ECONOMY

Fitch upgrades Cyprus, too

NICOSIA (Reuters) – Upgrades of Cyprus’s economy by Fitch yesterday and Moody’s on Wednesday were hailed by analysts as a confirmation of the improved creditworthiness of the island’s economy. Fitch yesterday upgraded the Mediterranean islands of Cyprus and Malta, applauding their successful efforts to qualify to adopt the euro in January 2008. «Cyprus’s long-term foreign currency Issuer Default Rating (FCIDR) has been upgraded to AA- (AA minus) from A+. Malta’s long-term FCIDR has been upgraded to A+ from A,» the agency said in a statement. With the upgrade, Fitch now rates both Cyprus and Malta higher than Moody’s Investors Service and Standard & Poor’s. Moody’s has Cyprus at A1 and Malta at A2, having upgraded them on July 10. S&P has both countries at A. «As for any other debtor whose creditworthiness is upgraded, Fitch’s decision to upgrade Cyprus is a very positive development for the economy reflected by the lower interest payments,» said Antonis Sophocleous, chief forex dealer at Depfa Investment Bank in Nicosia. Economist Marios Mavridis added that «since there had been various assessments of the Cyprus economy by the European Commission as well as developments that allowed Cyprus to become a euro area member, this upgrade of creditworthiness was justified.» But the latest upgrades might not be all the island can hope for given its euro area entry in six months, according to economist Costas Apostolidis: «At every stage toward euro adoption we should expect an upgrade of creditworthiness as a reward for our efforts to meet criteria. We should therefore expect another one in January, when Cyprus will have adopted the euro.» However, chances for a further upgrade in the near future could be spoiled, according to Apostolidis, by a slow-moving euro information campaign and presidential elections in early 2008. And in addition there was also still a question looming over whether banks were logistically prepared for the euro adoption or how the changeover of Cyprus pounds held by Turkish Cypriots would be facilitated, Apostolidis said.