S&P revises its Cyprus outlook to ‘positive’
LONDON (Reuters) – Standard and Poor’s revised its outlook on the Republic of Cyprus to «positive» yesterday, and said it was on track to join the eurozone next year. At the same time, the ratings agency affirmed its A long-term and A-1 short-term foreign and local credit ratings on the Mediterranean island. «The ratings on Cyprus are supported by its prosperous and resilient economy, short but impressive track record of fiscal consolidation, and the prospect of EMU membership,» said S&P credit analyst Eileen Zhang. «The ratings are, however, constrained by the sovereign’s high but declining public debt burden and poor external liquidity.» S&P noted that Cyprus’s general government deficit had fallen below 2 percent of gross domestic product last year and was expected to maintain this record in 2007, compared with 4-6 percent deficits in 2001-03. «Standard and Poor’s expects Cyprus to join the eurozone in 2008 as planned. Adoption of the euro will ultimately shield Cyprus from exchange rate risks,» it said in a statement. Zhang said Cyprus was expected to maintain a low fiscal deficit and to reduce its debt burden further after euro entry. Cyprus has a long-term rating of A2 from Moody’s Investors Service and of A+ from Fitch.
