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Media Centre

Moody’s upgrades Cyprus’ credit rating to B1

  • Posted on:  Tuesday, 17 November 2015 16:16

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Moody’s Investors Service has today upgraded Cyprus’ government bond rating by two notches to B1 from B3. The outlook is stable.

The key drivers for the upgrade are:

  • The faster than expected economic recovery and the expectation of a continued more broad-based growth that extends beyond exports. Moreover, the economy has demonstrated resiliency to external risks, emanating from Greece (Caa3, stable) and Russia (Ba1, negative).
  • After three years of contraction, real economic growth is expected to reach 1.2% in 2015 and 1.4% in 2016. Moreover, medium-term growth is expected to be more balanced, supported by a recovery in domestic demand helped by a stabilisation of the financial sector, improved competitiveness and the implementation of structural reforms.
  • Consistent outperformance on fiscal targets have led to a quicker reversal in the public debt ratio. A combination of better than expected growth and also strong budget execution underscore fiscal outperformance.
  • Moody’s expects fiscal discipline to continue post programme exit and through parliamentary elections next year. Under Moody’s baseline scenario, the government debt burden will now reach below 100% by next year and around 80% of GDP by 2020.
  • Moreover, Moody’s expects the country to successfully exit the economic adjustment programme (financed by the European Stability Mechanism (ESM) (Aa1 stable) and the IMF) by mid-2016, further supported by the build-up of significant liquidity buffers.