Upgrade of Cyprus Economy
November 3, 2014
Following the recent positive reviews of the Cyprus economy, the two international rating agencies Standard & Poor’s and Fitch, have upgraded the economy during the last days.
More specifically, Fitch upgraded the Cyprus economy to B+ and the horizon of the economy to positive from stable. According to the agency, the upgrade is a consequence of the better than expected performance of the economy during the first half of the year which ended up with a smaller than expected fiscal shortfall. The analysts of the agency believe that the GDP of the country will shrink even more in 2015, whereas they expect to see an increase of the GDP by 2016, one year earlier than their initial estimations.
In conclusion, they believe that the risks of the financial aid program were reduced substantially being though relatively high for the moment.
Standard & Poor’s upgraded the country’s long-term foreign and local currency sovereign debt to B+. At the same time, S&P affirmed the short-term foreign and local currency sovereign debt at B.
The fiscal performance of the country was higher than anticipated and the agency focused on the services industries where the growth shrinked much less than expected. Just like Fitch, S&P anticipate a decrease of the GDP in 2014 and 2015 which in turn will increase in 2016.
The analysts of the agency are positive for additional upgrades of the economy upon the banking industry showing an improvement in the quality of the assets in the banks’ portfolios and after all the capital restrictions are lifted.