Cyprus’s sovereign credit rating has been affirmed at just one notch below investment grade with a positive outlook by Standard and Poor’s rating agency, a statement made available in Cyprus on Saturday said.
The statement by the rating agency said that it may consider raising its present BB+/B rating to investment grade later in 2018, provided that the economic recovery following Cyprus’s 2013 bailout continues to provide “impetus for further meaningful general government and private sector debt reduction.”
It added that S&P also expects to see a decline in Cyprus’s short-term debt burden and further convergence of the island’s monetary conditions with those of the eurozone via a material reduction of unusually high nonperforming loans (NPLs).
However, it also warned that its outlook could be revised from positive to stable should there be lower-than-expected growth or a slowdown in the reduction of the government debt.
In addition it cautioned against the further concentration of the economy in certain sectors, such as construction and tourism.
Cyprus’s economic recovery since it was bailed out under a 10-billion-euro economic assistance program in March 2013 has been spectacular, having reached a growth rate of 3.9 percent last year.
S&P projected real GDP growth at an average 2.8 percent over the period 2018 to 2021 through investment activity and service exports, while private consumption decelerates as households increase debt servicing.