S&P up­grades out­look on Cyprus debt to pos­i­tive

Kuwait Times - - BUSINESS -

Ac­cel­er­at­ing eco­nomic growth and prospects for a con­tin­ued bud­get sur­plus prompted a key credit rat­ing agency on Friday to up­grade the out­look for Cyprus to pos­i­tive. Stan­dard and Poor’s said the im­proved out­look in­di­cates it could raise the grade on the coun­try’s debt in the next 12 months if the pos­i­tive de­vel­op­ments “con­tinue un­abated.”

S&P cur­rently rates Cyprus’s for­eign debt BB+. The agency in­creased the forecast for eco­nomic growth to an av­er­age of three per­cent a year through 2020, up from 2.5 per­cent pre­vi­ously, and said it ex­pects the bud­get “to re­main in sur­plus over the forecast hori­zon.”

Those im­prove­ments will help banks deal with bad loans, S&P said in a state­ment. Euro­zone mem­ber Cyprus plunged into a fi­nan­cial cri­sis in 2013, leav­ing a num­ber of its top banks in­sol­vent and forc­ing it to ne­go­ti­ate a painful bailout with in­ter­na­tional cred­i­tors.

It has since re­cov­ered, af­ter the govern­ment im­posed harsh aus­ter­ity mea­sures in ex­change for a loan of 10 bil­lion eu­ros (then $13 bil­lion) from the IMF and European Union.

Por­tu­gal’s im­proved eco­nomic per­for­mance and fall­ing bud­get deficit prompted a key credit rat­ing agency to raise the grade on the coun­try’s debt on Friday. Stan­dard and Poor’s said it was rais­ing the debt rat­ing on the coun­try’s for­eign debt one notch to BBB- on the re­ced­ing risks.

“The up­grade re­flects our im­proved forecast for Por­tu­gal’s GDP growth dur­ing 2017-2020, as well as the solid progress it has made in re­duc­ing its bud­get deficit,” S&P said in a state­ment.

The agency forecast the Por­tuguese econ­omy will grow by more than two per­cent on av­er­age through 2020, up from the pre­vi­ous forecast of 1.5 per­cent. Mean­while, Lis­bon is ex­pected to meet its bud­get deficit tar­get of 1.5 per­cent of GDP this year “putting the govern­ment debt to GDP ra­tio on a more firmly de­clin­ing path,” the state­ment said.

Por­tu­gal is post­ing its fourth con­sec­u­tive year of growth since 2010, and the coun­try in June made an early pay­ment to the In­ter­na­tional Mon­e­tary Fund on the 29.6 bil­lion euro loan it was granted in 2011 as part of a bailout plan. The IMF projects the coun­try’s econ­omy will ex­pand by 2.5 per­cent this year and two per­cent in 2018.—AP

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