Standard and Poor’s ratings agency has upgraded the island’s sovereign credit rating to 'B' from 'B-' with a positive outlook due to better-than-expected economic performance in 2013.

Meanwhile, Fitch Ratings has revised the outlook on Cyprus’s long-term foreign currency Issuer Default Rating (IDR) to stable from negative and affirmed the IDR at ‘B-’. The agency has also upgraded the long-term local currency IDR to ‘B-’ from ‘CCC’.

“We remain down to earth and we continue the effort with confidence,” Finance Minister Harris Georgiades said using Twitter.

The main drivers for the upgrades were the better-than-expected performance and the continuing progress in the implementation of the bailout adjustment programme.

“The upgrade primarily reflects Cyprus’ better-than-expected economic performance, based on its resilient tourism and business services sectors, and the fact that consumer spending in the private sector has not dipped as much as we anticipate,” S&P said. “In addition, the government outdistanced its 2013 fiscal targets by a considerable margin, and we anticipate a repeat performance in 2014.”

The government also continued to implement the economic adjustment
Program as planned, reducing the risks to full and timely payment of its debt service, S&P said.

Fitch said the outcome reflects a large fiscal correction and a less severe-than-expected recession. Tight expenditure control contributed significantly to the favourable outcome. Fitch has revised its fiscal deficit projections to 5% of GDP in 2014 and 4.6% in 2015, from 7.5% and 6.9%, previously.

Risks to programme implementation have eased on recent performance, Fitch said, but remain elevated. The agency said medium-term targets, in particular, were ambitious. Official projections showed a 3.3 percentage point improvement in general government primary balance in 2016 to a surplus of 1.2% of GDP, which could prove difficult to achieve. A significant portion of the consolidation also remains outside the programme period, which ends in the first quarter of 2016, it said.

President Nicos Anastasiades said the two upgrades were the best reward for the efforts made by the government and society to tackle the effects of the economic crisis. However, he added in a statement, upgrades themselves did not mean the end of the crisis. “We are not yet in a position to say we have overcome the problems but the upgrades are confirmation that we are on the right path.”

Anastasiades reiterated the government’s determination to carry out the necessary reforms so that the country would never again face the same dead ends as last year, when it had to agree to close one bank and seize deposits to recapitalise another in order to receive a €10 billion bailout.

He thanked the people of Cyprus for their “patience and maturity and the exemplary manner with which they handled the problems. The government’s thoughts are with the vulnerable groups of the population who are experiencing poverty,” the president said.

Source: Cyprus Mail