S&P raises Cyprus rating on stronger economic growth

Global ratings agency Standard and Poor’s raised its rating for Cyprus by a notch to BB from BB-, citing stronger than expected growth and declining government debt. The agency forecast Cyprus’s economy to expand by 2.7 percent in 2016, beating a March prediction as the eastern Mediterranean island emerges from a deep financial crisis.

The agency said Cyprus had benefited from “resilient business services, tourism, gradually reviving private consumption, and construction”. “We expect the Cypriot economy will continue to grow at about 2.5 percent in real terms in 2017-2019,” it said. Cyprus suffered a deep three-year recession after a credit crunch that brought the country close to bankruptcy in 2013. The government imposed harsh austerity measures in exchange for a European Union and International Monetary Fund bailout. In return for 10 billion euros ($13 billion at the time), Cyprus agreed in March 2013 to wind down its secondlargest bank, Laiki.

It also imposed losses on depositors in its undercapitalized top lender, Bank of Cyprus. S&P said on Friday the restructuring of the island’s financial services was moving ahead, but the sector was not expected to contribute to economic growth for several years. It added that reunification of the island, divided since a Turkish invasion of the north in 1974, could yield long-term economic benefits. In March this year, the euro group of finance ministers praised Nicosia for its successful exit from the bailout program. S&P said it expected government debt to gradually decline in the coming years. —AFP