Nicosia, Cyprus — The Fitch agency said on Saturday it has raised Cyprus' credit rating by one notch to BBB+.
It cited the country's increased ability to withstand financial shocks, the government's commitment to keeping its finances in order and a strengthened banking sector, partly thanks to the lowest bad credit ratio since the global financial crisis.
Fitch said in a statement that it also calls the island nation's outlook positive.
According to the agency, household and corporate debt in Cyprus continued to decline last year and is very close to the European Union average. It also pointed to the country's “very strong fiscal performance” over the past two years, with a primary surplus of 4.5%, which it called “by far the highest” among countries using the euro as their currency.
Public debt is expected to fall to 70.6% of gross domestic product this year and to 65.1% in 2025 thanks to high growth and large budget surpluses. Although Cyprus' debt levels are still relatively high, the government has managed to reduce it “at one of the most competitive rates in the eurozone” and among other countries rated by the agency.
Other factors for the upgrade include relatively high per capita income and credible policies supported by the European Union and the Eurozone.
Cyprus' economic growth accelerated this year and Fitch expects total growth to reach 3% this year and 2025.
Fitch noted a large current account deficit due to low savings relative to investment and warned that ratings could change if there was “structural fiscal easing.”
A 2013 financial crisis forced Cyprus to demand a multi-billion-euro bailout from its eurozone partners and the IMF, including a seizure of savings of more than 100,000 euros at the country's largest bank and its closure of the second largest bank. The seized deposits were used to prop up Cyprus's ailing banking sector.
