Fitch upgrades Cyprus to ‘B+’ up from `B-`
ΣΧΕΤΙΚΑ ΑΡΘΡΑ
Fitch Ratings upgraded on Friday Cyprus` long term foreign and local currency issuer default ratings (IDRs) to `B+` up from `B-` with a positive outlook.
The international rating agency says in a press release that the issue ratings on Cyprus` senior unsecured foreign and local currency bonds have also been upgraded to `B+` from `B-`.
The Country Ceiling has been raised to `BB+` from `BB-` and the Short-term foreign currency IDR has been affirmed at `B“, it adds.
“Cyprus has established a track record of fiscal consolidation and over-performance on its fiscal targets,” the ratings agency says.
Fitch now projects “a deficit of 1% of GDP for 2015 and surpluses of 0.2% and 1% for 2016 and 2017, respectively.”
At the same time it forecasts the general government gross debt (GGGD) “to peak at less than 108% of GDP this year, before falling to around 100% in 2017”.
This, it points out, “compares with a peak of over 130% projected by Fitch in June 2013.”
“At more than double the `B` median of 43% for 2015, the GGGD ratio is still high and reduces Cyprus’ fiscal scope to absorb domestic or external shocks”, it says.
Fitch also highlights that deposits have been broadly stable since capital controls were lifted, “although non-resident deposits (30% of total) declined temporarily in the run-up to the Greek crisis this summer.”
“While direct financial links between Greek-owned subsidiary banks and Greece have been reduced significantly, the sector remains vulnerable to Greece mainly via investor confidence”, it notes.
The ratings agency says that there are still significant risks to creditworthiness posed by Cyprus` continued deep economic and financial adjustment.
It considers that “the environment for banks remains challenging, in particular with regard to exceptionally weak asset quality.”
“The stock of consolidated sector NPEs was 47.4% of gross loans in August, the highest of all Fitch-rated sovereigns. Unreserved problem loans for the sector (ie gross NPEs minus system-wide provisions) stood at EUR18.8bn, or 107% of GDP for the same period,” it points out.
At the same time it adds that “implementation risks around banking reforms remain high as the process is dependent on the political will to confront debtors, which could wane in the run-up to parliamentary elections in May 2016.”
CYPRUS NEWS AGENCY