continue recording fiscal surpluses of 1.1% of GDP in 2018 and 2019, after over-achieving is fiscal target in 2017 with an estimated surplus of 1.9% of GDP, compared with a ‘BB’ median fiscal deficit of 3.2%.”

Moreover, it stated:

“The government tapped international markets in June 2017 and external interest payments are set to decrease to 6.6% of current account receipts in 2018-2019, down from an average 16.2% in 2011-2012. Cyprus is also attracting large foreign direct investments in the construction, tourism, energy and education sectors. Cash reserves were EUR1.2 billion at end-2017 covering expected gross financing needs for 2018,” the press release said.

The upgrade was warmly received by the country. The Finance Minister, Mr. Harris Georgiades tweeted:

“We still have difficulties that we must face. But our country’s progress is being recognised. And we can lift Cyprus even higher, as long as we continue the effort with confidence, consistency, and collective responsibility,”

Fitch highlighted the fact that the banking sector still needs to deal with the reduction of non-performing loans (NPLs). Nevertheless, Fitch noted that presently there are no developments forecast that would lead to a downgrade in the Country’s rating.

It should be noted that Fitch’s predictions did not account for any future privatisations scenarios or the exploitation of natural gas.

Cooperation Partners