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CI: Cyprus' Sovereign Rating Upgraded and Outlook Remains Positive
March 20, 2019
Capital Intelligence Ratings (CI Ratings or CI), the international credit rating agency, announced that it has upgraded the Republic of Cyprus’ Long-Term Foreign Currency (LT FC) Issuer Rating to ‘BB+’ from ‘BB’ and affirmed its Short-Term Foreign Currency (ST FC) Rating at ‘B’. The Outlook for the Long-Term ratings remains Positive.
RATING RATIONALE
The rating upgrade reflects the continued strong performance of the economy, as well as improving public finances and the ongoing recovery of the banking sector. In addition, legislative and structural reforms have helped to increase Cyprus’ institutional strength.
The economy continued its robust recovery in 2018, with real output growth of 3.9% (4.2% in 2017) helping to return it to its pre-crisis size in nominal terms. Growth was broad based and underpinned by the services sector (mainly tourism, health and education), as well as ongoing foreign-led construction and real estate projects. As a result of strong growth in domestic demand, import growth also accelerated, but the impact on GDP appears to have been partially offset by rising tourism receipts. The unemployment rate continued to decline, reaching a better than projected 8.8% in 2018, down from 16.1% in 2014. Overall, employment growth has been positive since 2016 and youth unemployment remains on a declining trend.